The American Gaming Association (AGA) is calling on state and local governments to crack down on the “unchecked” growth of illegal or gray market slot machines operating in their jurisdictions.
In a renewal of the commitment begun in February 2020 with the Association of Gaming Equipment Manufacturers (AGEM), the AGA has addressed the continuing dangers posed by unregulated, unlicensed gaming machines promoted as “skill games” with a white paper released last week.
“Skilled at Deception: How Unregulated Gaming Machines Endanger Consumers and Dilute Investments in Local Economies” is the title of a new white paper issued by the Washington, D.C.-based industry trade group, whose membership includes the country’s leading machine gaming manufacturers, suppliers and testing laboratories.
The 10-page report appears aimed on the one hand at alerting policymakers to the possible existence in their jurisdictions of machine games𑁋operating mainly in small businesses: grocery and convenience stores, gas stations, truck stops and the like𑁋either outside the law and untaxed or under loose licensing regimes that provide little or no oversight. These include, the report states, “so-called ‘gray, nudge, sweepstakes, skill’ and ‘no chance’ types of game.”
On the other hand, it appears the AGA has staked out the position that regulatory lines need to be more forcefully drawn and policing needs to be stricter than it is in many locales where, according to AGA Vice President of Government Relations and Gaming Policy Counsel Jessica Feil, “There’s been a rapid increase of unregulated gaming machines that exist in the shadows, taking advantage of loopholes and flouting the law.
“While we understand law enforcement must prioritize their efforts and resources, rooting out these machines should be part of the broader strategy to protect our communities,” she said.
The paper doesn’t provide statistics to support its proliferation claims, but it seems fairly clear from the timing that casinos and slot makers struggling to dig out from the effects of the Covid crisis now see the gray market as a greater competitive obstacle than they may have in the past.
“It is critical to prevent the unchecked growth of unregulated gaming that will depress tax revenue and job creation at regulated gaming properties,” it states.
To this end, the thrust of the report is its detailing of the stringent oversight that prevails in mainstream commercial and tribal gaming:
- “The regulatory environment for the casino gaming industry not only mandates that gaming equipment manufacturers and suppliers undergo a rigorous licensing and suitability process in order to receive a license to distribute equipment, but they must also comply with gaming agency minimum technical standards for machine hardware and game software.
- “Games may also be subject to a lengthy field trial process that allows the regulator to evaluate the product to confirm it operates appropriately and with integrity.
- “Manufacturers must provide comprehensive and technical information and documentation that describes and demonstrates how the product functions and operates in accordance with statutes, regulations and technical standards.
- “Regulated gaming device manufacturers must also comply with ongoing compliance and reporting requirements.
- In addition, “Most states require regulated gaming machines to meet a theoretical payout percentage, guaranteeing a certain amount of wins for patrons.”
Conversely, “Illegal machines do not undergo any meaningful testing, the companies that create and operate them are not subject to licensing or other regulatory standards, and they do not provide states with essential tax revenue. These machines also fail to ensure that game integrity and responsible gaming are upheld, putting consumers at risk by targeting the most vulnerable populations—including children.”
Moreover, the report claims, “These machines are often tied to criminal activity, including money laundering, drug trafficking, violent crime, and more.”
The paper concludes with a number of recommendations.
At the top of the list, “Law enforcement and policymakers must prioritize robust enforcement of laws to root out illegal and unregulated gaming machines. This includes enforcing laws already in force but also clarifying the law to make the illegality of these machines clear where any ambiguity exists.
Second, “States and communities must resist the temptation to simply authorize these machines. While many jurisdictions are looking for novel revenue sources, especially in response to the economic impacts of the Covid-19 pandemic, allowing these machines to continue will only reward bad behavior, erode investment made by regulated entities and expose consumers to unnecessary risks.
Finally, “Other industries need to ensure they understand their responsibility to eliminate illegal gaming machines at their businesses. Businesses cannot rely on illegal and unregulated games that put their customers at risk and should actively work to remove them from their communities.”
