Grey-Market Machines Disabled As Lawsuit Determines Their Legality In Kentucky

June 27, 2023
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A Kentucky judge has signed off on an agreement reached between the state attorney general and Pace-O-Matic to disable thousands of skill-based games, also known as grey-market machines, while the constitutionality of a ban passed by the legislature is challenged in court.

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A Kentucky judge has signed off on an agreement reached between the state attorney general and Pace-O-Matic to disable thousands of skill-based games, also known as grey-market machines, while the constitutionality of a ban passed by the legislature is challenged in court.

In the six-page "agreed status quo order", Franklin Circuit Court Judge Phillip Shepherd gave Pace-O-Matic until Thursday (June 29) to disable its “Burning Barrel” games state-wide, but the company is not required to remove any of the games from their current locations.

Pace-O-Matic has 2,500 “Burning Barrel” games in Kentucky, according to media reports.

Shepherd added that possession of the machines does not violate the prohibitions established by House Bill 594 while this order is in effect. Pace-O-Matic has until July 5 to file a notice and affidavit with the court explaining the steps taken to make sure all Burning Barrel games have been disabled.

“By disable, the court means that the games be rendered inoperable, not playable, and unable to deliver or receive any money or property or any right to receive any money or property,” Shepherd wrote.

According to the order, Attorney General Daniel Cameron will not to enforce the ban with respect to Burning Barrel games and will be required to give the court 24 hours' notice of any request for his office to participate in a “criminal action” against Pace-O-Matic.

“The attorney general is pleased that the plaintiffs have agreed to disable their machines, thereby eliminating the need for enforcement action while the litigation proceeds,” Shellie May, communications director for the attorney general, said Monday (June 26).

Pace-O-Matic filed a lawsuit shortly after Democratic Governor Andy Beshear signed the ban into law in March, arguing it was unconstitutional.

“I am a pro-gaming governor. But it is an industry that absolutely has to be regulated and it needs to be legal,” Beshear said after signing the ban.

Last month, Prominent Technologies, a manufacturer and operator of so-called skill games, filed a second lawsuit challenging the constitutionality of the Kentucky ban. Prominent was not named in the agreed status quo order obtained Monday by VIXIO GamblingCompliance.

Messages left with Prominent in Altoona, Pennsylvania, seeking comment were not returned.

Both complaints are similar and seek to overturn the state’s ban on unregulated gaming devices on the grounds that it violates the gaming machine owner’s right to free speech, the right to due process and the right against confiscation of property without just compensation.

Under HB 594, anyone who manages or owns the supposedly skill-based machines in Kentucky could be subject to a $25,000 fine per device.

On Monday, the Kentucky General Assembly’s Public Information Office issued a list of new laws that take effect on Thursday, including the ban on grey-market machines. Most laws in Kentucky take effect 90 days after the legislature adjourns.

The devices are called grey machines because they have operated in a grey area in the state’s gambling laws while growing more prevalent at gas stations, bars and convenience stores over the past two years.

Estimates place the number of machines in Kentucky at upwards of 40,000, an increase from around 12,000 in 2022.

The Pace-O-Matic lawsuit has become part of another case over a new state law that gives Cameron, plaintiffs and defendants the ability to have a court case randomly moved to any other circuit court in Kentucky’s 120 counties.

Cameron’s office requested the change of venue for the skill-based lawsuit on the same day in March that Senate Bill 126 became law.

Pace-O-Matic and other plaintiffs representing manufacturers and operators believe that law is unconstitutional and had asked Shepard in April to deny the request.

Instead, Shepard asked the Kentucky Supreme Court to consider the constitutionality of the new law.

“We are awaiting the Supreme Court’s action on our challenge to SB 126, regarding jurisdiction,” Michael Barley, a spokesman with Pace-O-Matic, said Monday.

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