Medina County Courthouse

Wednesday, October 13, 2010

Ten Dollar Limit on Skill Game Prizes Does Not Violate Equal Protection Clauses of U.S., Ohio Constitutions

Pickaway Cty. Skilled Gaming, L.L.C. v. Cordray, Slip Opinion No. 2010-Ohio-4908.
Franklin App. No. 08AP-1032, 183 Ohio App.3d 390, 2009-Ohio-3483. Judgment of the court of appeals reversed, and cause remanded to the court of appeals.
Preston, Lundberg Stratton, O'Connor, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Pfeifer, Acting C.J., concurs in judgment only.
Vernon L. Preston, J., of the Third Appellate District, sitting for Brown, C.J.

(Oct. 12, 2010) The Supreme Court of Ohio held today that a provision of state law placing a $10 value limit on the prizes that may be awarded for one play of a legal skill-based gaming machine is rationally related to legitimate government interests, and does not violate the equal protection clauses of the U.S. and Ohio Constitutions.

The Court’s 7-0 decision, authored by Justice Maureen O’Connor, reversed a ruling of the 10th District Court of Appeals.

In October 2007, the General Assembly adopted changes to R.C. Chapter 2915, the state’s anti-gambling statute. Among those changes was the insertion of new language distinguishing between illegal “schemes of chance” and legal skill-based amusement machines. In addition to other provisions distinguishing between permissible skill-based games and prohibited gambling, the bill limited the value of merchandise prizes or vouchers awarded for a single play of skill-based amusement machines to $10 or less.

Pickaway County Skilled Gaming LLC and Stephen S. Cline own and operate Spinners, an amusement game arcade located in Circleville. Shortly after the amendments to the gambling statute took effect, Spinners filed suit in the Franklin County Court of Common Pleas seeking a declaratory judgment that the prize-limit provision of the amended statute was unconstitutional, and seeking a permanent injunction barring the Ohio Attorney General from enforcing the prize-limit provision. The trial court granted summary judgment in favor of the state, rejecting the constitutional arguments advanced by the arcade owners. The owners appealed the trial court’s decision to the 10th District Court of Appeals.

On review, the 10th District ruled that the prize limit set forth in R.C. 2915.01(AAA)(1) was unconstitutional under the equal protection clauses of the U.S. and Ohio Constitutions. In its opinion, the court of appeals held that the legislative purpose of the statute was to prohibit games of chance while permitting the operation of skill-based amusement machines, and that the distinction between machines that award prizes worth more than $10 and those that do not is not rationally related to the legislature’s goal of distinguishing between illegal chance-based and legal skill-based amusement machines. Having found the prize-limit provision unconstitutional on equal protection grounds, the court of appeals did not address a separate argument advanced by the arcade owners that the challenged provision was void for vagueness. The Supreme Court granted discretionary review of the court of appeals’ equal protection ruling.

In today’s decision, Justice O’Connor wrote: “The fact that one purpose of R.C. 2915.01(AAA) 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 R.C. 2915.01(AAA)(1) may simultaneously serve other valid government interests. Indeed, the attorney general identifies two legitimate government interests that the prize-value limit purportedly serves.”

“First, the attorney general argues that the prize-value limit serves as an economic regulation of skill-based amusement machines. The state plainly has a legitimate interest in regulating its local economies. … The operation of skill-based amusement machines is a valid statewide industry in Ohio, and the state has a legitimate interest in establishing economic regulations for the industry, including regulating the prizes that may be awarded. Second, the attorney general contends that the prize-value limit protects against criminal acts and enterprises by acting as a prophylactic measure against illegal chance-based gambling. Courts have long recognized that state legislatures have a legitimate interest in regulating gambling. … Accordingly, the prize-value limit set forth in R.C. 2915.01(AAA)(1) satisfies the first prong of the rational-basis analysis. It serves two vital and valid government interests: economic regulation and protection against criminal acts and enterprises.”

“ … Therefore, we turn to whether the prize-value limit set forth in R.C. 2915.01(AAA)(1) is rationally related to the legitimate interests that the Attorney General has established in this case. We hold that it is. First, the ten-dollar prize-value limit set forth in R.C. 2915.01(AAA)(1) is a regulation that is part of the state’s scheme to protect its local economies. The statute is calculated to further the state’s interest by eliminating the lure of big prizes and thus minimizing irresponsible play while providing a legal safe harbor for harmless games (e.g., Skee-ball) that award token prizes.”

“ … The prize-value limit is also rationally related to the government’s interest in preventing criminal acts and enterprises by acting as a prophylactic measure against illegal, chance-based gambling. … Motivated by financial gain, operators of illegal chance-based amusement machines can easily alter games of chance to appear to be games of skill. Financial motivation may come from charging more to play illegal games of chance or from individuals who overspend in hopes of winning big prizes. … (T)he ten dollar prize-value limit is designed to eliminate the latter motivation. Furthermore, it stands to reason that players will not pay the same fee to play games that award a ten dollar prize as they would to play games that offer higher value prizes. By limiting the potential prizes awarded by skill-based amusement machines, R.C. 2915.01(AAA)(1) effectively limits the fee that operators can charge to play the games. Thus, the prize-value limit effectively removes the financial incentive for operators to disguise illegal chance-based machines as skill-based games.”

“ … We hold that the prize-value limit set forth in R.C. 2915.01(AAA)(1) is rationally related to legitimate government interests and does not violate the Equal Protection Clauses of the United States and Ohio Constitutions. We therefore reverse the judgment of the Tenth District Court of Appeals to the extent that it held otherwise. Because we hold that R.C. 2915.01(AAA)(1) does not violate the Equal Protection Clauses, PCSG and Cline’s void-for-vagueness argument is no longer moot. Since the court of appeals did not reach the merits of PCSG and Cline’s argument that R.C. 2915.01(AAA) (1) is void for vagueness, we remand the case to the Tenth District for consideration of PCSG and Cline’s first assignment of error.”

Justice O’Connor’s opinion was joined by Justices Evelyn Lundberg Stratton, Terrence O’Donnell, Judith Ann Lanzinger and Robert R. Cupp, and by Judge Vernon L. Preston of the 3rd District Court of Appeals, who sat in place of Chief Justice Eric Brown. Justice Paul E. Pfeifer concurred in judgment only.

Benjamin C. Mizer, 614.466.8980, for Ohio Attorney General Richard Cordray.

Gail M. Zalimeni, 614.221.3151, for Pickaway County Skilled Gaming LLC.

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