Skill games can stay in Wichita bars, stores, at least for now

WICHITA, Kan. (KSNW) — Gaming machines that offer payouts at Wichita businesses can stay unless officials determine they are illegal gambling machines.

On Tuesday, the Wichita City Council voted to update the City ordinances. The update makes it so that a licensed business, such as one that sells alcohol, tobacco, or gas, could potentially lose its license if it is caught with an illegal gambling machine.

But, the City Council stopped short of including skill games in the ordinance. However, they plan to discuss regulations for skill games within the next two months.

The problem

The Wichita Police Department and the City’s legal department say the problem of illegal gambling devices has skyrocketed in Wichita.

“We have seen some makeshift casinos in this city where you walk in, and it is many machines, and they have puppy pads on the chairs so people don’t have to leave their seats and they can play without having to go to the restroom,” Jan Jarman, with the City of Wichita legal department, said. “They shut that one down. That’s how serious this is. This isn’t a matter of someone has an extra quarter, and they’re going to stick it in the machine on their way out the door.”

The WPD’s evidence facility has nearly 1,000 illegal gaming machines seized from businesses, but Jarman said that is not solving the problem.

“Strangely, another machine is taking their place as soon as the obvious illegal machines are taken out,” Jarman said.

She said the new machines are called skill games.

Illegal games vs. skill games

The WPD and the City’s legal department argue that skill games are almost as much a game of chance as an illegal gambling machine and should be included in the ordinance change.

“These are machines that are impacting people. They are taking their livelihoods,” Jarman said. “They have no guaranteed payouts … They’re putting them in lower-income neighborhoods, and you don’t even have the same fair chance of winning as if you went to a casino.”

Jarman called skill games “gray” games because she said they toe the line between legal and illegal. She said the illegal games and the skill games look very similar.

“If you walked in, you would not know the difference,” she said.

Jarman said skill games have a small element that is a game of skill, but players have to pay attention to see it.

“You can play it without attempting the skill portion,” she said. “But if you’re quick enough and if you’re looking down in the corner and you see the next upcoming screen, it can increase your chances of winning.”

WPD Captain Travis Rakestraw told the Council that it is hard for his team to differentiate between skill and illegal games.

“If it’s not one they’re already familiar with, then it’s incredibly difficult for them to determine,” Rakestraw said. “It would be something that we would have to get the opinion of the state gaming, racing and gaming commission.”

Skill game supporters respond

Three people in the skill games industry told the Council that people with skill can win money at their games.

“People call them gray, but there’s really no gray,” Matt Pascal said. “They’re either legal or they’re illegal, so there’s black and white.”

Pascal told the Council he has been in the coin-operated amusement games business for 32 years. His company has skill machines at about 25 locations in Wichita, mainly bars. Pace-O-Matic makes the machines.

“They manufacture skill games working in multiple states,” he said. “I was able to be part of a process in getting legislation passed in Wyoming to regulate skill games.”

Pascal offered to work with WPD and the City’s legal department to come up with a plan to regulate skill games in Wichita. He suggested the City licenses each game and fine people who violate the City’s policy.

“We want to compete fairly, but those that don’t want to compete fairly, let’s make sure they get hit hard,” he said. “Put a heavy fine in there if they are found to not have – if they’re not an approved game with a stamp or something like that.”

Tom Hamilton represents POM of Kansas, which is Pace-O-Matic’s branch in Kansas. He said the game Dragon’s Ascent is the only Pace-O-Matic skill game in Kansas.

“The first thing we did when we brought the game to Kansas was through our law firm … we brought it to the KRGC (Kansas Racing and Gaming Commission) and gave them the source code, gave them the game and said, ‘Please, play it as much as you want,'” Hamilton said.

He told the Council that they invited the KRGC to vet the game

“There’s never been any determination by any Kansas agency that Dragon’s AsCent is anything but completely skill-based and legal,” Hamilton said.

Steven Joseph is the president of Galaxy Venture Capital Fund, which also has skill games in Wichita businesses.

He said he wants the City to regulate the industry, but not with the ordinance the WPD and the legal department proposed.

“The City has no provision for licensing skilled games,” Joseph said. “We would like you to have a provision for doing that. We’d be happy to pay a license fee.”

“What we would like you to do, if possible, is give us time to work with and determine, and other people in the law department, to develop something different than what they’ve proposed today,” he said.

Joseph said he was at a Kansas Supreme Court hearing where one of the justices made fun of the term gray games.

“One of the justices got the attorney for the state to admit that her computer sitting in front of her on her desk because she could play games online was a gray machine,” he said.

Joseph said there are no gray games, just games of skill and gambling games.

“Games of skill are a specialized type of game,” he said. “There is no maximum payout. There is no limited payout.”

Joseph said a number of his skill games in Wichita and around Kansas are losing money because there are more winners than losers.

“If you’re skillful enough, you can eat our lunch,” he said. “And in fact, in our federal income tax return for the past three years, we’ve shown losses in the range of a quarter million dollars.”

Council questions

City Council Member Jeff Blubaugh represents southwest Wichita. He said a lot of the games have targeted low-income people in his district.

He asked Pascal what his company grosses in Wichita.

“I don’t know,” Pascal said. “I think, on average, in the state, we’re about 16%.”

Blubaugh asked if Pascal’s company pays sales tax and federal and state income tax and how machine profits are tracked.

Pascal said the company does pay tax, and they use licensing software in the machine to track the numbers.

Blubaugh also wanted to know what can be done to prevent children from playing the games.

Pascal said the businesses with Pace-O-Matic machines have a contractual agreement and a code of conduct they follow. He said it includes limiting each business to three machines at a location and checking IDs before making payouts.

Several Council members wanted to know if the proposed ordinance would also include games where people can win prizes, such as All Star Sports. Jarman said the ordinance only involves gaming machines where people win cash.

Council Member Bryan Frye said he liked the idea of licensing the games to create more clarity for the WPD. He suggested more discussion before including skill games in the new City ordinances.

“I don’t want to have any unintended consequences, and, at the same time, I think we need to make sure these bad actors don’t continue what they’re doing,” Frye said. “I think we should probably pause a little bit and have some more discussion and maybe get some folks in the room to learn about how this is done in other states and what we can learn from it.”

Ultimately, the Council voted unanimously not to include skill games in the new ordinance. They set a tentative date of Oct. 3 to revisit the skill games issue.