Ohio SC: $10 is max payout

COLUMBUS, Ohio (Legal Newsline) - The Ohio Supreme Court this week reversed the decision of an appeals court, upholding a $10 limit on payouts from skill-based games found in a members-only arcade.

In a 21-page opinion filed Tuesday, the Court holds that the prize-value limit is "rationally related to legitimate government interests" and does not violate the Equal Protection Clauses of the U.S. and Ohio Constitutions.

The appellees in the case, Pickaway County Skilled Gaming, LLC, and its owner Steven S. Cline, argued that the prize-value limit serves no purpose other than to define criminal activity and that it's not "rationally related" to determining whether amusement machines are based on skill or on chance.

Ohio Attorney General Richard Cordray asserted that the $10 limit is "rationally related" to two legitimate government interests: establishing economic regulations governing the operation of skill-based amusement machines and protecting against criminal acts and enterprises as a "prophylactic measure" against illegal gambling.

According to Court documents, Cline's PCSG owns and operates Spinners Skill Stop Games, a members-only amusement-game arcade located in Circleville. The arcade contains 150 skill-based amusement machines for use by its members. The machines have names such as Queen Bee, Fruit Bonus 2004, Mystery J&B 2003, Crazy Bugs, New Cherry, Monkey Land, Rosen' Jack 2003 and Triple Jack 2003.

Ohio law states that no person shall "(e)stablish, promote, or operate or knowingly engage in conduct that facilitates... any scheme of chance."

That means the device may not incorporate any element of chance. The outcome of the game and the value of any prize must be based solely on the player's ability to achieve the object of the game or the player's score.

"Scheme of chance" does not include a skill-based amusement machine. These machines range from games commonly found at fair and amusement park midways and in family fun centers -- such as Skee-ball and Whack-a-Mole -- to more sophisticated skill-based games found in members-only arcades.

Although Ohio law permits the operation of skill-based amusement games, there is a $10 prize-value limit for each play on the machines.

The law specifying the $10 limit was enacted in 2007 in response to a documented "increase in the number of illegal gambling machines around the State of Ohio," state officials said.

In October that year, Cline temporarily closed Spinners and reopened the business after altering its operations in an effort to adhere to the new law.

Later that month, PCSG and Cline filed suit against the attorney general seeking a judgment declaring the law unconstitutional. They moved for summary judgment, arguing that it violated the Equal Protection Clauses of both the U.S. and Ohio Constitutions.

The attorney general's office filed a cross-motion for summary judgment.

The trial court reviewed state and federal equal-protection case law and concluded that the law did not violate the Equal Protection Clauses of the state and federal constitutions. The trial court held that the prize-value limit is not rationally related to whether a machine is "skill-based."

However, the trial court concluded that the limit is "rationally related" to determining whether a machine is for the purpose of amusement.

Accordingly, the trial court denied PCSG and Cline's motion for summary judgment and granted summary judgment in favor of the attorney general.

PCSG and Cline, in turn, appealed the trial court's judgment to the state's Tenth District Court of Appeals, which held that the prize-value limit violated the Equal Protection Clauses.

The appeals court held that PCSG and Cline's challenge to the law on the ground that the statute was vague on its face was moot and did not reach the merits of that argument. PCSG and Cline then filed a notice of discretionary appeal from the Tenth District's judgment, and Cordray filed a cross-appeal.

At that time, the state's high court accepted the appeals.

In its opinion, authored by Justice Maureen O'Connor, the Court wrote that the prize-value limit does not violate the state and federal clauses.

The Court also wrote that "it is clear" that one purpose of the law is to differentiate between machines that are legal games of skill and those that constitute illegal games of chance.

"PCSG and Cline urge us to reach the same conclusion (as the appeals court), arguing that the prize-value limit serves no purpose other than to define criminal activity," O'Connor wrote. "However, the Tenth District, PCSG, and Cline fail to recognize that 'not every provision in a law must share a single objective.' Rather, 'a statue can meet its proclaimed purpose while at the same time balancing other objectives.'"

The justice continues, "The fact that one purpose of (the law) is to define 'skill-based amusement machines' for the purpose of identifying what gambling is illegal does not negate the possibility that the prize-value limit set forth in (the law) may simultaneously serve other valid government interests.

"Indeed, the attorney general identifies two legitimate government interests that the prize-value limit purportedly serves."

The Court also said that the law is, indeed, "rationally related" to those government interests in "regulating its economies and in preventing criminal acts and enterprises as a prophylactic measure against illegal chance-based gambling."

O'Connor goes on to write that the Court agrees with PCSG and Cline that the $10 limit does not eliminate every possibility that individuals might play skill-based amusement machines in order to accumulate vouchers and redeem them for large prizes, or that individuals may become addicted to such games.

But, it explains, "the prize-value limit eliminates the possibility that an individual might receive a large prize after a few plays on a skill-based amusement machine. Because of the limit, individuals must play these games many times in order to accumulate enough vouchers to obtain valuable prizes -- and the more valuable the prizes, the more times individuals must play the games.

"Moreover, based on the ten-dollar limit and the value of the prize they want, players can estimate the minimum number of plays that will be necessary to accumulate enough redeemable vouchers to obtain the prize. Therefore, the prize-value limit may dissuade players from spending excessive amounts of money playing skill-based amusement machines hoping to win an expensive prize."

The Court, in its decision, reversed the judgment of the appeals court "to the extent that it held otherwise."

And because the Court held that the law does not violate the Equal Protection Clauses, PCSG an Cline's void-for-vagueness argument is no longer moot, it said.

Therefore, the case is to be remanded to the appeals court for consideration of PCSG and Cline's "first assignment of error," the Court ruled.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.