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Skills-based Gaming – The Holy Grail for Casinos

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March 01, 2015
Bill Geoghegan - Bill@LGTConsulting.com

In October of 2014, the New Jersey Division of Gambling Enforcement issued a request for proposals for skill-based social games that can be played in casinos, and promised to put approved games on casino floors within two weeks.  “Bring your innovative skill-based games to New Jersey and we will work with you to get them approved quickly,” said David Rebuck, the director of the agency. One casino owner announced that a number of positions on his floor would be available immediately to any skill-based game that had passed jurisdictional approval.

A skill-based game is one in which the outcome of the game is determined by the player’s physical or mental skill, whereas the outcome of a game of chance is randomly determined.
Hypocrisy and rationalizations abound in the world of gaming, and legal decisions are frequently illogical. In a recent court ruling in Pennsylvania, a sharply divided state appeals court has ruled that gambling machines can be games of skill, not chance. In 2010, state troopers seized two poker machines from an American Legion post, citing them as illegal gambling devices. The owner of the machines, Double D Gaming, insisted that the machines were games of skill.  The company had removed any random number generator from the machines, and instead allowed a player to stop each spinning reel by pressing a button. They argued that a skilled player could time the spinning reels to produce a winning result, thus it was a game of skill. The majority opinion stated, “For a game to constitute gambling, it must be a game where chance predominates rather than skill.”  In a dissenting opinion, the third judge argued that, “a machine is a gambling device per se, if it can be used for no purpose other than gambling. The skill required to prevail in the games at issue was nearly impossible for the average or casual player to attain.”

It would seem the same dissenting argument could be applied to every claw game, where attempting to extract a prize was just as impossible.

Operations such as Dave & Buster’s with locations in over 25 states, and thousands of local arcades allow children of all ages to play what are considered games of skill to win tickets that can then be redeemed for near worthless prizes.  Playing skee-ball or shooting basketballs to receive a few tickets is not considered gambling, but other games in arcades border on pure luck.
Fantasy sports is the current hot topic in the gaming world. While each jurisdiction has its own rules, in general a player of age 13 or more can enter into contests such as fantasy sports leagues for play or prizes, while 18 is the minimum age to participate in contests or games which have monetary payouts.
Single day leagues are now extremely popular, and it is hard to distinguish fantasy from sports wagering in that arena. In Nevada, casino sports books are struggling to find a way to include fantasy wagering in order to take advantage of the trend.
Horse racing has long received dispensation as a game of skill.  In the wire act of 1961 which prohibited transmission of sports wagers across state lines, horse racing was given a special exemption. In fact, horse and dog racing (with the exception of Jai alai) is the only form of sport which is almost completely supported by wagers.  The purses used to pay the horsemen are funded from the commission or take out from the pari-mutuel pools of bets made on the race.  While categorized as a game of skill, the greatest percentage of bettors at a track use no skill whatsoever to make their selections. The name of the horse, the color of the silks, or lucky numbers are far more often the basis for a selection.

Bingo has long been exempt from gambling prohibitions, primarily because it is frequently used to raise money for charities.  Lotteries are anything but a game of skill, yet in many states the minimum age to play is 18. Ohio permits Bingo to be played at age 16, while Keno and lottery can be played at 18.  Most jurisdictions that permit casino gambling require a player to be 21, however New York, Oklahoma and Rhode Island have a minimum age of 18.

Poker is considered by many to be primarily a game of skill, which exempts it from many prohibitions. In 2012, a Federal District Court ruled that poker is more a game of skill than a game of chance. The rationale is that top players tend to win more often, therefore skill is involved, although a player with lesser skill can occasionally win based on luck. A U.S. District Court ruling in 1965 established that another card game, Gin Rummy, was a game of skill.
Video game tournaments are held throughout the world, although many are held on line. Major League Gaming, founded in 2002, has held competitions for live broadcasts and as a spectator event. Casinos could host gaming tournaments with entry fees and prizes much as the World Series of Poker has done for the card players. A portion of the entry fees would cover the cost of running the tournament, and the remainder would be paid pari-mutually to the top players, but these tournaments can be held anywhere, not requiring a casino as a host, and it is questionable whether the gamers would cross over into the gambling world between sessions or after elimination.
The real issue for casinos is how to convert the extremely popular video-based games played by millions of gamers into games that can be played in a casino with the possibility of winning money, and can draw those gamers into the casino. Would a game based on Call of Duty, Grand Theft Auto or Super Mario Brothers in which real money could be won be enough to entice a player out of the house? The  challenge is to have some action within the game cause a gambling event that causes a random result.

The conundrum is this: is it still a game of skill when you can win money based on chance, and does allowing the more highly skilled players to win more often entice less skilled players to play the game?

Bill Geoghegan is a consultant in Las Vegas. He can be reached for comment at Bill@LGTConsulting.com.

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Skill-based games fall into six categories

1 Arcade games involve quick fingers and quick thinking. These games are generally sped-up puzzle games.

2 Puzzle games rely on logic abilities and require the user to solve certain types of puzzles. While not as fast-paced as arcade games, these games often come with a time limit.
3 Word games are puzzle games using word problems, like rearranging letters to make words.

4 Trivia games test the user's knowledge of trivia in specific categories or in general.

5 Fantasy sport games relying on the participant’s ability to assemble the best group of players.

6 Card games played with playing cards online and requiring good use of probability and other mathematical tactics.

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