What is Gaming/Gambling According to the LCB? And Why Does it Matter?

Gambling is permitted in many Pennsylvania businesses licensed by the Pennsylvania Liquor Control Board (“LCB”). The most obvious example is casinos which offer a myriad of games for their patrons.  There is also a special permit available to certain licensees from the LCB called a Small Game of Chance (“SGOC”) permit.  SGOC permits are available to select license types such as Hotel and Restaurant licensees.  SGOC permit holders may apply for a one-year renewable gaming license.  The gaming licenses can only exist in municipalities where small games of chance are permitted.  These gaming licenses are limited to pull-tab games; punchboards; raffles (including special permit raffles); daily drawings; weekly drawings; fifty-fifty (50/50) drawings (including major league sports drawings); race night games; and pools, excluding sports.  The games are subject to prize limits.  The maximum price for any single chance is $2,000.00 and no more than $35,000.00 in prizes may be awarded by a license in a seven-day period.  Gaming licensees must keep gaming proceeds in a separate bank account.  Records of income from gaming activity must be maintained for a minimum of two years. While the Pennsylvania Liquor Control Board (“LCB”) issues the tavern gaming license, the license application process involves two State agencies, the LCB and the Gaming Control Board.  Each agency charges separate fees and each conduct independent investigations of the application.  It should be noted that unlike a liquor license, a gaming license cannot be sold or transferred, and it may not be pledged as collateral for a bank loan. 

In recent years, video games have begun to appear in licensed establishments (and elsewhere) that offer players the opportunity to test their skill at various activities.  These so-called games of skill can be found in a video terminal kiosk or sometimes on a handheld device where players earn credits that can be exchanged for money.  Such games for example, test players skills ranging from playing tic-tac-toe with fruit icons, repeating button sequences in a form of “Simon Says,” or destroying asteroids in outer space.   What is not clear is whether these skill games are considered gambling under Pennsylvania Law.

While the legislature ponders this issue, the LCB follows Pennsylvania case law whereby gambling consists of the following elements: (1) consideration or a fee or charge to play, (2) an element of chance, and (3) a prize or reward.  Proponents of skill games contend that the middle prong of the test is not present when playing a “skill game” and therefore it is not gambling. 

The LCB states that certain items may be considered gambling devices per se and therefore their mere possession may be illegal in and of itself. The LCB and the Pennsylvania State Police Bureau of Liquor Control Enforcement (“BLCE”) emphasize that unlawful gambling falls under the Pennsylvania Criminal Code.  To date only one county in the Commonwealth has tackled the game of skill/gambling topic, and it concluded that games of skill are not gambling under the current law.  The LCB advises licensees to contact their local office of the State Police, or county district attorney for an official opinion on whether the skill games machines are gambling devices per se.  If a game is considered gambling per se its possession may be illegal in and of itself, putting licensees at risk of fines and the possibility that machines found on the licensed premises would be confiscated.  Gambling citations can jeopardize a license as the LCB may not permit its renewal.   

The BLCE is responsible for monitoring and investigating taverns and for issuing citations for violations.   The LCB has the authority to fine, suspend, revoke or refuse a license that is the subject of a violation.  Call us if you are affected by this issue.

— J. Ken Butera

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