Legal, licensed, regulated, and heavily taxed video game terminal operator Rob Miller testified his company, Commonwealth Gaming, is “under siege” because Pennsylvania has allowed illegal, unlicensed, unregulated, and untaxed competition to proliferate without consequence. In addition, the illegal video game terminals (VGTs) provide no tax benefit to the state.
He testified before the Pennsylvania Senate Community, Economic & Recreational Development Committee on June 23. Miller opened his testimony by calling the business conditions in Pennsylvania an “untenable situation.”
“No other state allows this to go on.”
Illinois fixed the illegal gambling device issue
Actually, both Illinois and North Carolina have had issues with VGTs that operate in gray machines, Chicago-based lawyer William Bogot told PlayPennsylvania after the hearing.
But Illinois solved most of the problem with a simple change in its law. Illinois addressed the proliferation of such unlicensed machines by making the possession of unregulated machines a felony criminal count rather than a misdemeanor. Bogot said truckloads of the unlicensed machines left the state the day before that change kicked in.
Commonwealth Gaming, with about a quarter of the licensed VGT market in PA, undergoes deep vetting of its machines and locations. However, that’s not the case with the gray market machines he competes against.
Testimony outlined the issues with illegal machines
Robin Miller testified:
“Our competitors in the so-called “skill” industry operate with impunity, under no rules without
any of the consumer protections fundamental to legal gaming across Pennsylvania. They have
no limit to the number of machines, hours of operation, or age requirements.
“They can offer establishments far more than the 15% share regulated VGTs are allowed to offer under the
law. Most egregiously, regulated VGTs shut down during COVID lockdowns only to see the
illegal competition merrily continues on as if the global pandemic did not exist.
“It’s as if my football team has to gain 10 yards in four downs, but the other team is allowed to choose their number of downs, ignore the refs, and gets 21 points for every touchdown.”
“The state of Pennsylvania receives a 52% tax from VGT and zero from skill games. Skill games
provide no consumer protection and operate outside the law. As you can see, it’s an impossible
competitive situation for a regulated company like mine.
“Even worse, it’s a massive lost opportunity to generate much-needed tax revenue for the people of Pennsylvania.
“Our company and our industry urge the legislature to tax and regulate the gaming that already
exists across the state and allow us all to compete on a level playing field.”
Real world anecdotes about illegal machines
Miller then provided three anecdotes:
- A licensed VGT operation wanted more than five VGTs and a bigger revenue share than allowed by law. They unilaterally unplugged five regulated VGT’s and replaced them with seven illegal machines. That means required surveillance, age limits, and self-exclusion protections are no longer part of the operation. So far, the establishment has faced no consequences.
- One truck stop chain decided to remove skill games and apply for a VGT license. Their skill game vendor is threatening to sue, claiming the skill game vendor has exclusive right to place electronic games in their stores. If true, this will completely block the installation of taxed and regulated VGTs.
- Another truck stop chain recently surrendered its conditional VGT license and installed skill games. Obtaining a VGT license is a complex, multi-year project, while skill games require no licenses, approvals, or background checks and are often operational with a mere 24 hours notice. Since no truckstop operators face legal action from skill games, they believe this might be the best business decision, particularly given the unfair competition from skill games.
Commonwealth has blamed AG for the proliferation of illegal machines
PlayPennsylvania broke the news about a scathing letter circulating in Harrisburg from a licensed video gaming terminal executive blaming the “proliferation of illegal skill games in Pennsylvania” on Attorney General Josh Shapiro.
However, Miller made no mention of the Shapiro while testifying.
Rutter’s testified ‘restrictive standards’ also a reason for slow VGT growth
Christopher Reed, a lawyer for the Rutter’s Companies, a PA-based convenience store chain with truckstops, focused on what he termed “restrictive standards” to get licensed.
Pennsylvania requires three acres of land and 50,000 gallons of diesel sales per month to host VGTs, while other states have no acreage requirement and only require 10,000 gallons of diesel sales per month.
Rutter’s suggested a reduction to two acres and diesel sales of just 15,000 gallons per month. Reed also said host communities should get a cut of the Commonwealth’s 52% tax.
Licensed VGTs subject to vigorous state review
Heather Worner, the director of Gaming Laboratory Operations for the Pennsylvania Gaming Control Board, outlined the testing for licensed machines including:
- Assuring payout of at least 85%
- Devices play as expected
- Payouts are truly random
- Machines connect to a central system
On the other hand, unlicensed machines face no testing and meet no state standards.
Goal is legislation, but time is short
This was the third related hearing by the Senate panel chaired by Sen. John T. Yudichak, examining how illegal machines impact the taxed gambling industry.
Pennsylvania Gaming Control Board’s lawyer explained that the board has no legal oversight for machines outside casinos in the first hearing.
At the second hearing, a PA State Police leader begged for swift “clarity in the law.”
The committee chair concluded the hearing by saying the goal is bicameral and bipartisan legislation.
But he put no timeline on that goal and the House Gaming Committee has expressed no similar goal
Legislatively, Harrisburg is on target to pass a state budget before breaking for the summer at the end of the month.
Lead photo c/o Pennsylvania State Police.