The game of legal cat and mouse over Pennsylvania’s controversial “skill games” went into a new round this week, as Pennsylvania State Police seized the so-far unregulated gaming devices from five bars in Dauphin and Cumberland counties.
The raids came just weeks after a Nov. 20 Commonwealth Court decision that dismissed a state Department of Revenue argument that the machines in question are in fact slot machines, improperly operating without licenses from the Pennsylvania Gaming Control Board.
In its decision, the court found that the gaming control board has jurisdiction only over gambling operations that occur in the casinos sanctioned by the 2006 law that legalized slot play at up to 14 different destinations around the state.
That has since been expanded to include online games run by the casinos, video gaming terminals at truck stops and a subsequent set of mini-casinos authorized in 2017.
But PGCB’s powers do not, Judge Patricia McCullough wrote, extend to the bars, restaurants, clubs and convenience stores where the skill games have been proliferating in the last three years.
The court’s Nov. 20 left this rather large gray area, however:
It noted, A) The state can still prosecute the use “illegal gambling” outside the licensed casinos through longstanding provisions in Pennsylvania’s criminal code; and B) the question of whether the skill games are “illegal gaming devices” is for the next phase of the case.
With that door open, state police liquor enforcement agents, who are charged with enforcing liquor and related laws in licensed bars and taverns, apparently decided to flex their muscles Monday evening.
PSP spokesman Ryan Tarkowski confirmed to PennLive Thursday skill games from four different manufacturers were pulled from bars this week including Champions Sports Bar, the Stadium Club and Gilligan’s on the East Shore, and West End Cafe and North Mountain Inn in the Carlisle area.
No charges have been filed yet, and Tarkowski said the related investigations are continuing.
As are frustrations from bar owners and game suppliers who feel caught between a desire to offer an extra amenity that they say customers seem to enjoy, and running the risk of a violation that could jeopardize a valuable liquor license.
Jason Naugle, general manager of Champions Sports Bar in Highspire, said he found himself wondering, why us, this week when “pretty much every bar, every gas station has them… We’re not a nuisance bar. We cooperate pretty well with the Liquor Control Board.”
Tarkowski did not offer information on why the selected targets were hit, but he did note this standing position from the state police:
“It is important for the public to recognize that the recent Commonwealth Court ruling in no way legitimizes illegal gambling activity.
“Due to the number of manufacturers of these devices and number of different game systems being produced by the manufacturers, the investigation and prosecution of this type of illegal gambling activity takes time to develop.
“Businesses and people who engage in illegal gambling activities do so at their own risk.”
Further complicating matters, the skill games manufacturers don’t present a united front.
Pace-O-Matic is the firm that launched the current case, seeking a state court validation of a 2014 Beaver County ruling that held its games were not an illegal gambling device per se because their outcomes were determined “predominantly by skill, rather than chance.”
Those that master it, the company says, can routinely win 105 percent of the original amount spent to play.
Attorney Matt Haverstick said his client is asking Commonwealth Court to extend that finding through all Pennsylvania jurisdictions. That’s what the parties are expected to dive into now that the Gaming Control Board issue has been taken off the table.
But at the same time, Haverstick said Thursday, “we don’t purport to vouch for any other actor in the industry.”
There are powerful interests on both sides of this fight.
In one corner, there are the game manufacturers, operators and the establishments they do business with – membership-based social clubs, bars and taverns that have felt frozen out of Pennsylvania’s growing gambling pie.
They say skill games have been a bright spot in a machine-leasing market once built on jukeboxes and video amusement games that’s been decimated in recent years by smart phones and other changes in the entertainment world.
“For the first time in decades, things are looking up for our industry,” said Del Guerrini, president of the Pennsylvania Amusement and Music Machine Association, told a state House committee earlier this year.
That was seconded by bar owners who say they have long been losing customers to the brighter lights and betting games offered at the state’s 12 commercial casinos, and the private social clubs, legion halls and fire companies who said the new games have bolstered sagging bottom lines and reinvigorated the community-based charity works they are known for.
“We’ve gone from barely being able to make ends meet to making meaningful charitable contributions to our volunteer fire service,” Bill Reigle, an officer with the Middletown Fire Company’s Home Association, told the same committee this summer. Reigle said two machines there helped the home association contribute $10,000 to the fire company last year.
On the other side are the state’s licensed casinos, angry because the skill games operate without the 34 percent gaming tax imposed on their slot machine profits; and the Pennsylvania Lottery, whose director argues that skill games are a present and future threat to the Lottery’s sales growth and, by extension, its support for seniors programs.
Drew Svitko, the Lottery’s executive director, has said that economists working for it and its game suppliers estimate that skill games are now in 20 percent of its retail locations, and bleed an estimated $138 million in sales from the Lottery annually.
Adrian King, an attorney for Wyomissing-based Penn National Gaming, meanwhile, told the House panel the games fly in the face of legislative objectives set just two years ago when the House and Senate opted against wholesale placement of video gaming terminals in bars and clubs.
The skill games now operating, King said, do so without any of the machine testing and oversight, operator background checks or accounting controls that the state has imposed on all other forms of gambling. Citing anecdotal reports of street crime associated with the new machines, King argued “These machines are illegal, they are out of control and they should be removed from the Commonwealth.”
What both sides say they do crave, however, is a little clarity. Especially after this new round of raids coming after what Haverstick described as months of relative peace while the court case was proceeding.
“The frustration comes from the lack of black and white” surrounding the games, Steve Meyers, general manager of Gilligan’s, a bar in Swatara Township, Dauphin County, that was hit in this week’s raids, told PennLive Thursday.
Meyers noted he just decided about 10 weeks ago to join the trend and add skill games because he’d been losing customers to rivals and finally felt confident enough in their legality.
“And as I’m sitting here now, I’ve got no machines, and yet they’re all around me (at other businesses).”
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