The Regulation of Skill-Based Gaming Devices in New Jersey Continues to Evolve

January 29, 2018Alerts

The regulation of skill-based gaming devices in New Jersey has continued to evolve. Most recently, on January 16, 2018, the proposed permanent regulation for skill-based gaming devices (N.J.A.C. 13:69-1.28Y) was not adopted by the New Jersey Division of Gaming Enforcement (Division) due, in part, to comments received by industry stakeholders concerning the regulation. The Division plans to propose a new regulation concerning skill-based gaming devices in the near future, and in the interim, will rely on a temporary regulation that distinguishes skill-based games from slot machines for ongoing approvals.

Regulation 13:69-1.28Y was initially adopted as a temporary regulation on February 23, 2016, and was amended prior to being proposed for permanent adoption on July 17, 2017. The regulation proposed for permanent adoption defined “skill-based gaming” as any Division-approved casino game where the game outcome is dependent in whole or in part upon the player’s physical dexterity and/or mental ability. Further, slot machine games with a skill-based component (hybrid games) would be required to meet a theoretical pay out percentage of 83 percent, and were required to either disclose the optimal strategy to achieve the highest theoretical Return to Player (RTP) or provide sufficient information for the patron to derive the optimal strategy in order to achieve the same. The regulation also clarified that games relying entirely on skill or that did not use a random number generator were not required to achieve a minimum theoretical hold percentage.

The official comment period for the proposed permanent regulation ended on September 15, 2017. Among the comments received by the Division was concern that attempting to label skill-based games completely reliant on skill for outcome would result in such games having to meet standards designed for randomly-generated outcomes. Put another way, skill-based games would be required to meet the same requirements as slot machines, including a minimum payout of 83 percent. In response, the Division decided not to adopt the proposed permanent regulation, noting that skill-based games should be their own category of games (a part from slot machines) and that it was untenable to require a mathematical model conclusively demonstrate a rate of return to a patron when the rate is determined by the skill of the participant.

The Division plans to redraft and propose a new skill-based gaming regulation for permanent adoption and public comment in the near future. In the meantime, the Division modified the February 2016 temporary regulation to distinguish skill-based games from slot machines. For example, the temporary regulation defines skill-based games as any Division-approved casino or online game where the theoretical RTP cannot be determined by a precise mathematical model based on chance, but is instead determined by the player’s physical dexterity and/or mental ability. Further, the temporary regulation clarifies that such games are not required to achieve a minimum theoretical RTP, and added a requirement that all such games must include signage indicating that they are skill-based games (and not slot machines), that they do not offer a minimum RTP, and that the outcome and payouts for the game are directly determined by the patron’s skill level. The temporary regulation is for the most part otherwise consistent with the permanent regulation proposed in July 2017. While the temporary regulation is technically expired, the Division will continue to use it to approve skill-based gaming submissions under its authority to approve games and slot machines pursuant to the Casino Control Act.

If you have any questions about this alert, please contact C.J. Fisher at 609.572.2209 or [email protected], Robert Baldassarre at 609.572.2214 or [email protected] or any member of the firm’s Gaming Practice.