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Gas station ‘gambling’ is back in Kentucky, despite a statewide ban on gray machines

Prominent Technologies' "no-risk games" at a Frankfort gas station on Monday, March 4, 2024.
Joe Sonka
/
KPR
Prominent Technologies' "no-risk games" at a Frankfort gas station on Monday, March 4, 2024.

Less than a year after a new law went into effect to ban certain cash payout video games in Kentucky, one of the companies behind those games is now back in stores with a new product it says is legal.

Prominent Technologies says its new games are not covered by the ban, but their claim has drawn early skepticism from the administration of Gov. Andy Beshear.

The Pennsylvania-based game maker was one of two companies that began operating what they called “skill games” in Kentucky gas stations, convenience stores and bars across Kentucky in 2021.

The now-shuttered skill games resembled video slot machines, but with the player taking an additional step of touching the screen to find matches. The company claimed that feature allowed them to comply with Kentucky’s anti-gambling statutes banning games of chance and risk.

After a heated and expensive lobbying battle between the companies and their rivals in the horse racing industry, the Kentucky General Assembly passed a bill in 2023 to ban the so-called “gray machines” — a moniker reflecting the gray area of their legal standing.

Prominent Technologies and Georgia-based company Pace-O-Matic disconnected their skill game software in stores in late June when the ban went into effect. Both companies have filed lawsuits challenging the new law.

After the ban took effect, Prominent’s team of developers and attorneys “went back to the drawing board,” and created a new product it claims does not run afoul of Kentucky’s gambling restrictions, according to Howard Greer, the company’s director of compliance and government affairs.

Starting in January, Prominent came back to Kentucky stores with a new game, Greer said.

“Basically, we looked at the revised law and how it's written, what it said and designed a new game,” Greer said. “And that game is a no-risk game.”

That explanation doesn’t satisfy state Rep. Killian Timoney, a Lexington Republican who was the chief sponsor of the bill to ban skill games last year.

Timoney said the company is thumbing its nose and insulting the intelligence of the state by trying to skirt around the new ban, calling the move “reprehensible.”

“That’s gambling,” Timoney said. “They're still playing in the gray area and they're taking advantage of Kentuckians. Again, it's why they're a bad actor.”

Back in business with ‘no-risk’

Kentucky Public Radio found four of these new games lining the corner of a gas station in Frankfort on Monday.

In front of each game sat an empty plush chair emblemized with the “Wild Cat” logo branding of its previous skill games, reading “Powered by Prominent Games.”

A manager said the games were installed three days earlier in place of disconnected Pace-O-Matic skill games.

“They’re legal again,” he said, adding that other stores started using them a month ago.

A Kentucky Public Radio reporter tested out the game, inserting three $1 bills and winning $7, which was cashed out at the register.

There are two noticeable differences from the company’s previous games.

First, there is no need for what the company refers to as “skill,” to win the game. Instead, a win is determined by the icons on the screen after the reels stop spinning, not requiring the user to touch the screen like the skill games.

Second, the game tells the player whether the next spin results in a win or loss.

That’s what differentiates the new “no-risk” game from that of an ordinary casino slot machine — and is therefore not covered by the state ban on games of chance, according to Greer.

“To be honest, we didn't have anything in the market that was quite like that, so we weren't sure how well it would perform,” Greer said. “But people seem to enjoy it. It's an amusement game, entertainment purposes.”

While the game tells the player if they’ll win or lose on the next spin, it doesn’t say what will happen on the following spin. So even if the player is told the next spin will be a loss, they may eat that loss in order to make it to a potential win.

The screen of a Prominent Technologies "no-risk game" at a Frankfort gas station.
Joe Sonka
/
KPR
The screen of a Prominent Technologies "no-risk game" at a Frankfort gas station on March 4, 2024.

Greer said he would not disclose how many new games the company has placed in Kentucky stores, but said they are now at more than 100 locations “scattered all throughout the state.”

Anticipating the new games may draw the scrutiny of law enforcement, Greer said the company’s lead attorney drafted a legal opinion on the games and shared it with Attorney General Russell Coleman at the beginning of this year.

The author of that letter was State Rep. Jason Nemes, a member of House Republican leadership from Louisville.

State regulators have ‘concerns,’ issue warning to store owner

Nemes has disclosed that Prominent Technologies is one of his clients on his filings with the Legislative Ethics Commission over the past few years. He did not respond to a request for comment on his client’s new games, but his Jan. 1 letter addressed to Prominent Technologies CEO Naresh Patel outlines his legal opinion.

He wrote that the patron in a “Risk-Free Play” is not putting anything at risk because the outcome is known ahead of time and their “skill” is no factor.

“It does not matter whether the patron is the luckiest or unluckiest person on the planet; and it does not matter if the patron is the most skillful or least skillful person on the planet,” Nemes wrote. “The foreknown result is the same and does not depend on chance or skill in any measure.”

While the 2023 bill amended Kentucky’s gambling statutes to add skill games to the ban along with games of chance, Nemes added that “those statutory revisions did not contemplate Risk-Free Plays.”

Nemes’ letter recommended informing the attorney general the company was going to market with the games, which “would show that Prominent Technologies has nothing to hide and is operating in the light of day.”

Bob Heleringer, a former Republican state legislator from Louisville who is also an attorney for Prominent, says Nemes’ legal opinion was sent to the attorney general at the time, but the company has received no response from his office.

Asked about Attorney General Coleman's position on the legality of the new games and any actions his office plans to take, his spokesperson Kevin Grout emailed a statement saying he would defend the ban in court.

"The General Assembly has acted, and gray machines are illegal in Kentucky," Grout said. "Our Office will continue to defend the law in court. If any Kentuckian has a complaint about illegal gambling, we encourage them to contact their County or Commonwealth’s Attorney who primarily handles these cases."

Heleringer said the company also sent the legal opinion to state regulators after one of their client’s stores was given a warning notice Jan. 28 by the Kentucky Department of Alcohol Beverage Control.

A gas station on Frankfort Avenue in Louisville’s Crescent Hill neighborhood was given the citation for violating the statute prohibiting possession of a gambling device, he said. The citation stated “a Wild Cat Gaming machine was operating at the licensed premises” and that a warning letter would be issued.

Heleringer said the regulator likely saw the Wild Cat branding on the console of the new game and assumed it was one of the old skill games that are now banned. The company then sent Nemes’ legal opinion to ABC, with Heleringer saying the agency's general counsel did not agree with the letter.

Prominent Technologies leaders and attorneys then requested a meeting with the ABC to discuss and demonstrate the games, which Heleringer and Greer said was also attended by the general counsel for the Public Protection Cabinet and commissioner of the Department of Charitable Gaming.

“We really just wanted to inform them of what we were doing,” Greer said. “Letting them know that we didn't want any locations to get in trouble.”

Greer and Heleringer say the company has not heard back from Beshear administration officials since that meeting.

Kristin Voskuhl, the spokesperson for the Public Protection Cabinet, wrote in an emailed statement that the ABC agency “is aware of the new machine.”

“We are currently reviewing information about the machines and have concerns about them based on the new law.”

As of Wednesday, the Louisville store cited by ABC for having the company’s game in January no longer has it displayed.

Critics and competitors react to the new games

At another gas station in Frankfort on Monday, an old Pace-O-Matic skill game was tucked away in a corner, turned off and covered up.

“We fully operate in compliance with the law,” said Pace-O-Matic Spokesperson Rachel Albritton.

Both competitors and critics told Kentucky Public Radio that they’d not yet heard of the new Prominent games in Kentucky stores.

Pace-O-Matic had the largest number of skill games in operation in Kentucky before the ban and competes with Prominent in other states where they aren’t prohibited. Albritton said Pace-O-Matic was not aware of what Prominent was doing and is keeping its games dark while their lawsuit challenging the ban proceeds in Franklin Circuit Court.

The two skill games competitors were forced into an alliance in Kentucky to try to defeat legislation to ban their games, which turned into one of the most expensive lobbying fights the state has ever seen.

A bill to ban the skill games passed one chamber in the 2022 legislative session, before House Bill 594 to ban them finally passed into law in 2023.

The horse racing industry sprang up in opposition to the games and funded a new group — Kentuckians Against Illegal Gambling — to lobby heavily for legislation to ban them. Pace-O-Matic also funded the Kentucky Merchants and Amusement Coalition to lobby against a ban, with those two rival groups spending more than $800,000 on advertisements alone during the first three months of the 2023 session.

The horse racing lobby — supported by the Kentucky Chamber of Commerce — argued the games were creating illegal “mini casinos” in gas stations and posed a threat to the state’s signature equine industry.

The skill game companies argued their product was allowed under Kentucky statutes and should be regulated and taxed to provide state revenue. They also filled committee rooms with gas station and convenience store owners, saying they provided a much-needed revenue boost to them during a time of economic uncertainty, as the companies would share a portion of the games’ revenue.

The skill games lobby also argued hypocrisy was at play. Churchill Downs and the horse racing industry two years earlier had lobbied successfully to legalize what’s known as “historical horse racing machines.” These video games also closely resemble casino slots and have financially propped up the industry.

The horse racing industry has remained one of the largest funders of political campaigns and committees in recent years, but Pace-O-Matic has emerged in Kentucky since 2022 with large checks of its own. In Kentucky’s 2023 race for governor, the horse industry mostly supported the Democrat, Beshear, while Pace-O-Matic heavily funded PACs supporting Attorney General Daniel Cameron, his Republican challenger.

Mark Guilfoyle, an attorney with ties to the horse racing industry and a lobbyist for Kentuckians Against Illegal Gambling, said they were not aware of Prominent’s new games in Kentucky stores.

“I certainly will consult with our team,” Guilfoyle said. “I mean, that would be something we're definitely going to be interested in understanding and combating, if that's appropriate.”

Timoney, the lead sponsor of the bill to ban skill games, also said this was the first he had heard of Prominent’s new games.

He said the company is flaunting its disregard for the law “and it’s up to the attorney general’s office to really become involved here and get after it.”

Republican House Speaker David Osborne — the lone co-sponsor of HB 594 and an Oldham County thoroughbred farm owner — did not respond to a request for comment on the new games or Nemes’ letter in support of them.

Take a seat, spin the wheel

Prominent’s representatives insist Timoney’s criticism is off base and they are operating within the law with their new “no-risk” games. Greer said he even holds out hope that legislators and the horse industry will have a change of heart, as Prominent doesn’t want to be unregulated.

“We would love to sit down with any industry that has an interest in our industry,” Greer said. “We'd love to sit down at a roundtable with them and discuss ways that we can coexist in the state.”

Following an expensive multi-year battle in Virginia — mostly pitting Pace-O-Matic versus casino operators — the state legislature on Monday passed a bill to legalize, regulate and tax the skill games, which would overturn a ban on the games passed into law in 2021. If signed into law, Virginia stores would limit the number of games allowed at ABC-licensed retail establishments, with revenue from the games taxed at 25%.

Greer also pointed out that many blatantly illegal video slot machines exist in stores throughout Kentucky that barely make any effort to stay within the law.

Three of those video slot machines not owned by Prominent or Pace-O-Matic are in operation at a gas station in Louisville near River Road. Early Wednesday morning, a patron sat at a booth in front of one of the games, clicking a button every few seconds for another spin of the wheel.

Video slot machines at a gas station in Louisville
Joe Sonka
/
KPR
Video slot machines at a gas station in Louisville on Wednesday, March 6, 2024.

The slot machines did not have a distributor company’s name on them, nor any visible license identifying them as a “charitable” game allowed under law. A store employee said he didn’t know what company provided the game.

No legislation has been filed in the current session of the Kentucky General Assembly that would address such games, skill games or no-risk games.

Pace-O-Matic’s motion for an injunction to block the skill games ban was dismissed in the Franklin Circuit, but the case is ongoing. The next hearing for Prominent’s lawsuit challenging the ban in Jefferson Circuit Court is in September.

State government and politics reporting is supported in part by the Corporation for Public Broadcasting.

Joe is the enterprise statehouse reporter for Kentucky Public Radio, a collaboration including Louisville Public Media, WEKU-Richmond, WKU Public Radio and WKMS-Murray. Email Joe at jsonka@lpm.org.