Every time Chris Cylke walks into his local convenience store, someone is playing an unregulated gambling machine.
“These things are right next to the window,” says Cylke, the American Gaming Association’s SVP, Government Relations, who lives in Virginia. “They’re not behind the counter like a lottery product. They’re right there, and there’s always somebody sitting there, day or night, and sometimes with a kid sitting next to them.”
Cylke is spearheading the AGA’s efforts to combat the unregulated machines across the country. Recently the trade organization sent a letter to Kentucky legislators, encouraging them to support passage of House Bill 608, which would ban unregulated skill games in the Bluegrass State.
According to the Lexington-Herald Leader, the machines started appearing in huge numbers at bars, restaurants and convenience stores in the state in 2021. Kentucky Lottery Senior Vice President, Communications, Public Relations and Social Responsibility Chip Polston told Louisville television station WHAS 11 that there are approximately 1,400 machines in 71 counties operating in lottery retailer locations. That figure doesn’t account for machines in bars and restaurants.
The proposed legislation in Kentucky banning the illegal machines (often known as gray or skill-based machines) passed a House committee on March 16. Debate continues on passing the bill is ongoing, as some Kentucky lawmakers favor taxing and regulating the devices.
The AGA has long sought to ban the machines that are “very much different than the legal regulated products that our industry offers which undergo rigorous testing,” Cylke says.
“The people who work within our industry also undergo significant background checks and have to go through licensing and suitability evaluations. Obviously, none of that’s the case with these machines that are now proliferating all over the country.”
In 2021, the AGA released a white paper outlining its concerns about the illegal machines. Citing the “growing number of companies that design, manufacture, sell, or operate machines that mimic regulated gambling devices,” the white paper notes the similarity of the games to regulated gambling devices.
“I think it’s pretty clear, at least at the federal level, that these would be treated as gambling devices,” Cylke said. “Therefore, we’ve also been not only making the case within states, but also at the federal level, that these machines ought to be registered with the Justice Department on an annual basis, which our industry does as part of its obligations.”
The AGA’s opposition to the gray/skill-based machines also stems from concerns about the industry’s reputation. Consumers may not realize the skill-based machines are unregulated. If problems occur with the machines, there’s little if any recourse for patrons.
“The AGA and our industry have worked to change perceptions around what our industry is and what we offer,” Cylke says. “And being good stewards in the communities where we operate and offering economic benefits, I think we also worry that these bad actors who are not part of our industry can also contaminate the hard work that we’ve undertaken.”
The gray machines can also drain revenue generated by legal gaming sources targeted for social and charitable organizations. Kentucky Lottery President Mary Harville told the Lexington-Herald Leader the number of illegal machines in Kentucky is up 42 percent since November 2021, which is projected to cut into revenue earmarked by the lottery for college scholarships.
There also are concerns about the illegal, unregulated games increasing problem gambling.
“It is a bit of a zero-sum game in terms of allowing these things to continue operating,” Cylke says. “There will be economic impacts, but also (impact on) responsible gaming. On the policymaking side, this is something that needs to have a lot of attention paid to it. These things clearly fall outside of what we would determine as a responsible operating environment.”
