Future Of 'Skill-Game' Machines Looks Different In Different States

December 21, 2023
After Kentucky enacted a ban this year, lawmakers in Pennsylvania, Virginia and Michigan are set to consider legislation in 2024 to determine the fate of unregulated gaming devices supposedly requiring player skill.

After Kentucky enacted a ban this year, lawmakers in Pennsylvania, Virginia and Michigan are set to consider legislation in 2024 to determine the fate of unregulated gaming devices supposedly requiring player skill.

For many years, unregulated skill-game machines have operated in convenience stores and bars despite efforts by law enforcement and state legislatures to rein in the growth of the games with names like Lucky Fruit and Amigos Locos.

The games, also known as grey-market machines, took center stage this year in Pennsylvania, Virginia and Kentucky, while a bill that offers a new definition of slot machines in Michigan is also on the legislative agenda.

In Pennsylvania, a bill to add “skill games” or “skill slot machine” to the list of illegal gambling devices under state law was introduced last month by state Senator Amanda Cappelletti, a Democrat.

Senate Bill 969 has been referred to the Senate Judiciary Committee. Cappelletti filed her bill about two weeks before the Commonwealth Court of Pennsylvania ruled in a case brought in Dauphin County that Pace-O-Matic (POM) machines are not slot machines and therefore not necessarily illegal under state laws.

Pace-O-Matic noted that that the Commonwealth Court of Pennsylvania also ruled in its favor in a Monroe County case that led to authorities returning several terminals and ruling POM machines to be a legal game of skill.

“Now that this ruling is in place, I hope we can focus on the more pressing matter of regulating and taxing skill games,” Michael Barley, POM chief public affairs officer, said in a statement.

“We are urging the General Assembly to pass reasonable legislation, not only to support the small businesses and organizations who benefit from skill games but to generate tax revenue for the state while also to giving law enforcement the framework they need to tackle illegal gambling,” Barley said.

The issue of whether the machines are illegal slot machines is expected to be eventually decided by the Pennsylvania Supreme Court. Until then, lawmakers will have to consider whether to support Cappelletti’s bill or another measure introduced to regulate and tax the machines.

Cappelletti continues to argue that skill-game terminals are not regulated and there are no consumer protections or assistance for problem gamblers. She claims the machines have diverted more than $650m from casino taxes that could have been used to support senior citizen programs.

Currently, there are estimated to be more than 80,000 unregulated machines in Pennsylvania. The machines can be found in gas stations and convenience stores across the state.

Republican state Senator Gene Yaw has introduced several bills in recent legislative sessions to regulate and tax skill games, a move strongly opposed by the state’s commercial casino industry and the American Gaming Association (AGA).

Yaw has a bill pending in the Senate’s Community, Economic & Recreational Development Committee to regulate the machines, which he estimates would generate $300m in annual tax revenue for the state.

Yaw’s Senate Bill 706 would also see a new division created under the state's Department of Revenue to regulate skill games rather than the Pennsylvania Gaming Control Board (PGCB), even though the board has experience of regulating slot machines in land-based casinos, as well as video gaming terminals (VGTs) in truck-stop locations.

Another legislative battle over the machines is brewing in Virginia, where lawmakers are expected to similarly consider a measure to legalize and tax skill games.

In October, the Virginia Supreme Court reinstated a ban on the machines, ruling the prohibition restricts gambling but not constitutionally protected free speech. Republican state Senator Bill Stanley Jr., an attorney who represents Sadler Brothers Oil Company, claimed the latter in his lawsuit seeking to overturn the original 2020 ban.

Stanley told the Roanoke Times that he believes lawmakers will pass legislation during the 2024 Virginia General Assembly “that will create a reasonable taxation and regulatory framework for skill games to return to Virginia”.

As of Wednesday (December 20), a bill to legalize skill games is not among the list of pre-filed measures in the state General Assembly.

In Kentucky, Governor Andy Beshear, a Democrat, signed House Bill 594 in March that makes skill games illegal in the state, with businesses that host the machines and game manufacturers facing local county government fines of up to $25,000 per machine if the devices are not removed.

Pace-O-Matic, which has 2,500 machines in the state, has sued to overturn the law. But under an agreement with the Kentucky Attorney General, the company only has to disable machines state-wide and not remove them until a Franklin Circuit Court judge rules in the case.

Meanwhile, one of several gambling bills introduced in the Michigan House of Representatives would redefine slot machines in state law, in an effort to close any loopholes created by new technology. Democratic Representative Cynthia Neeley last month introduced House Bill 5227.

The measure is causing concern among some of her colleagues because the definition of slot machines under the legislation is so broad that games in which a player earns tickets and exchanges them for prizes would be considered gaming.

The four-page bill would redefine a slot machine as “any mechanical, electrical, electromechanical, or other device, contrivance, or machine that, on insertion of a coin, token, or similar object, or on payment of any consideration, is available to play or operate".

“The play or operation of the slot machine, whether by reason of skill of the operator or application of the element of chance, or both, may deliver to or entitle the person playing or operating the machine to receive cash, premiums, merchandise, tokens, or anything of value, whether the payoff is made automatically from the machine or in any other manner.”

Neeley’s bill does not make crane games illegal, but each game must have a notice posted that it is not licensed or regulated by the state of Michigan.

The second session of the 102nd Michigan legislature begins on January 10.

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