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‘Skill Games’ Still Defying Shutdown

Some states still dealing with unregulated “skill games” despite the nationwide shutdown

‘Skill Games’ Still Defying Shutdown

On Monday, March 16, the Pennsylvania Gaming Control Board ordered all casinos in the state which had not already done so to shut down, part of the larger nationwide effort to slow the spread of the deadly coronavirus. The following day, the gaming boards in Missouri and Kansas followed suit, and in less than a week, the entire legal gaming industry was at a standstill.

Many in the industry had initially thought that shutting down two or three slot machines between each active game would allow casinos to remain open with social distancing, but after the Centers for Disease Control revealed that the Covid-19 virus can survive up to two or three days on stainless steel, plastic and other nonporous surfaces—like the player interfaces on gaming machines—an industry shutdown was unavoidable.

But as recently as April 10, convenience stores, pizza parlors, gas stations and other retail locations in Pennsylvania, Missouri and elsewhere still had live gaming machines operating. They are the so-called “skill games” that had been cropping up in several states prior to the crisis, the subject of an effort launched in February to battle them by the Association of Gaming Equipment Manufacturers (AGEM) and the American Gaming Association (AGA).

The games are unregulated machines that purport to offer better results if the player uses skill. However, the dubious “skill” involved is typically nothing more than receiving a winning spin on a machine (a machine that looks a lot like a slot machine), and deciding whether to wager on the next spin. In many cases, the player can opt not to even use the “skill” feature, which means they play just like a slot machine.

If the skill games were a concern before the current national emergency, they are much more so now. Because they are not subject to regulations or laws—all their manufacturers, of course, claim they are perfectly legal—until recently, no one had specifically ordered them to be shut down during the crisis, and many of them remain live today, some in rows of machines in small areas of various retail businesses.

“These machines are still out there, and they’re still illegal,” says Pete Shelly, spokesman for Pennsylvanians Against Illegal Gambling (PAIG). “We still see people playing machines around central Pennsylvania. Here we are, the casinos have closed down—20,000 workers idle. And their customers’ health and safety come first.”

PAIG, formed last October, is funded by the Parx Casino in Bensalem, the state’s most profitable casino. Parx is united with other regulated land-based casinos in the state in battling the unregulated machines.

“We are working with Pennsylvania’s licensed, regulated and supervised casinos, as opposed to the skill games operators, which are none of the above,” Shelly says. “Our goal is to shut down these illegal slot machines. So, we’ve launched the website, had some paid media, and we’re getting a lot of traction on social media, with reporters paying attention to the issue all of a sudden.”

According to Shelly, there are more than 20,000 of the unregulated machines operating in the state. There are gas stations that have built extra rooms on as gaming parlors featuring as many as 50 or 60 of the machines. Shelly says some businesses have put up tents to house the games. In addition to gas stations and convenience stores, the machines can be found in businesses as unlikely as the corner laundromat.

The organization has sent members out to take pictures at the locations, and has published a rogues gallery of photos that show the games—which pay out in cash or tickets that can be redeemed for cash—are easily accessible to children. One photo shows a man playing a slot-like device with his daughter, a toddler, in his lap wearing pajamas.

“It’s tough to practice social distancing when you’re standing shoulder-to-shoulder with a couple of other people playing illegal slot machines packed in the corner of a convenience store,” Shelly says.

Call to Arms

PAIG’s efforts to publicize the problem of unregulated machines has already yielded results. The Pennsylvania State Police has stepped up its efforts to enforce the governor’s Covid-19 shutdown by ensuring the unlicensed machines are shut down.

“The Pennsylvania State Police reminds licensed liquor establishments to refrain from having patrons remain in their buildings to operate illegal video gambling devices,” said the state police organization in an April 2 press statement. “The Pennsylvania State Police Bureau of Liquor Control Enforcement (BLCE) recently received an influx of public inquiries related to liquor licensees allowing patrons to remain in their establishments to operate video gambling devices, sometimes marketed as ‘games of skill,’ in violation of restrictions in place to mitigate the spread of Covid-19.

“While our position on the legality of these devices remains unchanged, ensuring public safety in the midst of the ongoing health crisis is our top priority,” added Major Jeffrey Fisher, director of the state Bureau of Liquor Control Enforcement. “Liquor licensees are cautioned that in addition to potential unlawful gambling charges, they are subject to citation if they fail to take steps to prevent patrons from remaining on premises to operate video gambling devices.”

From March 18 to April 2, BLCE completed 12,877 checks at licensed liquor establishments throughout the commonwealth and issued 53 warnings and four notices of violations (which are pending an administrative citation). Two establishments have had their liquor licenses suspended.

“We are encouraged by Pennsylvania State Police’s proactive efforts to address this glaring public health risk,” noted Shelly in a statement released the day after the police agency’s release. “As Pennsylvania State Police pointed out, these games of skill are already illegal in the commonwealth, yet now they pose the real potential to put lives at risk.”

Of course, the directive does not apply to corner stores, laundromats and other establishments that do not have liquor licenses. Despite the efforts, as of press time, Shelly says rogue machines were still operating in central Pennsylvania.

“If you go to any restaurant or pizza parlor, or anywhere I’ve gone personally since Covid-19 hit Pennsylvania hard, all the chairs are turned over,” Shelly says. “Nobody’s sitting down anywhere; you’re not to congregate. But these skills games still have machines open. There’s one in a small town right across the river here from Harrisburg, and they have three machines, and people are sitting there playing what is an illegal slot machine. There’s no supervision, no regulation. If they were a licensed, legitimate, regulated, supervised casino, they’d be shut down.

“Basically, they’re thumbing their nose at the state, and they have been for the year and a half these machines have been out.”

Before the current crisis, the Pennsylvania State Police had confiscated skill games in several raids across the state. The largest manufacturer of games in Pennsylvania, Pace-O-Matic, is currently in an ongoing legal battle against seizures of its “Pennsylvania Skill”-branded games. However, since the Covid-19 crisis began, the police obviously have had other issues to address.

Meanwhile, Shelly says PAIG has been fielding calls from across the state since the organization released its first press statement. “We started a toll-free number, and we’ve gotten north of 200 phone calls and emails from people,” he says. “There’s a machine at the gas station around the corner, there’s a machine at the pizza parlor. There’s a convenience store across from a church and my back yard and elementary school… We are getting some traction. People do want these machines out.”

The Pennsylvania Gaming Control Board may soon figure in the fight against unregulated machines as well. The board operates a grant program for local jurisdictions meant to battle illegal gambling. Thus far, the Local Law Enforcement Grant Program has been used to thwart a variety of forms of illegal gambling, but not for enforcement action against unregulated skill games.

However, Gaming Control Board spokesman Doug Harbach says prior usage does not restrict the program from being used in enforcement efforts against the skill games going forward.

“The grant program that we oversee per the Gaming Act is far broader than skill games,” says Harbach. “It is for law enforcement agencies to ‘investigate violations of and enforce laws relating to unlawful gambling in this commonwealth.’ For example, I remember a grant to the city of Harrisburg that was used in particular to thwart dog fighting.”

Harbach says the program aids state police where no municipal police force exists, but nothing in the law prevents the state police from using such funds in shutdown or seizure efforts regarding unlicensed skill games.

“The Pennsylvania State Police could apply (for the grants) with some restriction,” Harbach says. “The grant guidelines regarding the PSP state that the money can be applied for and used by them ‘when conducting unlawful gambling enforcement and prevention activities in a municipality which does not have a municipal police department.’”

Nationwide Problem

The problem of unregulated games operating despite the Covid-19 shutdown is by no means restricted to Pennsylvania. A few days after PAIG released its press statement, the St. Louis Post-Dispatch published results of its own research showing that skill-game operators were defying Missouri’s shutdown order as well.

The newspaper found unregulated machines still plugged in at gas stations in the Columbia area, and there are estimates that around 14,000 of the games are located in gas stations, clubs and bars around the state.

The largest manufacturer of the unregulated devices in Missouri, Torch Electronics, is embroiled in its own legal battle. The company’s leaders face felony illegal gambling charges in Linn County; the first hearing in that case was scheduled for April 23.

“We would hope that the criminal case proceeds,” says Mike Winter, executive director of the Missouri Gaming Association, “and if the General Assembly does not pass a bill this year to deal with the illegal machines, that court case and court decision may give them some guidance on possible directions to take.”

Meanwhile, on March 27, the Missouri Department of Health and Senior Services issued a directive banning the operation of gaming machines installed by Torch Electronics at gas stations and truck stops in the past year. The agency previously had not taken a position on the legality of the machines, but took action when advised they were operating despite the Covid-19 crisis.

“Due to the potential unnecessary exposure associated with individuals playing coin-operated amusement devices… and slot machines, all persons should avoid using such devices or machines and the owner of such devices or machines shall be prohibited from operating them for public use through the duration of this order,” wrote DHSS Director Randall Williams in a statement published by St. Louis Today.

The order, which went into effect March 28, is set to last as long as the state is under an emergency declaration. According to LeAnn

McCarthy, public information coordinator for the Missouri Gaming Commission, while the agency has received three formal complaints concerning illegal machines since the March 17 order shutting down casinos, there have been no complaints since the DHSS order.

Torch spokesman Gregg Keller told the newspaper the company would abide by the order. “Torch is complying with the government’s call to shut down coin-operated machines, as they do with all government laws and regulations,” Keller said.

“We are closed, and are not able to have our patrons come to our facilities,” says Winter at the casino association. “But these machines are still out there being operated. We’ve voiced our concern about the machines, and will continuously monitor the court cases as they move forward. If there are opportunities that we can participate to get the illegal machines out of play, we’ll take every opportunity to do so.”

Neither Pace-O-Matic in Pennsylvania nor Torch Electronics in Missouri responded to requests to comment for this article.

Legislative, Regulatory Efforts

Both Pennsylvania and Missouri have outright bans of the unregulated machines pending in bills that are currently stalled in committee, and neither is likely to see any movement this year as the pandemic plays out.

“We testified in support of the two bills that were filed in the Senate that try to get a handle on the illegal machines currently in use across the state,” says Winter. “We think it provides a good framework for law enforcement and prosecutors, and gives them the tools to actively go after illegal machines that are in place.”

As the casino shutdown continues, so does the national effort by the gaming industry’s operators, regulators and manufacturers to rein in the problem of illegal, unregulated machines. In February, AGEM published a fact sheet that identifies the different types of unregulated machines out there, and a few weeks later, Gaming Laboratories International followed up AGEM’s effort with a white paper focusing on the national problem.

“Illegal and unregulated gaming is a rapidly growing problem in the U.S.,” said the executive summary of the GLI study, available at the organization’s website, gaminglabs.com. “Sophisticated technology allows developers to circumvent vague or obsolete criminal gambling statutes, resulting in lost revenue for states and tribes. Moreover, it markedly increases risks for consumers, especially underage and problem gamblers.

“The best way to effectively protect states, tribes and consumers from the harms of unregulated and illegal gambling is through a modernized regulatory framework appropriate for this modern era.”

“We were very supportive of working with AGEM and helping GLI to get their recent white paper out,” said Bill Miller, president and CEO of the American Gaming Association, in an interview with Roger Gros published in late March by GGB News. “When I spoke at NCLGS in San Diego earlier this year about the illegal market, I didn’t know why we call them ‘gray market’ machines. They’re simply illegal machines.

“Remember, these machines don’t have any responsible gambling elements. They are not regulated. While some might say they’re regulated by some local entity, they’re certainly not regulated by the states. We need to shine a spotlight on this illegal activity in the same way that we shine a spotlight on local criminal enterprises, like illegal bookmaking and the illegal offshore market.”

“It’s beyond outrageous in states like Pennsylvania and Missouri that these unregulated machines that rip off players are still powered on,” says Marcus Prater, executive director of AGEM, “as regulated casino gaming goes dark and casino workers are losing their jobs. Local authorities need to do the right thing once and for all and shut them down for good.”

PAIG’s Shelly notes that the Pennsylvania State Police has released statements warning that the unregulated machines are ripe for corruption, money laundering, loan sharking and other crime, adding that they have led to robberies at many retail locations.

“A couple of these places have been knocked over—a laundromat, a convenience store/mini-mart,” Shelly says. “These machines are illegal, and they must go. Slot machines belong in licensed, regulated and supervised casinos. Period.

“The casinos provide hundreds of millions in tax revenue every year. They send $200 million-plus to the Horse Racing Development Fund every year. The local share provides grants and funds to local fire companies, EMS, senior centers—and all that is on hold right now, because they’re closed. And yet, these illegal operators who don’t pay a gaming tax, who don’t have to provide a local impact, who don’t employ 20,000 employees, who aren’t regulated, supervised or licensed, are still out and about, basically taking money away from the lottery and other programs here in Pennsylvania.

“The governor has made it clear, the PGCB has made it clear that as long as these machines are out there and are not shut down, taped off or wrapped in bubble wrap during this pandemic, there is a risk that as people gather to play these machines, the risk of community spread is heightened. Casinos are doing the right thing, and some of these other operators clearly are not.”

How to Spot an Illegal Game

In February, the Association of Gaming Equipment Manufacturers released a fact sheet in partnership with the American Gaming Association to industry stakeholders including state and local law enforcement agencies and regulatory agencies across the country outlining the characteristics of the illegal machines operating around the country.

The fact sheet describes the characteristics of each type of unlicensed machine, and provides a list of three elements common to all:

  • The games have not been affirmatively approved by the state under a regulatory system administered to protect the public.
  • The operators of the games are not subject to the suitability examinations and licensing for gambling operators imposed by state law.
  • The sponsors, proponents and operators of the games always claim reliance on some exception or “interpretation” that the machines are not gambling games because: either consumers use their skill, knowledge or dexterity to play and therefore there is no “chance” involved in the game; or, the game is made available without the consumer paying money into the machine to play, although the consumer may have given valuable consideration for some other good or service as a pretext to gain access to use the machine.

“Unregulated gaming machines designed to look like regulated slot machines to fool players into thinking they are getting a fair chance,” the fact sheet reads, “rarely include any responsible gaming features and enrich only the unregulated machine companies and locations while creating a burden for law enforcement, health care providers and regulators. Furthermore, unregulated gaming increases social costs and criminal activity and provides questionable tax or other benefits for the states where it exists.”

Frank Legato
Frank Legato is editor of Global Gaming Business magazine. He has been writing on gaming topics since 1984, when he launched and served as editor of Casino Gaming magazine. Legato, a nationally recognized expert on slot machines, has served as editor and reporter for a variety of gaming publications, including Public Gaming, IGWB, Casino Journal, Casino Player, Strictly Slots and Atlantic City Insider. He has an B.A. in journalism and an M.A. in communications from Duquesne University in Pittsburgh, PA. He is the author of the books, How To Win Millions Playing Slot Machines... Or Lose Trying, and Atlantic City: In Living Color.