Tax Battle Over Skill Games: Georgia's Gambling Sector Under Scrutiny

In the inconspicuous corners of taquerias and retail shops across Georgia, devices can be found that, at first glance, look exactly like traditional slot machines. However, these are known as Coin-Operated Amusement Machines, or COAMs, which are officially declared as skill games. While these machines operated under the public radar for years, outgoing Senator Bill Cowsert is now bringing the issue into the legislative spotlight with a provocative demand. He believes the state is being deprived of valuable revenue and criticizes the current tax rate as far too low.

The discussion centers on economic fairness and the question of how much a gambling-like product must contribute to society. Georgia is home to an estimated 7,360 of these devices, which statistically equates to one machine for every 1,549 residents. These machines are administered by the state lottery and serve as a vital pillar for the HOPE Scholarship program and pre-kindergarten funding. Nevertheless, profitability for the treasury remains below the expectations of some politicians.

Numbers and facts

Senator Bill Cowsert, a Republican, is venting his frustration over the current situation. When the industry was brought under the Lottery's supervision in 2013, it paid only 10 percent in taxes. It wasn't until the 2024 legislature that this rate was raised to 13 percent. For Cowsert, this is far from enough. He compares the revenue to the state lottery, which is statutorily required to pay 35 percent of its proceeds to the state, although according to Cowsert, it has never actually exceeded 27 percent.

"Georgia gets a lower rate of return than almost all our neighboring states. We essentially cannibalize our own lottery sales by encouraging COAM play — at the expense of lottery play for a lower rate of return." - Bill Cowsert, Georgia State Senator

On the other side are the industry's arguments. Lobbyist Les Schneider, an Atlanta attorney, emphasizes the high burdens on operators. He notes that master licensees and host vendors each keep 42.5 percent of the proceeds, with additional local taxes, license fees, and sticker fees exceeding $50 million per year. Schneider argues that increasing the number of devices rather than raising taxes is the correct way to boost state revenue.

Background

A major point of contention is the nature of the games. While critics view them as slot machines, Schneider insists they are skill games. Furthermore, Georgia law prohibits cash payouts. Winners can only redeem their points for free play, lottery tickets, or gift cards. However, Senator Cowsert views the latter critically, as a debit card is equivalent to cash in his eyes, suggesting that actual gambling is occurring.

In comparison, a sharper conflict is visible in Pennsylvania. There, Mike Barley, spokesperson for Pace-O-Matic, claims that skill games do not compete with casinos. He points to record casino revenues of nearly $521 million in May as evidence of peaceful coexistence. In Georgia, however, the situation remains stable at 13 percent for now, as Cowsert's colleagues balked at tripling the tax.

Why it matters for German players

For German players navigating the world of online casinos, the US debate over skill machines in snack bars sounds almost like something from another era. In Germany, the market has been strictly regulated since the State Treaty on Gambling 2021 (GlüStV 2021). Such gray areas, like those existing for COAMs in Georgia, are prevented domestically by the Joint Gambling Authority of the States (GGL). German players must adhere to a deposit limit of 1,000 euros per month across all providers, monitored by the LUGAS system.

Additionally, Germany has a clear stake limit of 1 euro per spin on virtual slots. While Georgia debates tax rates between 13 and 30 percent, German online slot revenues are subject to a stake tax of 5.3 percent. Anyone wishing to play safely in Germany should exclusively use platforms listed on the official GGL whitelist. Unlike the US machines, cash payouts (or transfers) of winnings are strictly regulated and guaranteed there.

What it means for GGL-licensed casinos

For operators with a GGL license, international developments mean that regulatory clarity is a competitive advantage. The uncertainty found in Georgia or Pennsylvania, where courts are still debating the legality of skill games, does not exist in Germany. The GGL ensures a level playing field, even though the strict player protection requirements place high demands on technology. German operators must ensure that no games are offered that bypass the 1-euro limit or lack the panic button function.

However, the discussions in the US show that pressure on unregulated or low-taxed niche products is growing worldwide. GGL-licensed casinos can position themselves as a reputable alternative that pays taxes properly and takes player protection seriously. In a time when illegal secondary lotteries or Curacao providers continue to try and lure German customers, compliance with GlüStV requirements remains the most important quality mark for legal providers on the German market.