PA Court Rules that Pennsylvania Skill Games are Neither Governed by the Gaming Act nor Regulated by the Pennsylvania Gaming Control Board. So What?

In two decisions issued in the last few months, the Commonwealth Court of Pennsylvania has established conclusively that the state’s Gaming Act is inapplicable to so-called “skill-based” video game machines that are ubiquitous in taverns, restaurants, and other liquor-licensed establishments in the Commonwealth. After a comprehensive discussion of the rules of statutory construction and the Gaming Act’s legislative history, the Court reasoned that the Gaming Act applies only to legal gambling devices operated in licensed establishments, and not to unlicensed or illegal slot machines, which remain governed by the Crimes Code. Therefore, the Court also held, the games and those who manufacture, distribute and operate them are not subject to regulation by the Pennsylvania Gaming Control Board.

In a January 22, 2020 article, the Delco Times declared the decision a “decisive win” for the game’s proponents. But was it?

The lawsuit, which POM of Pennsylvania, LLC (“POM”) filed against the Pennsylvania Department of Revenue and the City of Philadelphia, did not even raise the applicability of the Gaming Act or the scope of the Gaming Control Board’s jurisdiction. In fact, those questions arose only because the Department of Revenue raised them in a counterclaim. Rather, POM’s Complaint asked the Court to declare the game a legal device under Pennsylvania law and to enjoin the City from seizing the games or initiating administrative or criminal proceedings relating to the games and those who operate them. The Court did neither. At least not yet.

How will the Commonwealth Court determine whether the game is illegal? POM argues that the Court should follow an unpublished decision of the Court of Common Pleas of Beaver County in a 2014 case in which that court held that a similar POM game was predominated by skill, rather than chance, and thus was not an illegal gambling device. Although a Court of Common Pleas decision is not binding precedent, it may be cited for its persuasive value. Recently, the Pennsylvania Gaming Control Board asked its licensees and applicants for licenses to confirm that they do not operate or have an interest in the operation of the so-called skill games in the Commonwealth. One might infer from the inquiry that the regulator of legal gaming considers the games to be illegal devices. This anecdotal evidence might also have persuasive value.

Although not cited in the two Commonwealth Court decisions discussed in this blog, there is binding precedent from the Pennsylvania Supreme Court (Com. v. Two Electronic Poker Game Machines, 502 Pa. 186 (Pa. 1983)) as well as a well-reasoned Superior Court decision (Com. v. One (1) Jersey Hold’em Machine Serial No. DDGPA0003, 2014 WL 10749241 (Pa. Super. 2014), allocatur denied 632 Pa. 693 (2015) though designated “NON-PRECEDENTIAL” by that court) that should guide the Commonwealth Court. Ultimately those courts applied a “predominate factor” standard and relied on the proverbial “battle of the experts” to determine whether skill or chance was the “predominate factor” in determining a player’s success. They considered the following factors:

  • whether the game in question uses a random number generator (unless the random number generator functions only to select the game from a finite pool of games and does not affect the outcome of game play);
  • whether the game, no matter how difficult, is winnable by a skillful player;
  • whether the player can win automatically, without any effort;
  • whether the game uses casino game themes (though one may certainly question what the game theme has to do with the skill v. chance debate); and
  • whether the predominance of skill over chance is obvious and clear and not a close call.

A trial and the appeals that will inevitably follow will surely be time consuming and costly and may lead to inconsistent results from county to county unless and until the state Supreme Court considers the issue again. Even then, a manufacturer, distributor, or operator would require a separate determination for each unique game – no matter how subtle the differences – in order to be certain its games are legal and its principals are not subject to administrative or criminal action.

Of course, the Pennsylvania General Assembly can resolve the question with the stroke of a pen and render these lawsuits moot. Indeed, POM is pushing for legislation in Pennsylvania and elsewhere that would declare its game legal. That would be a “decisive win.”

Stay tuned to the Duane Morris Gaming Law blog for further updates as they develop.