A coalition of seven casinos lost a bid late Friday to have a state court order the Pennsylvania Lottery to immediately stop offering certain iLottery games. The casinos were seeking an injunction to stop the games as part of an ongoing lawsuit against the state.
Pennsylvania’s newest online casinos, Hollywood Casino and Parx Casino, still face competition from the state’s lottery, which operates online games under different regulations.
The iLottery games are open to those 18 years or older. The lottery pays no fees or taxes.
Only those 21 years or older can legally play online casino slot games. Additionally, casinos must ante up fees of up to $10 million and pay a tax rate of 54%.
Judge rules PA Lottery can continue offering iLottery for now
The ultimate legal question is if the iLottery games are legal under the ambiguous language of Pennsylvania’s 2017 gaming expansion law. That remains unresolved for now, Judge Renee Cohn Jubelirer noted in a 50-page opinion.
The opinion provides no real clues about how the court will eventually answer that question.
The judge promised to speed up considering the full lawsuit, though there is still no timetable.
The PA Lottery saw the decision as a vindication of their position, said spokeswoman Ewa Dworakowski.
“We were pleased to see the judge’s ruling. As we have said in the past, Act 42 of 2017 authorized the launch of PA iLottery and the games are being operated in accordance with the law.”
Casinos filed a lawsuit last year attacking the PA iLottery games not long after the latter launched them.
David LaTorre, a spokesman for the casinos, expressed their reaction in a statement:
“We are disappointed with the court’s decision, given the overwhelming evidence that the Pennsylvania Lottery is using casino-style games that are illegal. Our coalition will continue its lawsuit in Commonwealth Court and we look forward to aggressively pursuing our rights in an upcoming trial.”
The interactive lottery games went live in May of 2018 following the 2017 passage of the gambling expansion law in Pennsylvania. It is the same law that also opened up online casinos for the first time earlier this week.
Pennsylvania became the seventh state to sell lottery games online. The games brought in $32 million in new funds in its first year, according to court testimony.
No injunction leaves PA Lottery vs. online casinos unsettled for now
With their lawsuit moving like a glacier before global warming, the casino group sought a speedier resolution in hopes of resolving the issue before online casinos launched.
The casinos had argued that the iLottery games mimic slot machines and even sometimes share names and graphics with casino slots, which amounted to the unfair and illegal competition.
Explaining why an emergency injunction was not granted, the judge primarily noted disruptions that would result from an immediate shutdown, even a temporary one.
The judge especially pointed to the long period of time that has elapsed since the launch of iLottery games, which now have more than 100,000 customer accounts, many with funds attached.
Cutting off the revenue from the iLottery games, which is already included in the state’s budget projections, would cut more than $30 million in funds for programs assisting seniors.
The judge also noted ambiguities in the language of the law, e.g., when it comes to a direct comparison of the mechanics of the games allowed via the iLottery versus online casinos. However, she also added the state’s General Assembly clearly intended for both to offer online games.
The judge cited “conflicting testimony” from the experts on each side and the “ambiguity” of the law’s language and definitions for reasons not to grant an injunction. The judge found “many important terms are not defined” in the revised gaming law.
Finally, the judge said quantifying the monetary harm to casinos from iLottery games at this stage is not possible with casinos just now offering games online.
Judge finds ‘striking similarities’ between iLottery and slot games
Cohn Jubelirer cautioned there are “striking similarities” between some iLottery games and online casino offerings “which give the court pause.”
The judge noted that, while the casinos had initially opposed all iLottery games, their modified filing now targets only those games offering four features:
- Autoplay
- Reveal all
- Adjustable bets
- Bonus games
Slot games routinely use those elements. The central argument of the casino coalition is that “state Lottery launched a series of games that imitate the look, sound, feel and payouts of slot machines.”
That’s improper under the expansion law, according to the spokesman for the casinos. The state lottery counters that all their games are legal.
Casino revenues and iLottery revenues serve different budget needs
The revenue streams from each venture serve various constituencies.
Casino revenues offset general property tax levies for schools and also reduce Philadelphia’s wage tax. The funds can also fund programs such as drug, alcohol and gambling treatments.
Lottery’s revenues assist seniors. Assistance areas include tax and rental relief, free and reduced transportation, prescription programs, care services and local aging offices.
Defendants in the suit are the Pennsylvania Department of Revenue, which operates the PA Lottery, and its leader Secretary C. Daniel Hassell.
The state’s casinos first sent a letter to Gov. Tom Wolf to ask him to shut down iLottery games. When Wolf did not take action, seven casinos filed suit.
The underlying lawsuit remains unsettled, meaning the battle between these two groups is not over yet.
