Skill’ and Money

Illegal Games BOOM

Unregulated “skill games” get a lifeline thanks to the Covid-19 crisis By Frank Legato

Back in February, the AmeriPace-O-Matic illegal games are still can Gaming Association and the Association of Gaming being offered at gas stations and convenience stores across Pennsylvania Equipment Manufacturers joined to launch a campaign against the spread of unlicensed, unregulated “skill games” that the gaming industry, lawmakers and law enforcement officials have all Missouri, where 14,000 unregulated games operate considered to be essentially unlicensed, untaxed and illegal slot machines.

The machines, which pay cash awards that their manufacturers and proponents say are earned through skill, consider methods like seeing one result and deOne court decision in Pennsylvania held that POM machines were in ciding whether to wager again as a skill, in one example. Developed by a few fact illegal slot machines, but since they were not operated by a licensee, well-financed manufacturers, they are placed in locations as diverse as conventhey did not fall within the jurisdiction of the state Gaming Control ience stores, laundromats, truck stops and gas stations, and have been multiBoard. It was a loophole seized upon by suppliers of the games, which conplying for the past few years. Estimates of up to 20,000 machines across tinued to spread. Pennsylvania are not unusual for the states where these have appeared. Meanwhile, lobbyists gathered in state legislatures representing several

Following the initiative begun by the AGA and AGEM, opponents of the stakeholders—the gaming industry in attempting to ban the machines, unregulated gaming machines had been gaining ground, with law enforcemachine suppliers who say they welcome regulation for what they consider ment seizing machines in several states, and with manufacturers such as Georlegal games, and even machine operators, who, along with the suppliers, gia-based Pace-O-Matic (POM), which distributes games to several states, have gotten used to big earnings on the untaxed machines. and Missouri’s Torch Electronics embroiled in court battles over the legality It was in state capitals that the movement to eliminate the machines of their games. seemed to gather steam, with Virginia lawmakers voting in March to ban the games there, where POM machines are branded “Queen of Virginia.” In Missouri, where 14,000 unregu“I would suspect a skill-game bill would be (difficult to pass). It depends on who lated games operate, Torch Electronics was facing a criminal trial for illegal gambling, with a hearing date scheduled for April 23. In Wyoming, a state Senate bill to regulate and the characters are that set it up, how tax the machines died in committee. they present it, and exactly what they Then, the coronavirus hit, and state economies reeled as businesses of all types shut down. As the crisis continued, are trying to make legal, to decide state officials had to deal with many of the unregulated whether they’re successful or not.” games continuing to operate while legitimate casinos, along with other businesses, remained idle. Court cases were de—Wyoming Senate Vice President Ogden Driskill layed along with everything else.

Covid Reprieve

As states faced a financial crisis with little tax revenue and massive unemployment, some decided to throw the unregulated games a lifeline.

In Virginia, Governor Ralph Northam initially proposed legalizing the games under a bill that allowed casino gaming but banned skill games. As a compromise, Northam sent the bill back to the Senate with an amendment that would allow the games to continue to operate for one year, with a tax of $1,200 per month, per machine paid to the state. The amendment and casino legislation cleared, by wide margins in both chambers of the legislature.

Of more than $100 million in potential revenue from 7,000-plus machines, 84 percent will go to a statewide Covid-19 Relief Fund. Of the remainder, 12 percent will go to host cities and counties, and 2 percent each to a problem gambling fund and to the Virginia liquor control agency.

As of now, after one year, the Queen of Virginia games will become illegal. Pace-O-Matic officials and their representatives are lobbying for a permanent regulated-and-taxed status for the games.

Wyoming has moved this type of game closer to that status than anywhere. A bill sponsored by state Senate Vice President Ogden Driskill was signed into law that will have the effect of regulating and taxing the so-called skill games for 14 months. (Driskill was the only committee member to vote in favor of the prior bill to tax the games.) However, the Wyoming law goes further, creating a Wyoming Gaming Commission to oversee all commercial gaming in the state, including parimutuel racing.

The law stipulates that POM games and others like them must be licensed and certified by a state-sponsored testing lab, and obtain a state sticker. “Under this law, any game that doesn’t have a sticker on it from the commission is automatically illegal,” Driskill says.

The law stipulates that certification, and the sticker, will be granted only to machines that meet specific criteria. “The law dictates every parameter of the machine,” Driskill says. “How the reporting works, what games they can have, how they can have them, and so forth. It’s all under the purview of the Gaming Commission now.

“There is no back-door route in Wyoming anymore. You’re going to have to go through the process to get it done.”

For purported skill game manufacturers—there currently are three, including POM, which brands its games “Cowboy Skill” in Wyoming—the reprieve is temporary. “They are only legal for 14 months,” says Driskill. “Then, if no legislation is passed for skill games, they will be illegal in the state of Wyoming.”

Driskill estimates the opinions among Wyoming lawmakers to be split on the issue. “The Gaming Commission bill was a very difficult bill to pass,” he says. “This was the fourth time it ran. I would suspect a skill-game bill would be the same. It depends on who the characters are that set it up, how they present it, and exactly what they are trying to make legal, to decide whether they’re successful or not.”

The law is set up to encourage long-term regulation and taxation of the games. It essentially requires manufacturers and operators of “skill games” to play by the same rules as suppliers and route operators in regulated VLT jurisdictions. “There are three levels of licensing,” Driskill explains. “The machine manufacturer has to be licensed, the route (operator) has to be licensed, and the establishment has to be licensed.

“And there’s a lot of backbone to the law. The penalties are very severe—it’s $10,000 per offense, for each location, each machine, for anyone who breaks the law. There’s very strong encouragement not to try to game the system.”

Driskill says upwards of 1,000 games from the three suppliers have already made it through the licensing process.

The 14-month law, of course, sets up a year of lobbying in the Wyoming legislature. Driskill says the Covid-19 crisis has boosted the chances of a new “In Wyoming, we tried to stop the skill games. And really, there is very little regulation. You just have to pay a license fee, and lo and behold, you’re a distributed gaming operator for skill games in Wyoming.” —Sean Higgins, Executive Vice President of Government Affairs, Golden Entertainment

skill-game bill clearing the legislature.

“Before the Covid crisis, even with the budget crunch, I thought they’d have a pretty hard time passing the law. But the way I set the law up, local governments get all the returns from it. I’m guessing we’re going to have cities helping to lobby for the bill at this point.”

The relief to strapped local budgets will be substantial. Under the 14- month law, which authorizes up to four machines per location, operators will pay a fee of $2,500 per machine, per month to the state, in addition to a 20 percent tax paid weekly on the previous week’s proceedings. When contributions pass $1 million, the 20 percent tax will be divided between the state and local governments, with 45 percent going to local governments and the school foundation and 10 percent to fund the Gaming Commission.

Another Wyoming stakeholder likely to be watching debate closely are the state’s Native American tribes, which operate four casinos under compact, offering both Class III and Class II games.

According to Driskill, tribes formed some of the strongest opposition initially, but in the latest case, they fully supported the legislation.

“They backed it fully,” he says. “I put a tribal member on the commission, and they were exceptionally supportive. Once they understood that what we were doing was not a major expansion of gambling but only to get a handle on what was already out there, they supported letting the people decide what they want to see as far as gaming in Wyoming.”

The VLT Lobby

The other force likely to be lobbying for inclusion in any new Wyoming gaming legislation is the VLT industry, represented by the distributed-gaming route operators that currently supply games to markets such as Montana and Illinois, in addition to running gaming routes in Nevada. One such company involved in the Wyoming process is Golden Entertainment, one of the largest route operators in the U.S. with gaming routes in Nevada and Montana.

Golden also is a casino operator, having acquired the Rocky Gap Casino Resort in western Maryland, as well as three Las Vegas casinos, including the Stratosphere, two in Pahrump, Nevada, one in Laughlin, Nevada and one in Colorado.

Golden Entertainment has been involved in lobbying against unregulated gaming machines in several states, in addition to lobbying to expand its VLT footprint into new jurisdictions. “I’m out there in every emerging jurisdiction meeting with legislatures,” says Sean Higgins, executive vice president of government affairs for Golden Entertainment. Higgins says he was involved in the legislative campaigns both in Wyoming and Virginia, where the company’s lobbyists thought they had succeeded.

“I hired the set of lobbyists (in Virginia) who actually got the skill-games ban passed,” Higgins says, “before the governor got cute—since he was a skill games fan, I guess—and put in this one-year extension to help pay for Covid.”

In Virginia, Higgins says, Golden’s purpose was “to get distributed gaming

Budget Busters

Higgins says the budget crunch in the states resulting from Covid-19 will likely fuel efforts of unregulated-game manufacturers to secure legitimacy for the games. “The issue is that after operating for a number of years skewing the law—and arguing that they’re legal—they come to the legislature and say, just tax us a little bit, because we’re already here, and we can make the state money. That’s their M.O.” There are over 7,000 unregulated Queen of Virginia Higgins foresees Golden’s lobbyists continuing efforts gaming machines in bars and restaurants across that state “While we understand in Pennsylvania and Missouri. “In Missouri, we’re in the same place,” he says. with VGTs approved, or at least to get a ban on skill games approved so we could take the next year and educate the legislators and others in the state about VGTs.” the difficulty of stamping out unregulated gaming “There are several court cases pending, but none of them has seen final adjudication. So games of skill continue to proliferate there as well.” Golden Entertainment lobbyists are now working in states like Wyoming toward a new law next year, and in other states like Pennsylvania, where a skill-game ban stalled in the legislature as the Covid-19 crisis took over. In Pennsylvania, across the board, it’s important to continue fighting against its He also sees an uphill battle in working with state legislatures in this year of severe budget shortfalls. “The other problem becomes that you end up with legislators who have some sympathy for these skill game Golden also has lobbied to pass a bill to legalize VGTs in bars and taverns—left out of the 2017 gaming expansion law there, which approved them in truck stops only. “We’re trying to pass either VGT or VLT legislation; we’re obviously trying to create regulated markets,” says Higspread.” —Marcus Prater, Executive Director, Association of Gaming Equipment Manufacturers operators because much like in Pennsylvania, they’re manufactured there,” Higgins says. “And so you’ve got a senator and they’re manufactured in his home district. You’re going to have some sympathy there.” Pace-O-Matic officials did not respond to requests to gins, who notes that even the law in Wyoming—where comment for this article, but Higgins says they have an Golden was active in seeking a ban—does not clear up the advantage in the battle because of financial strength. problem. “The skill-game operators are trying to do whatever “In Virginia, if you look up Pace-O-Matic or Queen of they can to get themselves ‘regulated,’ so to speak. They were successful, on a temVirginia, you’ll see a list as long as my forearm of lobbyists they have there,” he porary basis, in Wyoming this year. If you read the legislation there, they can opsays. “Why? Because they make so much money they’ll do anything they can erate the skill games that were in place when the legislation passed, but next year, to keep their hand on that money. They do business as Pennsylvania Skill the legislature has to go back and take a look at all gaming.” Games in that state. They call themselves Cowboy Skill in Wyoming. They’re

As the games’ manufacturers secure licensing in Wyoming, Higgins says he Queen of Virginia in Virginia. They always claim they’re a local company. feels the law is still providing a “back door” to authorize games that would be ille“And they make so much money, we may hire one or two lobbyists where gal in most jurisdictions, even with the testing requirement. they have eight or 10 lobbyists, or more.

“In Wyoming, we tried to stop the skill games,” Higgins says. “And really, “We’re casino operators. This is a business that has been operating under there is very little regulation. You just have to pay a license fee, and lo and behold, the table, and even before there were skill games, there were gray-market you’re a distributed gaming operator for skill games in Wyoming. One of the games. What we want to do is bring it out in the light, make it legal and reguthings they did put in the bill was that you’d have to have a lab. But guess what? lated, and put product out there in which the public can have faith that they You can pick your own lab and give that lab’s name to the gaming commission. are what they say they are. That’s our business model, and we’ll continue to It’s like nothing I’ve ever seen or heard of before. So, we’re out here working to do push it.” a little education and hopefully roll that back in Wyoming as well.” Meanwhile, AGA and AGEM will continue their efforts to battle the pro

Meanwhile, the company continues its efforts along with the AGA and liferation of unlicensed games. AGEM to stop the spread of unregulated games in markets like Pennsylvania. “AGEM and the AGA announced in February our campaign to put a

“As we look at it, they’re trying to come in through the back door, with games spotlight on the spread of unregulated gaming and initially focused on Pennwhich we say are illegal,” Higgins says. “They claim they have a loophole in the sylvania, Missouri and Virginia because the legislatures in all three states have law, and here’s the thing—any time you have a loophole, you can try to exploit been active in considering how to get rid of the scourge of unregulated gaming that loophole. And their loophole is, these are games of skill, not games of chance, growing in their states,” says Marcus Prater, executive director of AGEM. and therefore, they do not fall under gaming, or gambling. “We sent the AGEM-AGA Unregulated Gaming Machine Fact Sheet to

“And then they insert themselves into small jurisdictions. I’ll use Beaver every legislator in each of those states and continue to monitor developments County, Pennsylvania as an example. They get a small court—the county court in there. We also have a plan to inform legislators in Wyoming as they debate the Beaver, which is the lowest court in the state—to agree that they’re a skill game. future of gaming there, and will be keeping an eye out for unscrupulous maAnd then they wave that court decision around to everyone to justify what they do. chine companies pushing their unregulated games in states grappling with the

“And they make so much money, they can fight these court battles for years... pandemic and its aftermath. They’re making money hand over fist, because they pay no taxes, as long as they “While we understand the difficulty of stamping out unregulated gaming can get away with it. As long as no one calls them illegal, or no court gives them a across the board, it’s important to continue fighting against its spread. State final adjudication that they’re illegal, and no legislature passes laws that say they’re legislators and law enforcement owe it to their citizens and the regulated casiillegal—which they haven’t done in Pennsylvania in years—they continue to opnos and lotteries in each of their states to combat unregulated gaming and the erate. When you look at it, it’s an ingenuous business model.” machine companies that don’t create any benefits except for themselves.”

Don’t Forget Responsible Gaming

As Covid-19 protocols are put in place, let’s not look beyond the problem gambler

By Ted Hartwell

As the gaming industry begins the process of reopening, it’s easy to be hyper-focused on the changes that need to occur in both the physical gaming spaces and the policies designed to facilitate social distancing, monitoring and response to Covid-19. All are necessary to protect the health of team members, guests and the community, and provide an environment where returning patrons will feel both safe and entertained.

It is equally critical to the mental health of team members, patrons and the community that adherence to strong responsible gaming standards not be neglected, especially now.

Covid-19 introduced itself to the world in late 2019, and over the course of just a few months showed its capacity to wreak havoc not only on human health, but also on the ways in which people have had to reevaluate their social interactions, work environments and pursuit of leisure activities. The worldwide economic fallout has been extreme, with many divergent opinions from economists and pundits on how bad things really are, and prognostications about how bad it will get before things begin to turn around.

Questions abound about how to time the reopening of various sectors of the economy. How soon is too soon when considering public health? How late is too late when considering economic health? The gaming industry is a microcosm of how these issues and more are playing out across the private sector.

MGM Resorts and Wynn Resorts each proactively announced closure of their Nevada properties prior to Governor Steve Sisolak’s announcement requiring the entire industry to do so. Placing public and team member health above profits will undoubtedly put them in good stead with the majority of returning patrons and employees.

Additionally, Wynn has been a leader in developing strategies to reconfigure the gaming space and policies to decrease the spread of Covid-19 among employees and guests. These policies have been touted by many in commercial and tribal gaming, and were reflected in policies approved by the Nevada Gaming Commission, charting the path properties must take to safely reopen.

Although responsible gaming was absent from the first draft of the commission’s requirements for reopening, a number of public comments urged the commission to, at a minimum, include language recognizing the importance of reinforcing responsible gaming messaging. How soon is too soon when considering public health? How late is too late when considering economic health? The gaming industry is a microcosm of how these issues and more are playing out across the private sector."

These comments were submitted from stakeholders across a wide spectrum, including current and former gaming executives, academia, treatment providers, prevention and awareness advocacy organizations and the recovery community. During a public workshop of the Gaming Control Board, Chairwoman Sandra Douglass Morgan announced that language on responsible gaming would indeed be included in the final language, which was ultimately released on May 27.

While the added section on responsible gaming contains only two sentences, they are very important sentences indeed. They require licensees to reaffirm their commitment to responsible gaming measures as part of their formal reopening plans, which were submitted to

the commission for review and approval in advance of reopening. They read as follows:

Responsible Gaming. Plans must include the licensee’s commitment to and implementation of responsible gaming measures. Licensees are encouraged to enhance their responsible gaming measures, including, without limitation, providing enhanced training to employees and creating specialized messaging for patrons.

So, why should we care about responsible gaming as much or more now than before? And why is it important to consider implementation of enhanced training for employees and new measures and messaging for patrons?

The answer is simple. The financial, emotional and psychological impacts brought about by isolation, trauma and financial or personal loss due to the events of the past several months are known risk factors for problem gambling and other addictive disorders. They create a dangerous cocktail for people who may be predisposed to problem gambling, and not cognitively equipped to make healthy decisions with regards to their personal gambling behaviors.

This group includes not only people who may have begun to experience gambling problems or who were in early recovery prior to the pandemic, but also people who, because of personal experiences caused by the pandemic, are for the first time at higher risk for developing a gambling disorder.

For the near term, perhaps even until a reliable vaccine has been developed and becomes widely available, the makeup of early returnees to the physical gaming space is likely to include a higher than usual percentage of individuals who are already suffering from a gambling disorder, and others who are suddenly at higher risk for developing a gambling problem specifically because of the Covid-19 pandemic.

Additionally, studies show that casino team members may be at higher risk for developing a gambling disorder than the general public, and they will have experienced the same types of im

pacts to their lives as returning patrons, heightening that risk. Returning employees have many concerns about their own safety related to their risk of contracting and transmitting Covid-19 to their families or others, and these risks should be both addressed and mitigated to the extent possible.

While responsible gaming practices may not be uppermost on team members’ minds at this time, reemphasizing the importance of maintaining these practices while reopening will give them a refresher course on the resources available to them and their colleagues who may develop a gambling problem. Team members who feel both safe and comfortable in their new environment will convey that feeling, both consciously and unconsciously, to the returning patrons.

During the pandemic there has been a significant increase in the use of online gambling and gaming platforms worldwide. The increasing ability to enjoy wagering from the safety and privacy of one’s own home or hotel room is a way to socially isolate while still engaging in this form of entertainment. However, while these options provide additional means of mitigating the transmission of Covid-19, isolation is, in and of itself, a risk factor for developing a gambling disorder.

Operators of purely online wagering sites as well as brick-and-mortar operators who offer the ability to wager online while in-house or in-state should be aware of the potential for increased problem gambling at this time and in the near future, and look for innovative ways to enhance messaging to these consumers in particular.

Finally, as licensees work to recreate the gaming space and implement new measures to curb the spread of Covid-19, there is also the opportunity to explore innovative responsible gaming messaging and access to that messaging. As gaming environments transition to increasingly “touchless” and “cashless” operations, some traditional responsible gaming tools such as physical brochures, which may in and of themselves create an undesirable “high-touch” area may, at least in the near term, need to be replaced by touchless electronic messaging on the gaming floor and associated spaces.

Additional important considerations are the inclusion of regular responsible gaming messaging and easily accessible tools in the apps on personal electronic devices that patrons use to participate in gaming on and off the floor and transfer personal funds into property accounts.

The responsible gaming requirements and guidance offered by the gaming commission offer a framework to address these concerns in new and potentially more effective ways.

Las Vegas’ major gaming properties have for many years exceeded Nevada’s state regulations on minimum responsible gaming standards, and most adhere to the principles outlined in the American Gaming Association’s Code of Conduct. Responsible gaming has long since transcended its early focus on regulatory requirements addressing those with problematic gambling behavior to include practices designed to prevent underage gambling, maintain responsible alcohol serving and consumption, and uphold a strong employee training ethic.

In spite of great strides in the area of responsible gaming in recent years through introduction of its GameSense program to properties worldwide, MGM Resorts International recently took the surprising step of eliminating its director of responsible gaming position. In general, the elimination of middle-management positions, and even some upperlevel positions industrywide, comes as no surprise, as properties look for means to stem the bleeding caused by the financial impact caused by Covid-19 shutdowns. However, the elimination of responsible gaming positions sends exactly the wrong message, and at the worst possible time.

Experts often talk about the need to avoid working in silos. I would argue that new policies on reconfiguration of the gaming spaces and new procedures to mitigate the potential spread of Covid-19 within those spaces are possibly best viewed through the lens of responsible gaming, which is ultimately all about creating an entertainment environment that is safe for both patrons andteam members.

This may be a radical idea, but these are radical times that require constant innovation and thinking outside the box as we continue to move forward into uncharted territory.

Adherence to existing responsible gaming standards and exploration of potential enhanced messaging is more important than ever before. The commission’s inclusion of language requiring recommitment to responsible gaming practices and encouragement of innovation of these practices is a win not only for patrons, team members and the recovery community but also for the industry and the state of Nevada. It ensures that the great desire and need to have patrons back on the gaming floor will not overwhelm the commitment to responsible gaming practices designed to keep individuals at a healthy level of gambling, and facilitate connections to resources for those who are unable to do so.

Ted Hartwell is a research scientist at the Desert Research Institute of the Nevada System of Higher Education in Las Vegas. He has consulted for years with the Nevada Council on Problem Gambling and the larger gaming industry in the areas of problem gambling and responsible gaming.