Kentucky: skill games ban stands

Garance Limouzy July 1, 2024

SiGMA news

Judge Shepherd has upheld the Kentucky ban on popular “grey machines”, skill games that offer cash payouts and were operating in a “grey” legal area. Some argue that these machines are games based on skill, but others declare that the element of chance present in these games ultimately makes them gambling machines or disguised slot machines. The controversy around these machines peaked when Governor Andy Beshear signed House Bill 594 into law in 2023. This legislation ended the blurred distinction between games and gambling, making the operation of these devices illegal and imposing substantial fines on businesses and manufacturers that did not comply.

Efforts to overturn the ban

The legal battle began when Pace-O-Matic, a major operator with 2,500 machines in the state, challenged the law, arguing against its constitutionality and seeking to overturn the ban. While the company’s machines across the state remain in small businesses, they are disabled, pending a final decision to remove them. Pace-O-Matic argues that the ban is unconstitutional for several reasons, including violations of free speech, due process, equal protection, and separation of powers. It also claims the ban constitutes taking property without fair compensation. The complaint states that skill games are a form of expression that communicates ideas through unique literary features and should be protected speech under the Kentucky Constitution.

Additionally, it contends that the ban unfairly targets certain electronic video-style skill games while allowing similar devices used in e-sports or sports betting.

Understanding the ban

Judge Shepherd’s decision sided with Attorney General Russell Coleman, who vigorously defended the law as necessary to protect Kentucky’s families and children from potential social harms associated with unregulated gambling. Coleman praised the bipartisan effort of the legislature in passing the bill. The ruling addressed several key arguments from opponents of the ban, including claims that the law violated free speech rights and unfairly targeted specific industries. Judge Shepherd’s comprehensive 52-page ruling dismissed these claims, affirming that the legislature had the authority to regulate gambling activities to protect public welfare.

Reactions to the ruling

Supporters of the ban, including House Speaker David Osborne, celebrated the decision as validation of the legislature’s intent to fight illegal gambling practices. They argued that allowing these machines to operate without oversight could have led to expanded gambling across the state, potentially undermining existing regulatory frameworks. In contrast, opponents of the ban, such as Pace-O-Matic and its legal representatives, expressed disappointment with the court’s decision and indicated they were considering an appeal. They argued that the law unfairly targeted their industry and advocated for recognising these machines as legal “skill games” rather than gambling devices. Earlier this year, in March, Virginia legislatures voted to unban skill games machines and regulate the market, stating that the tax revenue was much needed (grey machines are taxed at 25%) and that many small businesses depended on these machines to survive.