[co-author: Stephanie Kozol]*
Gambling machines in Kentucky have recently come under increased scrutiny following the enactment of House Bill 594, which amended the definition of “gambling device” under Kentucky law, effective June of last year. The law significantly impacts the legality of certain gaming devices, requiring industry participants to adjust their product offerings within the state.
Recently, Kentucky Attorney General (AG) Russell Coleman provided guidance to state law enforcement officials regarding the status of litigation surrounding the use of so-called “gray machines” and the emergence of “risk-free play” devices in Kentucky. The AG stated unequivocally that these devices are illegal under Kentucky law, that the prohibition is now in full force and effect, and that officials should feel free to bring enforcement actions with support from the AG’s office as needed. The AG’s statement demonstrates the importance of an evolving compliance program for industry players that can react quickly to changes in enforcement priorities.
“Gray Machines”
House Bill 594 amended the definition of “gambling device” under KRS § 528.010 to include any mechanical or electronic device where the outcome of the game is determined by “any element of chance, regardless of whether the result is also partially or predominantly based on skill…[1]” As a result, some gaming devices that have historically been legal in Kentucky are now prohibited. Games that operate in a legal gray area and claim legality based on an interpretation of this state law are often referred to as “gray machines.”
The advisory emphasizes the AG’s view that House Bill 594 is valid and enforceable. Coleman stated in the advisory that the AG’s office has defended the new law in two separate legal actions, one of which upheld the constitutionality of the bill.[2] That decision is currently on appeal to the Kentucky Court of Appeals.[3] The AG encourages county prosecutors and law enforcement to investigate and prosecute violations related to these devices, with the assurance of support from the AG’s office in defending the law and assisting with any related litigation.
Risk-Free Play Devices
The advisory also discussed an emerging type of gaming device, known as “risk-free play” games, that are becoming more prevalent in Kentucky and around the U.S. These devices inform players of the outcome of the next game before they play, ostensibly removing the element of chance from the traditional analysis of illegal gaming, thereby rendering the devices legal.
However, citing a more than 100-year-old Kentucky Supreme Court case, the AG opined that these devices are prohibited. In Welch v. Commonwealth, 179 Ky. 125, 200 S.W. 371 (Ky. 1918), a café owner, Welch, was charged with operating an illegal gambling device inside his café. Welch argued that the machine did not constitute a prohibited device.
The machine itself was labeled as a “gum-vending machine.” Each time a player inserted a nickel, they would receive one piece of chewing gum, worth approximately five cents. However, in addition to each piece of gum, it was possible that the player could win additional tokens that could be exchanged for up to one dollar. The machine featured a dial which would rotate to point to the different prizes before the player inserted their nickel for that play. The result was that the player always knew exactly what they were going to win for inserting their nickel.
The court in Welch found that even if a player knows the outcome of the next play, the lure of potentially receiving more than what was paid provides the element of “chance.” The machines were therefore prohibited gambling devices. The AG’s opinion concludes that “risk-free play” games are similarly prohibited under Kentucky law because they contain this same element of chance.
Why It Matters
As technology evolves, gaming companies are developing new ways to modernize devices to ensure such devices do not fun afoul of state laws. Kentucky’s House Bill 594, and the AG’s opinion, signal that lawmakers and regulators are looking for ways to address these evolutions.
[1] See KRS § 528.010(7)(a)(2).
[2] ARKK Properties, LLC, et al. v. Cameron, et al., No. 23-CI-282 (Franklin Cir. Ct.).
[3] ARKK Properties, LLC, et al. v. Coleman, No. 2024-CA-0875 (Ky. App.).
*Senior Government Relations Manager
