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The significant growth of unregulated sweepstakes casino games and skill-game machines has become a central issue for the leading trade body that represents the regulated U.S. gaming industry, according to an American Gaming Association (AGA) executive.
“Illegal, unregulated gambling has always been an area of focus for the association,” said Chris Cylke, senior vice president for government relations with the AGA, although he conceded that the focus has not always been a consistent one.
“Just several years ago, we realized that we need to have sort of a full-time focus on illegal and unregulated gambling,” Cylke said Wednesday (October 30) during a webinar hosted by the Indian Gaming Association (IGA).
“It’s not going away, but it is something that has major ramifications for the industry beyond just economic ones.”
Cylke said the AGA has been “banging the drum” mostly on illegal gaming machines and offshore websites but also has focused on the different challenges presented by other offerings that purport not to be offering gambling.
“We’re going to pretend like the laws and regulations don’t apply to us because we found some legal loophole somewhere,” Cylke said of arguments made by those companies. “We’re going to try to make a rocket ship here and go get into as many states as we can, get our product out as quickly as we can. So, it has been a challenge … dealing with that in real time.”
Cylke cited the ongoing challenge of skill games that have multiplied in Pennsylvania and other states, as some of these entities now have investments and are able to hire reputable attorneys to make arguments on their behalf, as well as hire lobbyists in state capitals.
“I’m thinking specifically of skill-game companies, and you know what they’ve been able to try to accomplish in terms of turning themselves from an industry that was completely unregulated into one where … they want to have some regulations and a [modest] tax rate, arguing that they’re critical to the future of small businesses in those states,” Cylke said.
Cylke added that the AGA will have to “stay vigilant on illegal and unregulated gaming because it is always going to be around.”
Pennsylvania Town Bans Skill Games
In another sign of regulation action regarding unregulated gaming, the town where Parx Casino operates just north of Philadelphia has become the second community in Pennsylvania to regulate skill games.
The Bensalem Township Council adopted an ordinance outlawing the machines that comes into effect on November 7. The ordinance prohibits skill games in all businesses other than those holding state-issued liquor licenses.
For convenience stores or other locations with liquor licenses, the ordinance requires that up to three skill games be placed within view of employees, be inaccessible to anyone under the age of 18, and have video surveillance.
Veterans of Foreign Wars and Knights of Columbus locations with an active state club license would be able to operate up to five machines.
Businesses without liquor licenses that continue to operate skill games face the possibility of permanently losing their use and occupancy permits. The machines that are legal will pay an annual $80 tax each.
Mayor Joseph DiGirolamo, a Republican, said the decision to introduce the ordinance involved a two-year process of law enforcement monitoring the number of skill games that have been installed throughout the township. Currently, it is estimated that roughly 170 skill games are in operation.
“Moving forward, we will enforce the ordinance,” DiGirolamo said. “We will go from there.”
Mike Barley, a spokesman for Pennsylvania Skill which is a division of Georgia-based Pace-O-Matic, said the company was alarmed that supervisors would pass a measure that will hurt small family-owned businesses and fraternal clubs that benefit from the supplemental revenue from skill games.
“We intend to fight this ordinance on behalf of locations that operate legal skill games,” Barley said in a statement.
“A ban that includes legal skill games, however, is not the answer. It only jeopardizes the livelihoods of small businesses and fraternal groups already struggling because of inflation and other economic issues,” he added.
Bensalem’s ban on skill games is similar to an ordinance passed by the Philadelphia City Council in March that banned the terminals unless the location has a liquor license and an area for at least 30 patrons to eat.
“We advocate for what Governor Josh Shapiro supports: skill game regulation and taxation legislation that will rid neighborhoods of illegal gambling machines, especially mini-casinos, without harming law-abiding business owners,” Barley said.
“The legislation also would provide tax revenue for the state to use on priorities such as transportation and mass transit.”
Shapiro had planned in his budget to tax the games at 42 percent and have the machines regulated by the Pennsylvania Gaming Control Board (PGCB). However, the governor’s plan was not included in the state’s final budget.
The Pennsylvania Supreme Court is expected to soon rule on a second lawsuit challenging the legality of the machines.
Barley said the ordinance restricting skill games was all about protecting Parx Casino.
