As Virginia gears up for gambling debate, thousands of slot-like games have already slipped in the back door

By: - December 20, 2018 1:44 pm

Games that allow people to bet money and win cash have popped up around the state, including in this Richmond corner store. Manufacturers say they’re games of skill, not chance. (Ned Oliver/Virginia Mercury)

They look like slot machines. Symbols spin around the screen like slot machines. And when everything lines up just right, they pay out $1,000-plus jackpots like slot machines.

But the manufacturers of these games – thousands of which have popped up in bars and convenience stores around Virginia despite a strict prohibition on most kinds of gambling – insist they are not, in fact, slot machines.

“A lot of times when people look at these things: they say it looks like a duck, it quacks like a duck, so it must be a duck. That’s not the case,” says Brent Jackson, a Richmond lawyer who represents Gracie Technologies, one of a handful of companies that has been rapidly expanding its presence in Virginia.

The industry prefers the term “skill games.” They’re separate from the historical horse racing terminals, which also function like slot machines, that the General Assembly approved earlier this year as part of a deal to reopen Colonial Downs.

Nomenclature aside, their legality is anything but settled. Police think the machines plainly violate the law. Even among manufacturers there’s debate about whose games are legal and whose aren’t. One company reports its competitors to the police when they come across the games.

But so far there have been no prosecutions in Virginia. Meanwhile, the Department of Alcoholic Beverage Control has reviewed one manufacturer’s game and concluded that, at least for their purposes, it’s indeed a game of skill.

Amid all the uncertainty, the games represent a little-discussed wild card heading into a General Assembly session during which lawmakers are expected to debate a variety of proposals to expand gambling in Virginia.

It might have already expanded.

Skill or chance?

Under state law, there are three elements to gambling: a bet, chance and prizes. These machines all take money and spit out prizes. But manufacturers argue they’ve replaced (or at least assuaged) the element of chance with skill.

The games never serve up jackpots, instead they serve up near jackpots — one symbol off from a win is a win. The skill in question is a player’s ability to recognize that and press a second button to complete the pattern, which usually places a wild card or nudges a reel up or down. There might be a time limit to react — 12 seconds in Gracie’s games.

A game from an unidentified manufacturer in a Richmond corner store. (Ned Oliver/Virginia Mercury)

It’s not exactly rocket science, but the manufactures say that doesn’t mean it’s not a skill.

“You’ve got to be able to hit the buttons in time,” says Jackson. “If you’re a little slow on the uptake, you miss out.”

Some manufacturers add another layer to the game they say puts them more firmly in compliance with state law.

Among them is Georgia-based Pace-O-Matic, which operates here through a subsidiary called Queen of Virginia Skill. If players lose the first game, they can opt to play a second, totally different game that’s based entirely on memory. Victory rests on a player’s ability to follow along with a 20-step Simon-says style game. Winners keep their original bet plus 20 percent.

Players can skip the second game and opt instead for the fast-paced, slots-like experience, but its existence allows the company to argue that people who play the game can win every time based on skill alone.

“The only time people lose is if they don’t have the patience,” says Pace-O-Matic’s Kevin Anderson, a former ABC agent the company hired to handle government affairs and compliance in Virginia.

The company has already placed about 2,400 consoles around the state, he says, mostly in bars.

Other manufacturers’ games have been popping up primarily in convenience stores, some of which have placed a half dozen or more of the games in back parlors that feel like a low-budget slice of Vegas.

One store owner, who spoke on the condition that he not be named and the exact location of his store not be identified, said he was approached by a vendor who showed him a letter saying it was legal. They left him a highlighted copy of the state’s gambling code to show police if they start asking questions and instructed him to call and let them handle it if that doesn’t work.

He said he didn’t consider them a smart outlet for people interested in gambling, but said people seem to like playing them.

Illegal in some states, accepted in others

Virginia is just the latest state manufacturers have flooded with the games.

Pace-O-Matic expanded from Pennsylvania, where they’ve survived court challenges despite scrutiny by law enforcement officials, who “still feel the machines are illegal,” according to PennLive.

Other states, like Georgia, have allowed the games but subjected them to regulation, generating $47.5 million in tax revenue last year that the state uses to fund pre-K education and scholarships. However, the machines have also spawned allegations of payoffs and bribery, according to the Atlanta Journal-Constitution.

A third group of states has taken a hard line against the games. In Wyoming, the attorney general this month said he considered the machines illegal gambling devices, a move likely to prompt law enforcement action, according to the Wyoming Tribune Eagle.

Virginia ABC agents greenlight games

In Virginia, Attorney General Mark Herring has not issued an opinion addressing the subject. A spokesman for his office said it’s up to local authorities to decide whether a given game might violate state law.

So far, only one state agency has formally weighed in: the Virginia Alcoholic Beverage Control Authority. At the request of Pace-O-Matic, the agency reviewed the company’s machines to determine whether placing them in a bar or restaurant would jeopardize that establishment’s liquor license.

A restaurant on Main Street in Richmond around the corner from Capitol Square advertises Queen of Virginia Skill, a subsidiary of Georgia-based software maker Pace-O-Matic, which has won ABC approval and argues its games are the only legal varieties in Virginia. (Ned Oliver/Virginia Mercury)

ABC officials determined they wouldn’t, writing in a letter to the company that the agency had concluded the product required “significant elements of skill,” specifically pattern recognition and memory.

“This decision is obviously not binding on the multitude of other agencies or elected officials that may have jurisdiction in this arena and reach a different conclusion than cited above,” wrote ABC Deputy Chief Thomas W. Kirby.

While the letter doesn’t carry any authority outside the agency, it figures heavily in Pace-O-Matic’s marketing materials, which boast the company’s terminals “are the only games in Virginia that have been reviewed for use by the Alcoholic Beverage Control Authority with an accompanying written letter.”

Manufacturers accuse each other of violating the law

In an interview, Pace-O-Matic took things further, asserting they’re the only company operating legally in Virginia. Anderson said Pace-O-Matic’s employees report other machines to police when they encounter them. During an interview in the company’s Henrico County office, he pulled up Gracie’s website to use as an example of a company it believes is breaking the law.

Gracie counters that if Pace-O-Matic’s games are legal, so are Gracie’s. Jackson, the Richmond attorney representing the company, said Gracie has sought the same ABC review Pace-O-Matic got and is just waiting for the results. He said Gracie is aware of Pace-O-Matic’s claims and hinted the company might be considering legal action.

“Pace-O-Matic has been trying to use their (ABC) letter throughout the jurisdiction to say they’re the only legitimate one,” he says. “Our technology is the same.”

However, he alluded to other operators in the state that the company does consider illegal. “That does cause us concern, because we don’t want to be lumped in with these entities,” he said.

A third company whose games have showed up in Virginia, Banilla, says it’s not sure any of the games are legal but said it can’t control what people who buy the games do with them.

“We’re staying out of that mess in Virginia,” said Kevin Morse, a representative of the company.

Amid uncertainty, parlors ‘popping up all over the place’

So far, no Virginia authorities outside ABC have jumped in to referee the fight.

And while Pace-O-Matic has donated to Gov. Ralph Northam and hired a team of lobbyists to represent it at the General Assembly, there hasn’t (yet) been any proposed legislation or other discussion about clarifying the state’s position on the games.

Morse hypothesized that might change this year, as Colonial Downs rolls out its historical horse racing parlors and other entities, including a group of Bristol businessmen and the Pamunkey Indian Tribe separately pursue casino plans.

“I think you’re probably going to see something come up in the legislature — one group trying to make them completely illegal and one group trying to push legislation regulating them,” he said.

Skill games in a Richmond corner store. The games have popped up in gas stations, convenience stores and bars around the state. (Ned Oliver/Virginia Mercury)

The confusion has left enforcement to local police departments and prosecutors, which so far have not pursued any action.

Josh Boyles, a prosecutor in the Richmond Commonwealth’s Attorney’s Office, called it uncharted territory.

“There’s been very little appellate guidance on this,” he said. “There are some cases that kind of touch on it, but not very helpfully.”

Richmond Police Lt. Ronnie Armstead said the machines don’t strike him as much different than past attempts to circumvent state gambling law.

Richmond and other departments around the state have successfully shut down internet cafes that purported to run sweepstakes or charged for time to use computers that had games of chance that offered prizes.

“They present themselves differently, but we know it’s illegal gambling,” he said.

But he said they’re difficult cases to prosecute and each prosecution requires significant manpower. And before any of that can happen, police have to find the machines.

“You’re not going to get people in the city to talk much about these types of businesses that are popping up all over the place because people love to gamble,” he said. “They’re not just going to walk into the precinct and say, ‘This is what’s going on over here.’”

Armstead said if it was up to him, he’d just legalize gambling.

“Under controlled circumstances,” he said, “I think that will help the situation a lot.”

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Ned Oliver
Ned Oliver

Ned, a Lexington native, has been a fulltime journalist since 2008, beginning at The News-Gazette in Lexington, and including stints at the Berkshire Eagle, in Berkshire County, Mass., and the Times-Dispatch and Style Weekly in Richmond. He is a graduate of Bard College at Simon’s Rock, in Great Barrington, Mass. He was named Virginia's outstanding journalist for 2020 by the Virginia Press Association.