Skill game: ban or regulate?

During a spirited debate, stakeholders express differing views on whether it is too late to impose a ban or licensing on grey skill games. One camp argues that these games negatively impact the casino industry, while the opposing side maintains that it's too late to take action. 

Recently, the National Council of State Legislators on Gaming (NCLGS) convened in Pittsburgh for its summer meeting, focusing on the rising prevalence of unlicensed skill games across multiple states. Experts sought to determine how government and licensed casinos can effectively curb the unchecked proliferation of these games.

Pittsburgh was a strategic choice for the meeting, as estimates suggest that Pennsylvania has over 100,000 slot machine-like devices in circulation. A representative from one grey skill game company claims that casino revenues indicate these games are not detrimental to the industry. 

Skill-based slot machines can be found not just in bars and clubs, but also in gas stations, convenience stores, and other easily accessible locations, including those frequented by children.

The panel was moderated by Oklahoma State Representative Chris Cannady. Among the participants were:

• Anthony Gaud, co-CEO of Gaud-Hammer Gaming Group (G3);
• Matt Hortenstein, general counsel, J&J Ventures;
• Jeff Morris, vice president of public affairs at Penn Entertainment;
• Kurt Steinkamp, ​​chief of staff of the Michigan Gaming Control Commission;
• Eric Weiss, North America Managing Director, IC360 Compliance Solutions;
• Michael Pollock, Senior Policy Advisor, Spectrum Gaming Group.

Genie out of the bottle released

The central theme of the conference highlighted the challenges of banning something that has already become deeply embedded in the market. Hortenstein and Weiss pointed out that there are already hundreds of thousands of skill-based games in circulation, rendering the prospect of a ban nearly unrealistic. Weiss likened the situation in states like Pennsylvania to a game of Wormhole: when one location is closed, another emerges almost immediately. Even law enforcement has struggled to keep pace; in Pennsylvania, skill game machines confiscated by police are often returned to their owners after favourable court rulings.

Kurt Steinkamp from Michigan emphasised that the decision to regulate skill games ultimately lies with state legislators. He called for collaboration between lawmakers and regulators to better understand the associated risks, which would facilitate information sharing and the development of regulatory frameworks.

Pollock, who has acted as an expert witness in skill games litigation, advocated for a complete ban on these games. He noted that since gambling expanded beyond Nevada, acquiring a slot machine licence has become a significant privilege, requiring operators to undergo rigorous assessments to demonstrate their trustworthiness. He argued that allowing licences for skill games would disrupt the established regulatory framework.

Pollock further compared the notion of tax and regulation of skill games to granting licence to illegal casinos when introducing a new jurisdiction, citing historical examples. For instance, Ontario regulators had previously offered licences to grey-market betting operators when they launched their regulated market in April 2022.

Morris from Penn pointed out that skill game manufacturers frequently violate regulations without proving their reliability. He expressed concern that licensed operators are losing millions in potential revenue to these skill games, while the government is missing out on revenue opportunities.

Betting cannot be prohibited

At the end of the discussion, all participants agreed that there should be a level playing field in any jurisdiction that chooses to regulate and tax skill games. Skill games should be subject to the same analysis, player protections, responsible gaming measures and tax rates as slot machines in a casino.

They also noted that the number and location of games should be limited. They should not be placed in widely accessible places such as stores, gas stations, or lottery ticket offices, where the skill game would be difficult to control properly.

The genie may never be put back in the bottle. However, participants said such measures would help prevent the detrimental effects of skill games across the country.