iStock_000013939016_MediumSkill-based gaming has become a hot topic in the gaming community.  In the first part of this two-part series, we will identify the business problems that skill-based games hope to address and take a look at what actually constitutes a “skill-based game.”  In the second part of this series, we will take a look at the various legal issues that policy makers, legislators, and regulators must consider when implementing skill-based gaming in their jurisdictions.

As elderly casino patrons continue to age, and particularly as the baby boomers reach retirement age and beyond, the need to attract new casino patrons to replace lost patrons becomes more urgent.  Casinos are being forced to target millennials to replace the loss of other patrons.  However, millennials have grown up in an age where video gaming has become increasingly popular, interactive, and sophisticated.  With the introduction of smart phones in the last decade, and the vast variety of games that can now be played with a phone, the need for constant interaction has increased even more.  As a result, traditional slot machines that use purely random number generation no longer provide the level of interaction that is required to attract new patrons to casinos.  Enter skill-based gaming.

To clarify, skill-based gaming is not expected to be a complete remedy or solution for the problem.  Casino operators do not currently consider skill-based games to be a replacement for existing games.  To the contrary, these new games are only intended to be an additional attraction to get new patrons on the casino floor.  At this time, most operators only envision using between five and ten percent of the casino floor for skill-based gaming.

So what is a skill-based game?  A very simple definition would be a game where the outcome is primarily determined by physical or mental skill instead of purely by chance.  Historically, we have seen skill-based games (albeit unregulated) in the context of carnival or county fair type games where each patron pays for a chance to play a game and win a prize.  At present, one could argue that skill-based games currently exist in most casinos in the form of video poker and poker rooms.  Skill-based games can be pure skill games where no element of chance is involved (think a free-throw shooting contest).  Alternatively, skill-based games can be a hybrid in which elements of both skill and chance are present.  At this time, it appears that most skill-based games are expected to be of the hybrid variety.  For these hybrid games, manufacturers and operators must consider two key factors – where does the element of skill come into play and how is the wagering component incorporated.

Some skill-based games are very similar to traditional slot machines that use random number generation.  Patrons will still wager and play the game in the same manner as traditional slot machines.  The difference, though, is that these devices will incorporate a bonus round concept in which the amount of the bonus the patron receives is based on a skill-based element (e.g., a bonus round where the patron plays Space Invaders or another video game with the amount of the bonus being predicated on performance).  Other skill-based games use a tournament style format.  Players will buy-in to the tournament, and the winnings for each patron will be determined based upon the place that the patron finishes in the tournament (e.g., free-throw shooting contests, traditional poker tournaments, etc.).  In a similar vein, other skill-based games will require multiple patrons to wager and play against each other.  The winner of the game will then receive the money wagered by all of the players less a house rake (e.g., Words with Friends and grab poker- a game where cards fly across a screen and multiple players “grab” the cards to make the best possible poker hand).  Regardless of which form they take, all skill-based games have one thing in common- at some point, an element of skill plays a role in the outcome.