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In a strongly worded advisory to state prosecutors, Kentucky Attorney General Russell Coleman went after a type of gaming machine meant to sneak past state law called “risk-free play.”
The games have emerged in the wake of the state cracking down on “gray machines,” which, like risk-free play, try to offer gambling in a way that skirts regulations.
In a press release, Kentucky Attorney General Russell Coleman said about the advisory that, while gaming operators are trying to muddle the state’s black-and-white rules about gambling machines, there is no gray area:
“The law is clear – gray machines and other games like them are illegal gambling devices that have no place in Kentucky.
Along with our law enforcement and prosecutorial partners across Kentucky, we will uphold the law as passed by our Commonwealth’s policymakers in the General Assembly.”
Coleman pledged his office would provide “whatever assistance” state prosecutors need to investigate and prosecute gray-machine cases.
Key takeaways
- The Kentucky Attorney General sent an advisory letter to state attorney offices encouraging the investigation and prosecution of risk-free gray machines.
- The advisory comes as gray-machine operators find new ways to circumvent state gaming laws.
- Last year, Kentucky outlawed gray machines, a move that resulted in two lawsuits, one of which is ongoing.
What are risk-free play games?
The AG’s letter to prosecutors zeroed in on risk-free machines. A standard gambling machine is based on a simple principle: The bettor doesn’t know the outcome of their bet.
Risk-free machines, however, allow the bettor to know the outcome of the first bet they place. However, the outcomes of subsequent bets are unknown. The gambler thinks they’re getting a freebie, while the operator hopes the gambler will play beyond the first bet.
In that sense, the games are similar to sports betting operators that offer misleading first-bet promotions. This promotional format allows new customers to:
- Place a bet.
- Receive a payout if they win.
- Receive a payout equal to what they lost if they lose, provided the bet meets the promotion requirements.
The hope is that the initial “no-risk” bet will keep the customer on the hook. That same principle is at play with risk-free machines. The operator hopes bettors will play beyond the first bet and, in theory, leave with less money than when they arrived.
Coleman wrote in his advisory that this tactic of luring bettors into the next bet with the prospect of possibly winning more money crosses the regulatory line.
“The game lures the player into continuing to play on the chance that the next game play will result in a win worth more than he will have to pay for the current play,” Coleman wrote.
“This hope that the subsequent gameplay will be a winner is the ‘element of chance’ that makes these so-called ‘Risk-Free Plays’ games illegal gambling devices. There is no safe harbor in Kentucky’s gambling laws for this kind of game.”
How did Kentucky gaming get to this point?
Gray-area gaming has been a thorn in the side of Kentucky regulators and lawmakers for a long time. The state’s legislators finally took decisive action against them in early 2023.
At the time, the Kentucky Legislature passed a bill outlawing any unregulated gaming machine that involved even a sliver of chance. The bill went into effect in June 2023.
If gray machine operators wanted to continue offering their games, they had to go through the proper regulatory channels and pay taxes on revenue earned from the machines. Certain operators did not like that, so they filed two lawsuits.
Both lawsuits were dismissed; one by the operator and the other by the judge, keeping the games banned. The latter case is going to the Kentucky Court of Appeals.
In the wake of the new gaming law against gray machines, gray-machine operators had to get creative. That creativity led to the risk-free machines that Coleman zeroed in on in his advisory.
