HARRISBURG — A court-imposed clock is now ticking for state lawmakers to regulate skill games after years of failure to come to a deal.

Lawmakers had said they were waiting for a ruling on skill games to act and this week they got it: In a scathing decision Monday, state supreme Court justices said skill games are, in fact, slot machines subject to gambling laws.

In other words, the devices, which have long existed in a legal gray area, are now prohibited outside of casinos — and police can confiscate them from the bars, restaurants and social clubs where they're often found. The court put a 120-day stay on that enforcement, however, giving lawmakers until October to come up with a regulatory scheme and avoid a wave of seizures.

Still, the decision won’t make it easier for the divided legislature to agree on how to structure a brand-new piece of Pennsylvania’s competitive gambling landscape.

Casino owners, horse racing interests, sports betting companies and other wealthy players are all fighting over their slice of the multibillion-dollar pie. Adjusting one part of this regulatory regime could spark a legislative debate involving many special interests looking to protect their bottom lines.

State House Minority Leader Jesse Topper, R-78th, said trying to pass a skill games bill that doesn’t acknowledge the overlap with the commonwealth’s other forms of legalized gambling would be a mistake and one that “people have made over the past few years.”

“They’re simply looking at it as, ‘How do we regulate and tax skill games?’ They’re not looking at it as, ‘How do we bring them into the overall gaming fold and make the industry better?’” Topper said. “I’m open to a lot of different ways to do it, but it has to be within that construct — not chasing revenue.”

So far, leaders in each chamber are keeping their cards close to their chests as far as specific proposals; but the debate will involve sorting out a tax rate, how many machines should be allowed to operate, who gets to benefit from them, what to do about addiction and public safety concerns and where to direct new revenue.

Whether to tax skill games’ gross revenue at the same rate as casino devices has driven years of debate over regulation.

Gov. Josh Shapiro proposed a 52% tax rate earlier this year, in line with the state’s existing tax rate on slot machines.

At an unrelated news conference Tuesday, the Democrat said the ball is now in the state Senate’s court.

“What I’ve encouraged the Republican leadership of the Senate to do is to work with the Democratic leadership in the Senate and see what kind of package can get 26 votes in their chamber,” he said.

Republican leaders in the upper chamber previously backed a tax rate of 36% and in a statement following the court’s ruling, reiterated their support of the legislation “as a basis for discussion.”

But that rate was too high for skill games developer and distributor Pace-O-Matic, whose working relationship with the upper chamber’s GOP leadership imploded last year. Pace-O-Matic executives and other industry allies poured millions of dollars into efforts to defeat the bill including the 35% rate and to primary GOP lawmakers aligned with leadership.

Still, the industry has legislative allies. State Sen. Gene Yaw, R-23rd, whose district includes a company that manufactures the devices, has proposed a 16% tax rate.

Yaw and others have also suggested a flat, per-machine fee. Supporters of that proposal include state Rep. Danilo Burgos, D-197th, a former grocery store owner who has spoken at rallies organized by the skill games lobby.

Under bipartisan legislation Burgos is sponsoring, the state would collect a $500-a-month fee on each device.

There are an estimated 70,000 machines in businesses across the commonwealth, according to the state Office of Attorney General. How many of these devices should be allowed to continue operating is a major point of contention.

Burgos’ and Yaw’s bills — backed by the industry — would cap the number of terminals statewide at 50,000, they say.

Shapiro’s budget proposal would cap the number of licensed skill machines and video game terminals at 40,000 and limit establishments to having five at any given time.

State Sen. Chris Gebhard, R-48th, who sponsored the 36% tax rate proposal from his chamber’s leadership, said he wants the Gaming Control Board to oversee the machines and limit them to establishments already regulated by the Liquor Control Board. That approach would reduce the number of machines by roughly half.

Businesses and social clubs work with either a skill games manufacturer or distributor to get devices. Those who host Pace-O-Matic skill games in their businesses keep about 40% of the profit, according to the company.

Spotlight PA could not identify an industry group that tracks business profits associated with skill games. Chuck Moran, executive director of the Pennsylvania Licensed Beverage & Tavern Association, said he’s anecdotally heard of single machines providing profits ranging from a few hundred dollars to thousands of dollars every month.

How much money the state could bring in depends on the tax rate, the number of machines and regulations.

On the low end, Burgos projected his flat fee could bring in about $300 million annually. On the high end, the Shapiro administration estimated taxing the devices like slot machines could bring in as much as $2.1 billion a year by the end of the decade. A state Independent Fiscal Office analysis of Shapiro’s plan produced a lower long-term projection of up to$1.2 billion in annual earnings.

Those dollars could be used to accomplish any number of policy goals — from funding public transit to backfilling federal healthcare cuts to reducing the amount of money taken from the state’s rainy day fund.

In his budget pitch, Shapiro proposed putting the revenue into the state’s General Fund, which is effectively its checking account. It pays for everything from public servant salaries to low-income healthcare to state park operations. In Shapiro’s plan, this would offset proposed spending increases on education while keeping up with rising costs for low-income healthcare coverage.

In a statement Monday, state Senate Republican leadership said putting the money in the General Fund makes sense “with the fiscal realities facing our Commonwealth.”

The state has struggled for years to bring in enough revenue to cover its expenses. This year, the commonwealth is on track to spend about $5 billion more than it is projected to take in tax revenue.

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