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Games Of Skill? No Chance!

gamblingCommentary By Chuck Michaelis

“Oh what a tangled web we weave, When first we practice to deceive”- Sir Walter Scott

What looked, at first, like a carefully choreographed effort to circumvent the will of the Ohio electorate, which voted in a 57%-43% rejection, on casino-style gambling has begun to take on the appearance of having devolved into a Three Stooges comedy routine. And while we might laugh at the eye-poking, suspender-snapping and non-sequitur banter of the performers, whose ranks include elected representatives and for-profit gambling companies, the potential outcome of their actions cannot be treated so cavalierly.

The latest chapter in this continuing story began earlier this year when Representative Bill Seitz of Cincinnati and Senator Steve Stivers of Columbus, ignoring the crushing defeat just last fall of State Issue 3 that would have allowed casino gambling in Ohio, introduced identical companion bills in their respective bodies, HB 118 and SB 125. The purpose of both bills is to permit Ohio racetracks to provide a venue for bettors to gamble on the outcome of random and anonymous pre-recorded horse races which would be shown on a multi-purpose gambling device specially chipped for this particular style of gambling. An identical bill was defeated last session when testimony was given that proved that with a simple chip change, these horse racing terminals could be converted to video slot or lottery (Keno) machines (see the article “Racinos Bad Public Policy” elsewhere on the Principled Policy blog).

In that 2006 session, realizing the bill was guaranteed to raise the ire of social conservative voters in a crucial election year (which became a virtual political bloodbath anyway), Ohio House Speaker Jon Husted required Rep. Seitz, the House Majority Whip, to guarantee 50 “yes” votes from his own caucus before it could be brought to the floor, according to well-placed sources. Despite Seitz’s best lobbying effort, he could not deliver the required “yes” votes. Now, in this session of the General Assembly, the Senate version of this bill (SB 125) has moved forward first, passing the Senate on 5/23/07 by a vote of 25 “yes” to 8 “no” and is now before the Ohio House. It is doubtful that Speaker Husted will impose the same restriction on this bill as that placed on the House version last session.

The purpose of this legislation is officially to “help” the Ohio horse racing industry that is feeling pressure from casino gambling in nearby states to be more competitive by offering similar gambling options. Legislators are warm to this idea because increased revenues at the tracks means, supposedly, increased tax revenues to the state. Just like the state “cashes in” with the Ohio Lottery, which is in reality a tax on the poor based on false hopes fueled by flashy and misleading advertising, some Ohio legislators hope to cash in on the revenue potential from “Racinos”, heedless of the extensive economic and social costs associated with this effort. Most importantly, the unstated reality is that large increase in revenues to tracks and gambling corporations can translate into large contributions to re-election funds and party coffers, especially to the “friends” of the gambling interests.

It is evident to many observers that the tracks have been well-greased this go-around, and that SB125 is on a fast track to final approval. The Ohio legislature will be recessing for the summer after finalizing the state’s biennial budget bill, which will be adopted by the end of June. The pace of hearings on SB125 is such to ensure that the bill is brought to the House floor for a vote prior to that recess. The bill was assigned to the House State Government and Elections Committee (gee, what irony in a name), on which sit 7 of the co-sponsors of the companion legislation, HB 118. A check of the record shows that two more members of this committee voted in favor of the previous session’s version of this expansion of gambling, giving the bill at least 9 votes (which happens to be just the number needed to clear the committee with a simple majority, which is comprised of 17 members of the House). House sponsor Rep. Seitz sits on the committee, as well as four other members of the leadership of the chamber from both parties.

The committee has stated how concerned they are about the struggling horse industry, but has yet to raise any questions or concerns relative to the human costs such state endorsement of further addictive behavior would bring to Ohio. Research clearly indicates that such rapid-fire gambling options increase the potential for developing problem gambling in a more expedited onset of the behavior which indicates such addiction. None of that has been of pressing concern so far to the elected representatives of the people, nor is it a concern that in the last 16 years, the people have soundly rejected all attempts to expand gambling in Ohio.

From the other side of the political spectrum is the recent St. Vitus Dance of Attorney General Mark Dann on the status of the “Match ‘Um Up” game distributed by Castle King LLC. AG Dann hired Gaming Laboratories, LLC to do a study to determine if “Match Um Up” had a skill element greater than 50%, which would purportedly make the game a “game of skill” rather than a gambling device. Based on this report, Dann ruled the game a “game of skill.” How precisely this determination can be made from the information provided by Gaming Laboratories remains a mystery because nowhere in the report is there an indication of any percentage of skill versus chance involved in Match ‘Um Up.

As soon as AG Dann announced that the report would be released to the public, Castle King immediately filed for and was granted a temporary injunction requiring the Ohio AG to keep the Gaming Laboratories report secret. This threw Dann into fit of pique and he immediately announced that if the report were not released, then he would declare the games “gambling devices.” This raises an obvious question; what sort of information could possibly be contained in this report that would change the status of “Match Um Up” from a “game of chance” to a “game of skill?” The answer is apparently nothing of any real significance. Castle King agreed to the release of a redacted report, available here.

In a June 7, 2007 article in the Columbus Dispatch, Castle King attorney David Kopech argues that the unredacted report contains information such as the game icon pattern and strategy that could allow players to “beat the game” and allow competitors to copy it. This statement proceeds from some very interesting assumptions. For instance, it assumes that a person knowing the icon pattern and game strategy could overcome the device’s software-controlled icon timing and other factors. It also assumes that there is no governing devices in the game to control the skill element.

In another article in the Columbus Dispatch from June 9, 2007, explains that beating the game through “skill” requires memorizing the positions 128 icons as they whiz by, each icon being visible for either three-tenths or eight-tenths of a second (0.333 milliseconds or 0.83 milliseconds), the speed determined by the software and fully under the control of the game operator (not the player). In the same article Dr. Richard McGowan of Boston College explains that in this kind of game the distinction between skill and chance is irrelevant. He added that “It’s a backdoor way of trying to get into casino gambling. No doubt about it.”

Former Ohio Attorney General Jim Petro, who is not opposed to gambling, in the same Dispatch article explains that the games payouts are determined mostly by chance and are controlled by a governor and cannot be won every time, making them mostly dependent on chance and therefore illegal. Petro also pointed out that allowing similar “skill” games opens the door to Indian Casino gaming.

Petro’s and McGowan’s assertions that the devices are actually games of chance are backed by the technical specifications as outlined in the patent applications for them. A close examination of those specifications reveals that the devices are designed to limit the skill element, thus keeping the “odds with the house” ensuring limited payouts and big collections for the game operator.

And in yet another article from the Columbus Dispatch from June 10, 2007, we were informed that Castle King has “…hundreds of machines waiting in warehouses for shipment around the state if Dann approves…” This revelation raises an obvious question. Why would a gaming device manufacturer move “hundreds of devices” worth several thousand of dollars apiece into a state where the previous Attorney General had ruled that games in question were gambling devices and illegal to operate under Ohio law? Why would they store this type of device in a state that had only 6 months before resoundingly defeated casino-style gambling expansion? Wouldn’t it be easier and cheaper to keep them in a warehouse at or nearer the distributor and truck them in if, by some chance, the AG should rule in their favor? Logically, the only reason to go to the expense (hundreds of thousands of dollars) of filling several warehouses in Ohio with illegal gaming devices is if you believe you have excellent odds of having them declared legal. For what reason, do you suppose, Castle King concluded that it was a good economic gamble to invest massive economic resources in the effort to have the devices available for delivery at a moments notice, when they could have had the machines here by truck in a few hours if the AG’s decision was favorable? And what does it say about the company’s estimate of the potential profitability, that they believe it would be more lucrative to warehouse them here and have them ready at the exact hour they become legal rather than delaying the few hours that it would take to truck them in? These and other questions need answers. This author is not holding his breath while waiting for those answers.

With the legislature’s Republican delegation taking careful aim at its own electoral foot and about to pull the trigger with the gambling expansion bill (among other issues like eminent domain reform), all that needed be done by the Democrats was to relax and let it happen, even help it along by voting for whichever measure happened to find success. Gambling opponents would only remember that the Republican majority proposed and passed the bill. A very sound political strategy. Then along came Attorney General Mark Dann, who stumbled into the fray with his now-withdrawn proposal to anoint what are clearly gambling devices (as anyone examining the information available on the devices would by reasoned analysis conclude) as “games of skill.”

Enter stage left the very savvy politician Governor Ted Strickland on his white horse. Putting his best populist face forward, Governor Strickland said that the people have spoken at the ballot box on the issue of casino gambling. This from the same Governor Strickland who was inexplicably tone deaf earlier this year, and unable to hear the electoral song sung by voters in 2004 on Issue One while implicitly recognizing homosexual partners, one or both of whom are employed in state government, as being the equivalent of married and entitled to “domestic benefits.”

The Governor devised a clever strategy that allowed AG Dann to recover at least some of his credibility. He announced that he will veto any legislation that expands gambling in Ohio. This is a good thing and even a good thing done for the wrong reason is commendable. Thank you, Governor Strickland!

He also issued a joint statement with AG Dann in which they both called for the Ohio Legislature to pass a new law banning cash payouts on games like Match ‘Um Up and Tic Tac Fruit. This allows Dann some wiggle room to correct the blunder of dallying with gambling interests by appearing to be “concerned” about the gambling corporations’ “lack of candor” and proposing a solution for the problem he himself created. This public relations dog-and-pony show is intended to cover the fact that gaming devices are already banned by Ohio law. In a Columbus Dispatch article from June 15,2007 Ohio House of Representatives Jon Husted catches this “nuance” stating that the debate over banning payouts is moot because the devices are already illegal. He also said “How about we just eliminate them? Just enforce the law.” Husted also echoes Former AG Petro’s concerns that the legalization of small cash payouts would be a back door to legalization of gaming machines which opens the door to Indian gaming casinos as it has in other states like Arkansas. Federal law allows tribes to negotiate to open casinos using the devices approved by the states.

So, in the final analysis Governor Strickland’s seeming response to the clear voice echoing the will of the people may have a somewhat different motivation than that purported. What looked at a distance like a knight on a white horse may be resolving into a snake oil merchant on a donkey as we examine him close up. Time will tell.

In the legislature, it seems term limits, big political payouts and avoiding the hard work of balancing a state budget through the tough choices of lowering taxes and cutting state spending might outweigh the will of the people in this instance. I wonder if the people who voted in such large numbers last fall to curb gambling will show back up next fall to curb those who like to gamble on the good will of the electorate. A large number of members of the Ohio legislature are placing their bets on a very risky game of chance.

Chuck Michaelis is the president of Rocky Fork Formulas, Inc., a dietary supplement design and distribution company. He is also the Executive Director of Camp American, a week-long summer Christian worldview education camp for ages 12 years to adult. He is currently the Vice-chairman of the Institute For Principled Policy. You can contact him at [email protected]

Posted in Commentary, Gambling, Public Policy Radar.


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Continuing the Discussion

  1. Principled Policy Blog » Blog Archive » AG Dann Awakens From Stupor! linked to this post on August 22, 2007

    […] into his own foot just two short months ago (see our blog articles and the attached news stories here and here), Dann has issued a letter to more than 700 gambling device operators ordering them to […]