As the American gambling industry coalesces around legalized sports betting and state by state the slots begin to spin and virtual chips hit the tables, there remains a fight for legitimacy for some in the landscape.

Manufacturers of land-based cabinets with games of skill or games of chance might find themselves in a sort of gray area – and they have good reason to worry that business life is not always black and white for them.

People gamble and they really don’t care if the odds are against them. It just takes one lucky hit to make up losses and potentially swing into the far-positive territory. Most people understand that a lucky hit may never come, and they are okay with that… content to pay to play for entertainment value as long as they at least have a chance to win big.

Gambling is the new big thing going by the numbers. The industry is well-regulated, with independent labs auditing the programs and random number generators with actual return-to-player percentages checked against the theoretical RTP to verify the maths and fairness of the games.

More Than an Advocate for American Casinos

The American Gaming Association is by its very nature an advocate for regulated gambling but it also uses its political heft to try to strong-arm competition its members may face. When speaking about online casinos that operate with offshore licenses and are completely legal at the federal level, though not in all states – the association tends to demonize the operators as illegal, unlicensed, and unregulated. In fact, 99.9% of all offshore casinos are indeed licensed where they are registered.

Addressing federal restrictions, it should be noted that IGT, now part of a world lottery conglomerate formerly known as GTECH, asked a federal court for final clarification about whether or not online casino gaming and lottery sales that cross state borders were under the purview of the Wire Act of 1961.

Each administration over the last decade or so has taken a different position on the matter with the Obama DOJ issuing an opinion in 2012 that the Wire Act only applies to sports betting (of course there were no online casinos in 1961 so how could it be otherwise?). The Trump DOJ contended that all online gambling that didn’t occur 100% within a single state’s borders was illegal under the act and reversed the Obama-era decision in 2018. The Biden administration let its position be known by refusing to defend the Session/Barr era lawsuits related to the matter.

Obvious that Wire Act Never Applied to Online Casino Gambling

That at least some members of the GOP knew full well it didn’t apply to poker or online casino casinos can be garnered from the fact that H.R.707 — 114th Congress (2015-2016) (introduced but never passed) sought to: “Provide that the prohibition against transmission of wagering information shall apply to any bet or wager, or information assisting in the placing of any bet or wager, thus making such prohibition applicable to all types of gambling activities, including internet gambling”.

IGT sued the U.S. DOJ over the ambiguously interpreted act in late 2021 and nearly a year later the company prevailed when the U.S. District Court in Rhode Island affirmed the prior U.S. Department of Justice (Obama era) opinion that the 1961 Wire Act applies only to sports betting – not to online poker or online casino gaming, making the question moot and as settled law.

Readers can learn more about the law from its inception as promoted by US AG Robert Kennedy, a history of DOJ opinions, and the final conclusion by the court at JD Supra here.

The AGA will also often lump offshore operators in with the currently unregulated or under-regulated skill game providers found at truck stops, mom-and-pop restaurants, grocery stores, and other neighborhood venues around the American landscape. It’s wrong-headed and simply has no basis in fact in many cases.

Take Pennsylvania’s Pace-O-Matic for example. Courts have consistently ruled in the company’s favor finding that the slot-like games were indeed legal games of skill and not purely games of chance. It is impossible to be paid out if the player doesn’t surmise where the winning line is and activates the payout by selecting only the winning symbols.

While the courts have ruled for the company that hasn’t stopped some gung-ho or overzealous district attorneys from seizing the machines and peripheral equipment as well as the cash that’s in the machines when they are confiscated illegally (according to a recent judge’s ruling).

Skill Games Don’t Cannibalize Sticks and Bricks Revenue

One of the arguments that the American gambling industry and its protector’s project is that these skill games are somehow cannibalizing the “legal” operators’ revenues. But that is a ludicrous assertion on its face going by the AGA’s own numbers. The year 2022 was a record-breaking year for the US commercial gaming operators producing a cash haul of more than $60b last year. That record-breaking revenue smashed the previous record of $53b set in 2021.

The same report stated that more than one in three Americans old enough to gamble went to a casino at least once last year, 84m of us.

According to an article at G3 Newswire, a spokesman for Pace-O-Matic, Mike Barley said: “When you are continuously hitting the jackpot on revenue, you can’t at the same time complain that skill games are a threat to your casino business. It doesn’t work that way. The numbers are the numbers.”

Whether or not a causative effect can be found or direct lines drawn from one to the other, he contends an increase in the number of available skills games in a given market also sees casino profits on the rise.

Skill Games are 100% Legal in Some States

Looking at Pennsylvania, where the legal games from Pace-O-Matic are found almost everywhere across the commonwealth, gambling revenues, mostly from in-person casino slot play were up 18% in January over the same period a year ago and operators saw $475m of revenue in December.

Barley points out that there is really no overlap in players who play slots versus skill games because each type of player is looking for a completely different experience. People who play skill games step out for some entertainment in their own communities whether they drive across town to a fire hall, fraternal club, or a veterans post or simply walk across the street or down the block to a restaurant, gas station, or a small grocery store.

“It’s just not the case that a couple headed to a casino decides instead to stop off at an Elks Club to play skill games instead,” he said. “Trying to say that the two experiences are the same for players is ridiculous. We don’t have the flashing lights and wall-to-wall games. For us, it’s maybe five games in a corner of a neighborhood restaurant.”

The G3 Newswire article concludes with the suggestion that rather than “pointing fingers” at the completely legal skill games, organizations like the AGA might consider teaming up with Pace-O-Matic in order to squeeze cheating operators and illegal machines out of the market.

Pace-O-Matic wants more regulation of skill games as well as taxation by the state which would make state governments stakeholders in the small but important sector.

Source: Record US casino revenues prove legal skill games pose no financial competition, G3 Newswire, February 3, 2023

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