Legal update – Skill-based gaming machines: it’s still early days...

Legal update – Skill-based gaming machines: it’s still early days...

By IAGR Media

Skill-based gaming machines: it’s still early days for regulators, casino operators and the next generation of players

By Julian Hoskins & Alexandra Hoskins | Senet Legal Pty Ltd

It’s been almost three years since the first skill-based game, GameCo’s ‘Danger Arena’, a first person shooter game, debuted at Caesars’ three Atlantic City casinos in November 2016. Since then, skill-based gaming machines have been installed in various casinos (predominantly in the US) including in Las Vegas, Nevada, Oklahoma, New Mexico, Southern California and on various cruise liners including Celebrity Cruises’ Celebrity Equinox. Game developers leading the way include GameCo and Gamblit Gaming. Several other companies have developed skill-based gaming products, including Scientific Games, Konami, Next Gaming, Synergy Blue and Wymac Gaming Solutions.

These new style games have been developed to reinvent the gaming floor experience, however their ‘newness’ currently presents various challenges for regulators and casino operators alike.

Skill-based gaming machines expanding traditional casino offering and designed to appeal to younger players

With traditional slot revenue seeming to peak in many jurisdictions, skill-based gaming machines are an innovative product aimed at trying to lure a younger generation of players, being typically those that grew up in the video game era. Game developer Synergy Blue recently asked executives from over 100 casinos about their top priorities, their challenges, and the role they think skill-based games could have in the future of casino gaming. In their 2019 report titled “The State of skill-based games in a new era of gambling”, 70% of executives say they have, plan to, or are considering adopting skill-based games, games with skill components or games with arcade-style play.

Casino operators are no doubt wanting to focus on the best elements of video gaming and the higher levels of engagement and entertainment that come from betting. Many casino operators are likely to predict skill-based gaming machines as becoming popular and gaining traction with a younger demographic that might find more enjoyment in these types of games than traditional slot machines. Compared to skill-based gaming machines, traditional slot machines lack any skill element. Players simply choose their stake and press the button, which it is suggested younger players find somewhat unappealing.

According to the Las Vegas Convention and Visitors Authority 2018 “Visitors by Generation” report, millennials and Generation Xers have emerged as Las Vegas' core visitor demographic. Among those visitors who gambled while in Las Vegas, the average amount of time spent gambling was 2.2 hours. Boomers (average of 2.6 hours) and Gen X Visitors (2.4 hours) spent more time gambling than Millennials (1.8 hours). On average, Millennials visited more casinos (average of 6.6) than Gen X visitors (6.3) and Boomers (6.1). However Boomers still budget the most for gambling (average of $735.51) compared to Gen X ($588.55) and Millennials ($295.25). Synergy Blue reports that 50% casino executive respondents are focusing on Gen X, a more financially established generation of new players. The appeal of skill-based gaming machines for casino operators is to provide more appeal options for Gen X and millennials.

This new generation of gaming machines being developed thus far include shooting games, racing games, card games and puzzles, similar to the types of games being played at home on Nintendo, Atari and Xbox. Skill-based games have been developed in a variety of different styles including arcade-style multiplayer, touch screen, joystick, trackball, driving and shooting games. GameCo’s Danger Arena game, for example, is very similar to an arcade-style video game, complete with a controller, and features top console, pc, and mobile games. Games that have been installed on the casino floor in the US include Scientific Games’ ‘Pac Man’, Konami’s ‘Frogger’ and GameCo’s ‘Pharaoh’s Secret Temple’ and ‘Nothin’ But Net’.

To what extent are the games based on ‘skill’ versus how much is based on randomly generated numbers? 

Traditional slots and skill-based gaming machines both use random number generators to determine the return to player. The ‘skill’ element, where the player has more control over the outcome, is generally only applied during a bonus round, so if the player is good at video games then he or she will arguably have a stronger chance of winning. But up until a bonus round, skill alone generally doesn’t determine the wagering outcome.

Compared to traditional slots, skill-based gaming machines are arguably much more immersive and therefore have the ability to hold the attention of players for longer periods of time.  Therefore the revenue generated from skill-based gaming machines is generally unlikely to be as high as traditional slots.  

What are the key challenges for regulators granting approvals of skill-based gaming machines?

The key challenges that have impacted the approval of skill-based games include:

  • lack of research for regulators to understand if skill-based gaming machines cause gambling harm or lead to an exacerbation of problem gambling
  • the need to balance industry innovation with responsible practices
  • legal or regulatory frameworks (including relevant testing standards) which pre-date the development of skill-based gaming machines and which may be difficult to apply.

Regulators around the world are being cautious before granting approvals for skill-based gaming machines. To date, approvals in various jurisdictions (including the US and Australia) have been slow, including as a result of the lack of available research in respect of harm minimization. One of the key challenges for regulators globally is that skill-based gaming machines are still relatively new and there is a lack of substantial research to determine whether skill-based gaming machines cause gambling harm or lead to an exacerbation of problem gambling.

The Victorian Responsible Gambling Ministerial Advisory Council and Dr Sally Gainsbury, from the University of Sydney’s Gambling Treatment & Research Centre, are currently carrying out research to better understand the effects of skill-based gaming machines.

Find out more about the research in this field in our Research Spotlight

At the same time, regulators don’t necessarily want to be seen as stifling industry innovation.  It is a case of finding an appropriate balance. In New South Wales, for example, the Gaming Machines Act 2001 states that one objective of the Act is to “facilitate the balanced development, in the public interest, of the gaming industry”.

The Australian / New Zealand Gaming Machine National Standard 2016 (which has been adopted by each of the various States and Territories in Australia, as well as New Zealand, subject to any relevant jurisdictional appendix), requires that games should not present to players features that may be considered harmful, in that a feature or features could expose players to potential harmful gambling behaviours. In relation to specific measures to minimise harm, the National Standard provides (amongst other things), that games must: 

  • not give the player a false expectation of odds
  • accurately display the result of a game outcome
  • provide clear game rules and instructions
  • not provide false information
  • not be misleading, illusory or deceptive – such as a near miss design
  • provide sufficient information to facilitate informed choice
  • provide outcomes which are not dependent upon previous outcomes or favor one player over another (except where excluded elsewhere in the National Standard)
  • not encourage the player to continue playing or increase the amount bet per play.

The National Standard (as well as other comparable standards globally) should be relatively easy to apply, however it was written around the same time as the invention of the first skill-based gaming machine and could be improved to deal with new technological innovations and advancements, such as skill-based gaming machines.   

Conclusion

Until further research on the impact of skill-based gaming machines on gambling harm is available, regulators around the world should carefully consider approval applications on a case-by-case basis. The industry is yet to fully understand the impact of skill-based gaming machine gambling harm.

Skill-based gaming machines with features substantially different to traditional slots and which contain features, functions and characteristics in respect of which there has been limited research, will undoubtedly present the greatest challenges for regulators, at least in the short term. Game developers may also find in these circumstances that certain machines may benefit from being subject to a ‘sandbox’ (or trial) arrangement by relevant regulators, pending the release of further research in relation to gambling harm. 

Trialing of skill-based gaming machines on a case-by-case basis may be the balance required between understanding the impacts on gambling harm and allowing for product innovation.  

Company Details

International Association of Gaming Regulators
7881 W Charleston Blvd, Suite 155
Las Vegas, NV 89117
USA

Fax: +001 (636) 277-6665

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