Zoning for Skill Games: A Look Into This Relatively New Phenomenon

By: Nathan Y. Pak, Esq.

The definition and regulation of skill games is a fast-moving issue in the courts and the legislature. This article deals with how the advent of skill games interacts with municipal zoning law.

Imagine an electronic gaming device with bright shining lights and energetic clinking to indicate. Patrons insert cash, play the game, and sometimes win, sometimes lose. Now imagine a few dozen of these machines in a single room. Sounds like a scene straight from Vegas, right? Could it come to a township or borough near you?

Something like it may very well be, in the form of skill games. Skill games strongly resemble slot machines but they are not gambling devices—and current zoning ordinances’ failure to account for them may lead to their placement in unexpected and unintended locations.

As defined under law, a “skill game” is a game in which there is consideration and reward, and where skill predominates the outcome, rather than chance. A gambling game, on the other hand, is a game of consideration and reward, but chance predominates over skill (such as a slot machine). What kind of “skills” does a skill game test? Simple games such as aligning symbols on a board, or card-flipping memory game. The key is that chance is not a factor in the player winning a monetary reward.

As of this writing, gambling devices are heavily regulated and taxed by the commonwealth, whereas skill games are unregulated and untaxed.

Like slot machines, skill games can have major financial benefits. Skill games are often placed in gas stations and convenience stores. Anecdotal evidence suggests that they are a major financial boon for the venues that have them. Further, pending legislation may subject skill games to regulation and taxation, potentially opening a revenue stream for the municipality.

But there are reasons a municipality may want to limit the presence of skill games, too. Skill games look like slot machines, complete with bright shining lights and chimes. Indeed, skill game manufacturers utilize casino imagery to market their products, as the website of one skill game manufacturer, Pinnacle Amusement, attests. And data has suggested that the social problems associated with slot machines come with skill games as well. In particular, the large quantities of cash held by a skill game machine leads to increased criminal activity and security costs for the venue.

There is also the optical aspect: boroughs and townships often do not want their downtown to look like a casino, and large numbers of adults playing slot machine-like games in the neighborhood can be seen as undesirable.

Because skill games are a relatively new phenomenon, they are often allowed in zoning districts where the borough or township never intended them to be allowed. In particular, many business districts allow arcades and gaming centers, having in mind traditional arcade-style gaming cabinets (like Pac-Man). But these zoning ordinances often inadvertently include skill games. An example from this author’s own township’s zoning ordinance defines “video gaming/pinball device” as “a coin-operated machine, mechanical machine, or electronic machine, which operates or may be operated as a game or contest of skill or amusement of any kind or description.” Under this definition, the ordinance may allow skill games—a casino-like facility—to be placed where the township intended a relatively harmless video game arcade.

Practitioners should be aware of this gap and advise municipalities and applicants accordingly. On the one hand, municipalities should amend their zoning ordinances to account for skill games to regulate their use and location within their borders. On the other hand, potential skill games operators should examine local zoning ordinances to explore what possibilities are available under the current zoning ordinances.

Skill games will be an interesting issue for the foreseeable future on many levels, including the legislative, regulative and taxation fronts. Zoning and land use advocates would be wise to keep abreast with the skill games issue and anticipate issues that their clients might face as well.