Skill-based gaming has become a hot topic in the gaming community. In the first part of this two-part series, we identified the business problems that skill-based games hope to address and took a look at what actually constitutes a “skill-based game.” In case you missed it, be sure to check out Part I.  In the second part of this series, we will take a look at the various legal issues that policymakers, legislators, and regulators must consider when implementing a skill-based gaming regulatory scheme in their jurisdictions.

Do We Want To Implement A Skill-Based Gaming Regulatory Scheme?

Policymakers must first determine whether a skill-based gaming regulatory scheme is something states should want to implement.  To that end, policymakers must consider public perceptions and concerns (i.e., are there members of the public who may object to implementing skill-based gaming?).  Aside from those who are morally opposed to gaming generally, there could potentially be other opponents of skill-based gaming. While skill-based games are meant to target millennials, an unintended side effect may be that they also attract underage gamblers.

Another consideration should be the impact of skill-based gaming on regulatory resources. Is implementation of a skill-based gaming regulatory scheme something that needs attention at the present? Or, would the limited resources of a state’s regulatory body be better served focusing on other issues at the moment?

What Are Other Gaming Jurisdictions Doing That May Impact Our Decision?

If policymakers determine that a skill-based gaming regulatory scheme is something the state should want to pursue, they must then address issues related to competition among various states and jurisdictions. For example, does the state want to be among the first states to implement a skill-based gaming regulatory scheme? As with most businesses, there are both advantages and disadvantages to being “first to market” with a new product. The actions of adjacent jurisdictions can also heavily influence the decision making process. For instance, the Memphis, Tennessee, regional market is primarily served by two gaming jurisdictions – Arkansas and Mississippi. One jurisdiction’s approach to skill-based gaming will likely, and probably should, highly influence the other jurisdiction’s approach. Similarly, states with tribal gaming must also consider the tribe’s approach to skill-based gaming when determining how to approach the issue with commercial operators.

How Does Skill-Based Gaming Fit Into Our Current Regulatory Scheme?

Once policymakers have made the decision to move forward with the implementation of a skill-based gaming regulatory scheme, legislators and regulators must consider various issues regarding the path forward. The first consideration must necessarily be whether skill-based gaming is permitted under existing law. Existing statutes permit skill-based gaming in some states (e.g., Nevada, Mississippi, New Jersey), but statutory amendments will be necessary or appropriate to permit skill-based gaming in other states (e.g., Pennsylvania and possibly Louisiana and Florida). Even though existing statutes permitted skill-based gaming, Nevada nevertheless amended its gaming law in order to provide clear direction to the Nevada Gaming Control Board to adopt regulations on skill-based gaming and to encourage innovation and consistent regulatory application. It is advisable for other states preparing to implement a skill-based gaming regulatory scheme to follow Nevada’s lead and grant broad statutory authority to regulators to provide maximum flexibility to address future technology and innovation.

How Do We Create A Skill-Based Gaming Regulatory Scheme?

After regulators have been granted statutory authority to promulgate skill-based gaming regulations, regulators must then determine how to address skill-based gaming in their regulations. To the extent possible, regulators will likely desire to address as many issues as possible through definitions. By adding the concept of skill-based gaming to existing definitions, regulators can piggyback off existing regulatory schemes to create a comprehensive regulatory framework for skill-based gaming without reinventing the wheel or requiring extensive revisions to the existing regulations. Aside from applying existing regulations to skill-based gaming through incorporation in various definitions, the primary area that regulators must address through regulations is how to handle minimum payback percentages. This area appears to raise the most issues for skill-based gaming and must take into account the variety of different skill-based games and, particularly, how the wagering component is introduced into a particular skill-based game.

Conclusion

As is evident, implementing a skill-based gaming regulatory scheme raises a lot of different questions for policymakers, legislators, and regulators to consider. While skill-based gaming is not expected to be a panacea, it is clearly a part of the future of the gaming industry. For that reason, policymakers, legislators, and regulators in all jurisdictions (even in those jurisdictions that choose not to implement a skill-based gaming regulatory scheme) will likely be faced with all of the questions raised in connection with skill-based gaming.