On Friday, a group of Pennsylvania-licensed casinos suffered a setback in a high-stakes court battle pitting them against the Keystone State and its iLottery.
The casino group, which consists of Parx Casino, Hollywood Casino at Penn National Race Course, Harrah’s Philadelphia Casino & Racetrack, The Meadows Casino Racetrack Hotel, Stadium Casino, Valley Forge Casino Resort, and Mohegan Sun Pocono, was seeking a preliminary injunction against some iLottery games that they allege violate the law. Since the suit was filed in August 2018, the casinos have alleged that the games are breaking the law by mimicking their slot offerings.
A pair of hearings were held late last month ahead of the opinion handed down on July 12 by Commonwealth Court Judge Renee Cohn Jubelirer. The judge denied the injunction request, which was seeking to halt the iLottery games in question, which include titles such as Volcano Eruption, A Dragon’s Story, and Monster Wins, among others.
The case is still proceeding toward trial, according to Jubelirer’s 51-page opinion. A duo of Pennsylvania casinos launched online casino gambling this week in the wake of the judge’s opinion.
Market share concerns
The casino group argued in court that their respective businesses would be harmed from the alleged unlawful competition. A license to offer online gambling cost each casino $10 mm.
According to the testimony from Drew Svitko, Executive Director of the PA Lottery, the PA Lottery currently has 100k player accounts and has generated $375 mm in revenue since it launched in May 2018. The iLottery has generated $32 mm in profit on that revenue.
“We agree that loss of a business opportunity and market share may constitute irreparable harm […],” wrote the judge. “However, in this case, there has been no concrete evidence that [the casinos] will lose a business opportunity. As of July 15, 2019, [the casinos] will be able to offer online gaming that includes different gaming opportunities than are available through iLottery.”
“There is competing testimony about whether the markets, or players, for the two types of online offerings are the same,” Jubelirer also concluded.
As for the Lottery’s revenues, “Svitko testified that an injunction would all but cripple the iLottery, that the projected revenue included in the budget would be lost, and that the Lottery could not recoup the money it has spent on advertising its products,” said the opinion.
Furthermore, the lottery would suffer “reputational harm […] in the form of negative press and accusations, morale, and lost efforts,” according to the Svitko testimony.
‘Striking similarities’
Jubelirer did acknowledge that certain iLottery games and traditional casino slot games bear a resemblance, but she said it’s not enough to grant a preliminary injunction.
“While the side-by-side video comparisons of the iLottery games and the online or land-based casino games did highlight striking similarities, which gives the court pause, based on the evidence presented, it is not yet clear to this Court whether the General Assembly intended to preclude iLottery games from utilizing features that appear to have been used in paper-based instant tickets or scratch-off games, or the ability to use technology to make those instant games more entertaining and attractive to players.”
The casinos have a problem with four specific features of the state’s iLottery games: autoplay, reveal all, adjustable bets, and bonus games, according to the court document. “Construing these statutes and the legislative intent with regard to the games and features at issue is challenging, as this is not a situation where the statutory language is clear and unambiguous,” the judge concluded.
The 2017 gaming expansion law that legalized sports betting in Pennsylvania also legalized online gambling from the lottery and the casino industry.
Casinos respond to the opinion
David La Torre, a spokesperson for the coalition of casinos, issued the following statement to Penn Bets.
“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. Pennsylvania casinos are not opposed to iLottery — only their use of simulated, casino-style games. Every casino paid as much as a $10-million fee to provide online casino games; has undergone strict regulatory oversight, and must ensure its games cannot be played by anyone under age 21. The Lottery paid no fee; has no regulatory oversight; and is permitting Pennsylvanians as young as 18 to play.”
Pennsylvania casinos are subjected to a 54% tax rate on their slot machine winnings.
Both sides in the litigation have been asked to file a proposed joint pretrial schedule, setting forth proposed deadlines for the close of fact discovery, the exchange of primary and rebuttal expert reports, and the filing of dispositive motions, by Aug. 30, 2019.
