Casinos Take Action Against Growing Popularity of Slot-Like Games

The U.S. casino industry has launched a campaign to raise awareness about what it believes should be considered gambling. The industry is hoping to educate the public about the risks and dangers associated with gambling, and to encourage people to make more informed decisions about whether or not to gamble.

In some states, videogame machines that look like Las Vegas-style slots have been appearing in bars, convenience stores and social clubs. The game developers say that unlike gambling that occurs on slot machines, these games require players to use skill to win money.

Casino-industry lobbyists argue that the games are a form of gambling. They allege that the games are a thinly veiled attempt to operate slot machines outside of gambling regulations and avoid taxes.

The American Gaming Association (AGA), a trade group representing the interests of the casino industry, has issued a report estimating that Americans wager $109 billion on unregulated gaming machines each year. The operators of these machines are estimated to take in nearly $27 billion in revenue.

The AGA has asked the U.S. Justice Department to scrutinize these games and require the machines to be registered as gambling devices under federal law.

The Justice Department has responded to the gaming association by saying that illegal behavior tied to gambling is a priority. The department has forwarded the information to the Federal Bureau of Investigation, according to a letter sent to the AGA from the U.S. Attorney General’s office.

As gambling has become more prevalent in the United States, the rise of gambling machines has followed. States have legalized casinos and online gambling, making it easier for people to gamble from home. This has led to an increase in the number of gambling machines in the country.

Mobile games that offer virtual prizes have blurred the lines between gambling and games. Offshore gambling websites still take illegal bets from U.S. consumers.

Even with the recent expansion of online betting, many casino companies still rely heavily on slot machines for revenue. In fact, the commercial gambling industry generated about $53 billion in revenue last year, with nearly $33 billion coming from slot machines, according to the American Gaming Association.

The machines at the center of the skill-based games debate look a lot like modern video slot games. They have screens with a grid of squares that spin, and players have to match icons by tapping the screen. The games are installed in shops and bars under revenue-sharing agreements between business owners and the game developers.

Pace-O-Matic Inc. is one of the leading developers of these games. The Georgia-based company says that its games require players to interact in order to win, similar to a game of tic-tac-toe. The company also said a skilled player could theoretically win every time, an argument that the casino lobby disputes.

Matt Haverstick, an attorney representing Pace-O-Matic, said the company has advocated for increased regulations over skill-based games. He said the company wants standards that can be applied to the company and its competitors, to remove bad actors. But the games aren’t gambling, he said.

"The casino industry is trying to gain control over a funding source that it doesn't already have," Mr. Haverstick said.

Pennsylvania has become a battleground for the issue of casino gaming. The operator of the Parx casino outside Philadelphia this year filed a complaint against Pace-O-Matic and Miele Manufacturing, which builds games for Pace-O-Matic's software.

Parx has argued that the companies are operating what amounts to a criminal enterprise that creates unfair competition for licensed gambling operators. Parx paid $50 million for a slot-machine license and pays a significant amount in taxes on its earnings from slots. The company argues that this creates an unfair playing field for licensed gambling operators.

"The proliferation of illegal games has reached a point where it can no longer be tolerated," said Gary Samms, an attorney for Parx. The lawsuit is pending in U.S. District Court in Philadelphia.

In 2020, Virginia state lawmakers approved legislation that allowed commercial casinos and made many skill-based games that pay out cash illegal. This move was seen as a way to generate more revenue for the state and to provide more options for gambling.

Hermie Sadler, a former Nascar driver, last year filed a legal challenge to the ban on skill-based games. Mr. Sadler's family business operates truck stops and convenience stores in Virginia, and they have offered skill-based games in various forms, such as pinball machines, since the mid-1980s. The scrutiny only came when major casino operators made a push into the state, targeting the games that look similar to slots.

"I don't think it's fair for the government to try and create a monopoly for the casino industry at the expense of small businesses," said Mr. Sadler. "In my opinion, that goes against the principles of the free market."

A judge has issued a temporary injunction that prevents the state from enforcing the ban. The Virginia Attorney General's Office has not commented on the lawsuit.

Bill Miller, the gaming association’s chief executive, said the casino industry is doing well in Las Vegas, Atlantic City and other regional markets. However, he believes it is important for the group to bring the issue of online gambling to the attention of law enforcement and governments. The gaming association’s letter to the Justice Department asks for an investigation into offshore sports-betting sites.

"There is an illegal market that exists right under your noses, and you are losing massive amounts of tax revenue," Mr. Miller said. He added that this market is "costing you jobs, and it's costing you money."