Legal Battles Over Skill Games Continue Across PA; Pace-O-Matic Files Lawsuit Against Gaming Regulators and Liquor Control Enforcement

Written By Staff on June 14, 2022 - Last Updated on June 16, 2022
PA Skill Games Involved in Illicit Activity

Unlicensed “skill games” continue to spread across Pennsylvania. Since they exist in gray legal areas, the games have caused numerous issues with a number of stakeholders, including: law enforcement, PA casinos who say are siphoning business without paying the proper taxes, and local businesses that depend on them for revenue.

In May, there were two separate instances where PA county courts ruled that the “skill games” were wrongfully seized during raids and must be returned.

What are skill games?

They look and play a lot like slot machines. Skill games can usually be found at convenience stores, VFWs and bars. The main point of contention is that winning at a slot machine is based on luck and skill games say that for players to win, some skill or ability is required. (It’s usually a memory game or ability to follow prompts).

Slot machines in PA casinos are regulated by the Pennsylvania Gaming Control Board. Slots are subject to a tax rate of 54%, one of the highest in the country. Skill machines are governed by the Crimes Code. They are not subject to the same taxes as slot machines found at casinos.

Skill games seized

During two dates in Dec. 2019 and Jan 2020, undercover Pennsylvania Liquor Enforcement officers went to the Swizzle Stick in Luzerne County, PA. While there, they played multiple electronic video games owned by Pinnacle. On Jan 27, 2020, during a routine inspection, they seized three machines (Ultra and Ultramax) from the Swizzle Stick. The Bureau of Liquor Control Enforcement (BLCE) officers seized the following machines in Luzerne County.

  • Jan 27, 2020: Park Market Six Packs to Go, 2 machines during a routine inspection.
  • Sept 30, 2020, Anthracite News Stand, 4 machines
  • July 20, 2021: BW Saloon, 2 machines

In total, the BLCE seized 11 machines manufactured by Pinnacle.

Court orders skill games and cash returned to Pinnacle

In June 2020, Pinnacle began filing motions with Luzerne County to have the machines and cash seized returned claiming that they are not gambling devices. During the hearing trial, Susan Hensel, Esq., testified on behalf of Pinnacle. Hensel was the first employee of the Pennsylvania Gaming Control Board. She served as Director of Licensing from 2005 to 2021 and is now founder and partner of Hensel Grad., a law and consultancy firm.

She played the Banilla models and games that had been seized by the BLCE. Hensel testified that various player skills are used in both the reel and patterns of the game such as pattern recognition, understanding and knowledge of the game, dexterity and memory. Since these memory skills can determine the outcome of the game, it was Hensel’s opinion that the Banilla games are “skill games.”

The court defined the three elements of gambling as consideration, a result determined by chance rather than skill, and reward. Luzerne County Court ruled that the player’s skill can cause the result of a successful outcome during each play and therefore the machines are not gambling devices and cannot be seized as contraband.

The ruling reads, in part:

“The outcome of every round of play on the instant machines is not predominated by chance as it, ultimately, is neither a matter purely of fate nor is it even dictated by the source code of the gaming software encoded within the machines. The outcome of every round of play, instead, is predominated by a player’s choice over their election to utilize–and their exercise of–skill, to whatever degree it may have been honed.”

“Pinnacle, therefore, has met their burden to prove by a preponderance of the evidence that skill predominates over chance in the gameplay on the Ultra, Ultramax, and Dual machines which house the Banilla gaming software.”

The BLCE was ordered to return the following to Pinnacle Amusements:

  • 3 Keystone Ultra-model, 5 Keystone Ultramax, 2 Ultramax Dual-mode, 1 Keystone Gold I-model
  • $1,526
  • As a result of the seizures at Park Market Six Pack To Go, the PLCB was ordered to return $256

Read the full Pinnacle v BLCE Opinion and Order here.

Seized games in Clearfield County returned to Pace-O-Matic

In late May, a Clearfield County Court order deemed that seized Pennsylvania Skill Amusement Devices be returned to Pace-O-Matic. The Commonwealth of Pennsylvania admitted to “no wrongdoing.”

The seized property returned to Pace-O-Matic included:

  • 5 Pennsylvania skill amusement devices
  • 30 weekly accounting documents
  • D-Link Router Box, NetGear Router Box
  • $5,0000

Pace-O-Matic spokesman Mike Barley said in a press release:

“This is a tremendous victory and vindication of Pennsylvania Skill games and reaffirms our status as legal games of skill. This is another step in our effort to have legal games of skill further legitimized. In fact, Pace-O-Matic stands out among our competitors as the active and driving force seeking additional regulation and taxation. It is not often that a company or industry that markets a legal product approaches the state General Assembly asking for additional regulation and taxation.”

Pace-O-Matic says state regulators and BLCE harassed and conspired

Pace-O-Matic, a developer of skill games, filed a lawsuit in PA Commonwealth Court in April against the Pennsylvania Bureau of Liquor Control Enforcement (BLCE). It has since been amended to include the Pennsylvania Gaming Control Board.

POM’s suit maintains that the skill games have never been deemed illegal in Pennsylvania and points to a 2014 Beaver County Court ruling as the basis. POM’s lawsuit alleges targeted harassment, collusion and conspiracy.

Some of Pace-O-Matic’s complaints against the BLCE allege:

  • Targeted harassment toward POM and its business partners starting in 2018.
  • The officers instructed to deliver messages to the owners that skill games were illegal, would be imminently seized, or  legislated out of existence.
  • Casino lobbyists and public relations personnel recruited the district attorney of Clearfield County to seize the skill games.
  • BLCE has used the same incorrect description of Pennsylvania gambling law, and has ignored the import of the skill game’s preview feature and “Follow Me” game, to deceive judges throughout the Commonwealth and secure judicial sign-off on defective search warrants.
  • The Bureau has worked with casino lobbyists and public relations personnel to disparage the skill games, instigate seizure of the machines, and harass POM’s business partners.
  • Bureau personnel also directly communicated with casino lawyers in a conspiracy to harass and attack POM. The email below was listed in the lawsuit as an example:

The lawsuit states that up until 2019, PGCB took the position that it did not regulate the skill games. After a PA Commonwealth Court ruling in 2019 which held that the Gaming Act did not apply to skill games, POM alleges that the PGCB began to change its stance on skill games.

Some of Pace-O-Matic’s complaints against the Pennsylvania Gaming Control Board allege:

  • Changed its legal position on due to pressure and lobbying from casinos such as Parx, Penn National, Churchill Downs, and Mohegan Sun.
  • Casinos and the Bureau have conspired with PGCB for PGCB’s allocation of grant money to district attorneys who agree to single out the skill game for seizure.
  • PGCB steers grant money to district attorneys and assists in coordinating the training of county detectives who agree to seize and prosecute the locations lawfully possessing the skill game.

“Skill games are a threat to the legal gaming industry and state lottery”

Peter Shelly, a spokesperson for the casino industry group Pennsylvanians Against Illegal Gambling (PAIG), commented to PlayPennsylvania in Jan 2022:

“There is no question that skill games are illegal no matter who manufactures them. To suggest the (Pennsylvania) Lottery isn’t losing millions of dollars defies the state’s data and is ludicrous. Skill games are impacting the Lottery and programs the lottery benefits. There is a reason the Office of Attorney General and Pennsylvania State Police keep confiscating these machines; they are illegal.”

Pennsylvanians Against Illegal Gambling sent out an email to Pennsylvania lawmakers on June 9. It read in part:

“Spin does not change the fact that these illegal machines are a direct and growing threat to the legal gaming industry and the state lottery. There is zero capital investment, zero job creation and not a single cent in gaming taxes. Pennsylvania’s licensed and strictly regulated casinos, on the other hand, pay over 57% of gross slot machine revenue to the Commonwealth, support 30,000+ jobs, and provide more than $2 billion in annual wages and benefits.”

The ongoing drama about skill games in PA

No need to turn to your favorite streaming service for your next drama. The saga of skill games in Pennsylvania spans years and continues to add chapters of drama, bickering and legal actions.

Some casinos have reduced the number of slot machines. One of the reasons is unregulated games of skill.

Some opinions about Pennsylvania skill games

Cyrus Pitre, Chief Enforcement Counsel at Pennsylvania Gaming Control Board during a PGCB meeting said

“The only difference between a slot machine and a skill game is that a slot machine is regulated by the Board. A skill game is put out there willy nilly by anyone in the public to operate. There’s no protections and nothing to benefit the state from these machines. This board has a duty to protect the public and the industry it helped create to ensure the operation of any gaming activity is regulated and licensed.”

Senator Gene Yaw introduced legislation in Nov. 2021 that would tax skill games. He says they help small businesses:

“If you want to know why legal video skill games are important, all you have to do is walk into any market in Western Pennsylvania, family owned restaurant, VFW or bar. “They are allowing these businesses to provide health insurance for their workers, increased salaries, and in some cases, keeping the doors open.”

Adrian King, a lawyer at Ballard Spahr representing Penn National Gaming said:

“Penn National contends that skill machines have undoubtedly contributed to slot count reduction being necessary. Skill games are a type of slot machine. This isn’t just a Penn National problem.”

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