How Skill Machines Bypassed Video Slot Regulations in the USA

Shane. - October 28, 2023
Picture of a slot reel surrounded by gold dollar coins.

Join us to learn more about the world of unregulated skill machines and how these slot-like games have managed to avoid being classified as gambling despite robust US gambling laws.

When it comes to finding ways to circumvent the letter of the law, the gambling sector has always had people testing its limits to see what is legal and what is not. In the United States, one of these limit testers that has successfully sidestepped RNG-based casino game regulation for years has been the “skill machine” or “grey machine", which is popular in bars, restaurants, gas stations, and even shopping malls.

This type of specialised not-a-slot gambling machine is not uncommon. In the United Kingdom, AWP (amusements with prizes) machines ruled the pub scene. They are slot machines in every way other than giving out prizes, not cash, so players were not technically gambling according to UK law.

Join us as we learn more about these machines in the US, how they avoided legislation, their popularity, and the current legal challenges they face.

What is an American Skill Machine?

These slot-like gaming machines have caused incredible regulatory upheaval due to the fact that they look and, for the most part, play just like any other video slot. They are hulking great machines with a spin button and a screen filled with reels and symbols, offering a variety of payouts for collecting matching sets.

The argument for them not being illegal casino games is built on the premise that there is a level of player skill involved in determining some of the outcomes. The reel screens are often called puzzles, and should two symbols appear in a row, the user can choose to remove the third symbol, replacing it with what amounts to a Wild and creating a winning line.

Other versions allow the player to see the next card, another term for a screen filled with symbols, and choose to hold some symbols before moving ahead to create winning paylines that way.

It is this control over the winning symbols that is argued as making it a skill game like poker. However, that control only counts when there are winning symbols. All other spins do not offer any chance of winning, making them no different from a standard RNG slot machine.

How Popular Can Bar Games Be?

A less defensible position is “it’s just a bar game”. Some players see them as inoffensive and argue that since they appear in bars, gas stations, and other public locations, they must be low-risk casual games and, therefore, safe to play.

According to a report by the American Gaming Association (AGA), that belief could not be further from the truth. They claim that regulated machines have a hold of 7.7%, whereas unlicensed machines have been found to hold 25% or more.

Since these machines are not licensed, vendors do not pay any taxes on the revenue they generate. The AGA report showed that Americans stake more than $100 billion on these black market slot-like machines, which equates to a loss of “$8.7 billion in state taxes and $27 billion in legal gaming revenue”.

AGA President and CEO Bill Miller said:

“Keeping America’s gaming industry strong, safe and responsible can only be done through the robust infrastructure of the well-established legal market, not by rewarding bad actors with half-measures that fail to address the dangers of unregulated gambling.”

One of the biggest concerns about these games, outside of the financial losses and poor odds, is that they are available to minors. They are displayed in public venues with little oversight and, as such, can be played by people under the legal gambling age, which increases the risk of them developing compulsive gambling behaviours.

Courts Flip-Flop on Defining Them as Casino Games

While these slot-adjacent gambling games have managed to avoid nationwide regulation, the legislation of online gambling and sports betting in the US has begun to shine a spotlight on these grey areas in the industry.

Before this, the cases that have been brought to bear on the developers of these games, most notably Georgia-based Pace-O-Matic, have all fallen in favour of the unsanctioned industry and its providers.

Two Pennsylvania-based cases, one in 2014 and another in 2019, both found that the games were not technically slot machines and, as such, did not fall foul of local gambling law.

Jeff Morris, vice president of public affairs for Penn Entertainment, made his view crystal clear by calling them “illegal slot machines” and adding to that the view of the organisation's CEO Jay Snowden, who called them “an unregulated, unmitigated disaster” at an industry event.

The tide is, however, beginning to turn with a Missouri-based class action lawsuit claiming skill game providers are “violating racketeering law”. The case included photographs of underage gambling and raised concerns over payouts, gambling addiction, and lack of security, given the amount of cash being exchanged.

The latest blow to the sector came on Friday, 13 October 2023, when the Supreme Court of Virginia quashed a lower court ruling by reinstating a total ban on slot-like skill games in the state with immediate effect.

What Does the Court of Public Opinion Say?

While state and federal courts continue to debate the topic and, in some instances, contradict one another, the court of public opinion is pretty clear about where it feels these gambling games fit into the scene.

The AGA investigation found the following:

  1. Do skill games lack proper player protection? 71% of respondents said yes.
  2. Do skill games pose a risk to young players? 64% of respondents said it does.
  3. Do skill games increase the risk of violent crime? 56% of respondents said yes.

Miller commented on the above, saying:

“Unregulated machine manufacturers have built their businesses by duping consumers and small businesses while avoiding taxes, oversight, and consumer protections. These results are further evidence that Americans see these machines as a threat that should be eliminated, not regulated.”

In a separate interview, Miller said:

“I think the greatest danger is the lack of consumer protections. They are plugged into the wall, and they operate exactly like a slot machine without any of the protections for someone who might have a problem with gambling or somebody who might not be 21.”

Regardless of what the legal outcome is, it is clear that the populace does not feel these games are adequately secured or managed by proper, safer gambling regulations. Irrespective of the decision to ban or regulate, the state lawmakers need to address the unfettered access and wildly differing payouts to ensure fairness and consumer safety.

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