“Skill-Game Showdown: Company Faces Legal Hurdle Against State Regulators”

TOPEKA — The Kansas Supreme Court dismissed a legal dispute initiated five years prior by an electronic “skill-game” enterprise that sought an official determination that its Dragon’s Ascent game, accessible to players at truck stops or convenience markets, was lawful under state regulations.

The state Supreme Court upheld a district court’s rejection of claims by POM of Kansas, a branch of game developer Pace-O-Matic from Duluth, Georgia, in a lawsuit seeking a declaratory judgment asserting that the state’s casino regulations didn’t pertain to the company’s arcade game.

In the initial 2019 lawsuit, POM of Kansas requested a court ruling that their unregulated Dragon’s Ascent game adhered to state laws because it was a contest of “skill.” They contended it was distinct from slot machines in casinos, which were deemed regulated games of “chance.”

The justices also annulled a district court ruling that dismissed arguments claiming the state’s criminal gambling laws were unconstitutionally vague because no clause provided fair notice to companies regarding whether a device was classified as a game of chance or skill.

The crux of the Supreme Court’s ruling was that the courts lacked subject matter jurisdiction, or legal authority, to adjudicate this particular case. In court filings and oral arguments, POM of Kansas struggled to prove standing to pursue the lawsuit because there was no credible threat that the devices would be confiscated by the state or that the company would face prosecution in Kansas for offering Dragon’s Ascent to players.

“Dragon’s Ascent has functioned throughout Kansas for several years without incident,” stated Justice Keynen “K.J.” Wall, who authored the opinion. “No devices have been confiscated. No prosecutions have occurred. No cease-and-desist orders have been issued. And neither the Racing and Gaming Commission nor the attorney general has indicated that the game is unlawful.”

The company lacked standing since there was no injury attributable to the state parties targeted by POM of Kansas’ lawsuit, explained Wall, who was appointed in 2020 by Democratic Governor Laura Kelly.

“Though uncertainty regarding the legal status of Dragon’s Ascent may create practical obstacles for POM, such difficulties do not establish jurisdiction when our state constitution necessitates an actual case or controversy,” Wall stated. “We cannot broaden our judicial authority simply because a resolution would be beneficial.”

In games such as Dragon’s Ascent, which have not been regulated by the Kansas Racing and Gaming Commission like casino slot machines, players shoot at dragons or partake in other activities in pursuit of prizes exchangeable for cash.

Worried that Dragon’s Ascent might be classified as an illegal gambling device, POM of Kansas solicited KRGC and former Attorney General Derek Schmidt to confirm the legality of the game. KRGC and Schmidt declined to provide formal opinions, leaving POM of Kansas without an opposing party that supposedly harmed or threatened to damage the company. POM of Kansas proceeded to launch the game nonetheless.

“If the AG doesn’t wish to pursue this, then you still don’t have a capacity to be here,” Justice Dan Biles remarked to POM of Kansas’ lawyer during the case’s oral argument.

Overland Park attorney Thomas Hamilton, who represented POM of Kansas, mentioned that KRGC director Don Brownlee dispatched a letter to district attorneys and sheriff’s offices that subtly implied Dragon’s Ascent was not legal.

In the correspondence, Hamilton indicated, Brownlee claimed Dragon’s Ascent possessed too many non-skill attributes to allow mastery of the game. KRGC staff played the game at POM of Kansas’ request. One KRGC staff member placed a weight on the control stick, in a test of the random nature of the game, and was reportedly able to outperform coworkers who relied on their personal skills to engage with Dragon’s Ascent.

Hamilton stated that the warning letter functioned as an indirect alert that businesses should refrain from installing the electronic game until KGRC or the attorney general endorsed it as legal.

“There are venues where we experienced lost revenue, lost business because we refrained from placing the games there due to that threat,” Hamilton stated.

Under the current law in Kansas, no official procedure exists for certifying arcade games as skill-based instead of chance-based.

The Supreme Court ruling last week did not conclude litigation concerning so-called gray games in Kansas. A separate lawsuit remains active in Shawnee County District Court. Casino companies operating in Kansas became involved in the legal battle by asserting that Dragon’s Ascent was not only illegal but also caused them financial damage.