Do the Pennsylvania Lottery’s “iLottery” games unlawfully simulate casino-style lottery games?
Greenwood Gaming, et al. v. Dep’t of Rev., No. 571 M.D. 2018 (Pa. Cmwlth.) (unpublished original jurisdiction opinions entered May 25, 2021 and September 8, 2021), direct appeal, appeal docket 76 MAP 2021
Act 42 of 2017 amended the Lottery Law and the Gaming Act to authorize the Lottery to offer “internet instant games” (lottery games in which the player uses a computer to play) and to authorize Pennsylvania casinos to offer “interactive games” (online slots and other casino games). Act 42 prohibited the Lottery from offering the games casinos were permitted, and vice versa. As to the Lottery’s offerings, Act 42 specifically prohibited the Lottery from offering games that “simulate casino-style lottery games.” When the Lottery began offering iLottery games in May 2018, Pennsylvania casino operators initiated suit in the Commonwealth Court, alleging that the Lottery’s online games simulate casino-style slot machines in violation of Act 42. The Lottery responded that its games simply reflect modern digital gaming technology generally and/or traditional lottery products that have been historically offered by the Lottery.
The Commonwealth Court held a five-day trial, at which numerous witnesses, including experts, testified concerning the similarities and differences between iLottery games and slot machines. The casinos also challenged the testimony of Lottery expert Michael Lightman, alleging that his testimony exceeded his qualifications as an expert and was based on his own definition of slot machine, which could not be found in a statute, regulation, or industry standard. Mr. Lightman was disclosed “as an expert per stipulation in the development and design of slot-style games, internet slot games, and iLottery games”; however the Lottery respondents sought to have him testify regarding the development of traditional lottery games as well, to which the casinos objected. The Commonwealth Court permitted Mr. Lightman’s testimony. The court addressed the merits in a separate opinion issued the same day, rejecting the casinos’ challenge and dismissing the petition for review:
In sum, having reviewed Act 42, the Lottery Law, and the Gaming Law, as well as the parties’ arguments and evidence, the Court finds that the features of iLottery games challenged by Petitioners are not signature, iconic, or key features particular to casino slot machines. Rather, they are features that: relate to technological advances in online gaming; are based on online entertainment and gaming, as well as existing entertainment sources like television and board games, which have indisputably inspired both iLottery game and slot machines game designers; or existed in the same or similar fashion in traditional lottery products that were translated into a new online medium. It cannot have been the intent of the legislature for Section 303(a.1) of the Lottery Law and Section 502 of Act 42 to be read to preclude either one of these newly authorized online games, iLottery or interactive gaming, from taking advantage of technological advances, changes in gaming and entertainment, or features that are found in existing popular entertainment. Therefore, Petitioners have not established that the iLottery games are simulating casino-style slot machines in violation of Act 42 and the Lottery Law and not met their burden of proving an entitlement to declaratory or injunctive relief.
May 25, 2021 Opinion denying petition for review at 44-45 (emphasis in original).
The casinos filed post-trial motions, which the court denied by opinion and order entered September 8, 2021.
On direct appeal to the Supreme Court, the casinos argue that the Commonwealth Court erred by: (1) misinterpreting the word “simulate” by (a) requiring that a Lottery game must use features that are exclusive to casino-style machines in order for prohibited simulation to occur; (b) requiring a Lottery game to essentially replicate a slot machine in order for “simulation” to occur; and (c) evaluating the objectionable features of Lottery games in isolation instead of considering the simulation of casino-style games as a whole; (2) even assuming the court’s interpretation of “simulate” is correct, its conclusion that none of the features of iLottery “simulate casino-style lottery games” is against the weight of the evidence; and (3) admitting the testimony of the Lottery’s expert Michael Lightman.
The Supreme Court has limited argument to the first and third issues, and will address the weight of the evidence arguments on the basis of the parties’ briefs:
AND NOW, this 16th day of August, 2022, oral argument is GRANTED, limited to the following issues as presented by appellants:
1. Whether the [t]rial [c]ourt committed reversible error by misinterpreting and misapplying Act 42 of 2017, where, inter alia: (a) in applying the definition of “simulate,” the [c]ourt superimposed an exclusivity requirement not found in any law, regulation, or definition of any statutory term; (b) under the [c]ourt’s highly restrictive interpretation of “casino-style lottery games,” an iLottery game would need to effectively replicate an actual slot machine in order to “simulate” a “casino-style lottery game,” thus rendering that term meaningless in Act 42; and (c) the [c]ourt failed to consider the simulation of the games as a whole and instead improperly limited its evaluation to reviewing the objectionable features of the iLottery games in isolation?
2. Whether the [t]rial [c]ourt committed reversible error by admitting, considering, and relying on the testimony of [the Lottery’s] proffered expert Michael Lightman?
The remaining issue will be decided on the previously submitted briefs.
For more information, contact Kevin McKeon or Dennis Whitaker.