The Akron Legal News

Despite changes, Ohio skills games regs remain cloudy to operators

BRANDON KLEIN
Special to the Legal News
Published: February 7, 2019

Since the late 1970s, Bruce Watkins navigated the uncertain waters of the skill-based games business.

The owner of BGSG Technology LLC, a skill games operator and vendor, has been careful in providing skill games to bars and restaurants.

"We have to watch what were doing," Watkins said. "We don't want to have problems."

From claw machines to ticket-dispensing games such as skee ball, Ohio has grappled with how to regulate such machines because they come close to the line of being considered gambling machines.

"There's nothing about skill games regulation ... that's simple," said Kevin Braig, an attorney who specializes in gaming law. "Anytime you put money into a machine and the machine gives you something back it has potential to be considered gambling."

He described the evolution of skill-games' regulations as "stop and go," "hit and miss," and convoluted.

And there has always been the option to just not regulate such games, he said.

Bars with skill games were more vulnerable as the Ohio Division of Liquor Control has more law enforcement passing through their premises.

Kurt Gearhiser, another attorney who's represented the skills games industry in Ohio, said skill games regulations were mostly based on a series of court cases over the years.

Nevertheless, the Ohio legislature approved its latest regulations in 2015.

It considers skill-based amusement machines as devices that reward players only with merchandise prizes or redeemable vouchers for such prizes, which cannot have a value worth more than $10 wholesale per play.

They also cannot be cash, gift cards (except for gas), plays on games of chance, lottery tickets, bingo, firearms, tobacco or alcohol.

"The outcome of the game must be based solely on the skill of the player," said Jessica Franks, communications director for the Ohio Casino Control Commission, which is the state's regulator for skill games.

Additionally, the Commission created three categories for skills games.

Type-A amusement machines are basically arcade games that don't reward players with prizes, except for free replays, such as pinball. Those types of games do not require a license for operators, vendors and venues.

Type-B amusement machines are devices that provide an instant prize such as claw and crane machines.

And Type-C amusement machines are redemption-style games where a player would redeem tickets or other types of vouchers for a prize.

"The Commission's regulatory framework differentiates the types of games because we have encountered businesses that claim to be operating legitimate (amusement machines) but are actually operating illegal slot machines," Franks said. "Only Type-B and Type-C (amusement machines) require licensing by the Commission."

Therefore, vendors, operators, the hosting location and some employees all need to have a license to be in the skill games business. The licenses last for three years.

The Commission began accepting applications last summer and issued the first licenses to amusement machines in October.

Applicants undergo a background check with state officials providing a recommendation to either grant or deny a license the Commission at a public meeting.

As of Dec. 12, the Commission has approved 45 operator licenses and four vendor licenses. An operator is defined as a person or individual who owns or makes licensed-type amusement machines to players.

"It is a common practice in the industry for (amusement machine) operators to place games in other businesses and share the revenue generated," Franks said. "This is where the Type-C location license comes in."

Aside from their own licenses to do business, operators and vendors have been able to submit games since late April.

They can either submit games to the Commission directly or to one of their three certified testing labs. The Commission may request the game be submitted to a testing lab for evaluation.

As of Jan. 10, the Commission has approved 221 amusement machines of both types for use in the state.

Franks did not have data on how many games vendors and operators have submitted to the testing labs directly but the Commission itself now has 196 game approval requests has issued notifications for three games to undergo testing.

Gearhiser said family center businesses like Dave and Busters and Magic Mountain have received approval to operate. But games located in bars and restaurants are still waiting for approval.

In addition, operators and vendors that have been in the business had a grace period to register and apply for licenses last year to continue operating. Those that missed the deadline cannot operate until they received their licenses.

And while juvenile-oriented skill games like skee ball have been approved, Gearhiser knows of many adult skills games are still awaiting for approval.

With Ohio among the early states to license skill games, Gearhiser said the current regulatory environment of skill games has a lot of uncertainty.

For instance, the interpretation of a 65 mph speed limit is simple and straightforward but that is not the case with the current regulations being implemented, Gearhiser said. "There's a lot of room for Casino Control Commission to make interpretation."

"We just don't know yet where we stand at," he said.

For Watkins, who's now waiting on receiving his licenses, there's still some uncertainty on what machines he can bring to the market. There's also a concern if approved games will resonate with customers.

"It's kind of been cloudy," Watkins said.

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