Kansas Supreme Court Leaves “Grey Machines” in Legal Limbo

TOPEKA, KS — The Kansas Supreme Court has dismissed an attempt by game provider Pace-O-Matic (POM) to secure a declaratory judgment regarding the legal status of its so-called “grey machines,” leaving the machines' legal status unresolved for the time being. This decision, issued in late December 2024, has profound implications not just for POM but for the broader gaming industry, as the legal landscape around new types of gaming machines continues to evolve across the U.S.

POM, which operates electronic skill-based games like Dragon’s Ascent in various businesses throughout Kansas, had sought a court ruling to clarify whether its machines constitute illegal gambling terminals. The company argued that a letter from the Kansas Racing and Gaming Commission (KRGC), which described the game as having insufficient skill elements to avoid classification as gambling, posed a significant threat to its business. Despite these concerns, the court ruled that POM did not demonstrate how the absence of a declaratory judgment would directly harm its operations, leaving the company without a legal path forward at this time.

Without such a ruling, POM and other operators of similar “grey machines” face the continued risk of prosecution and potential seizure of their terminals. However, legal experts suggest that the immediate risk of action against these machines remains low, leaving their status in a kind of legal limbo.

 

A National Legal Struggle Over Gaming Innovation

The Kansas case is part of a broader, national struggle to adapt existing gambling laws to address new innovations in the gaming industry. The “grey machines,” often referred to as “skill games,” incorporate an element of player control but are still dependent on chance for the outcome. This combination has left state regulators and courts grappling with how to classify such games under existing laws that typically define gambling based on chance alone.

While Kansas’ legal battle may be at a standstill, other states are actively engaging with similar challenges. In North Carolina, for instance, the Court of Appeals ruled at the end of 2024 that unlicensed “skill games” were in violation of the state’s gambling laws. Meanwhile, a case before the Pennsylvania Supreme Court is seeking to clarify the legal status of these machines, and a Kentucky court upheld a statewide ban on them earlier this year.

The legal uncertainty surrounding these machines is compounded by the fact that they are often marketed as skill-based, offering a chance for players to influence outcomes through their actions. But the involvement of chance, which determines the ultimate prize, keeps these games in a murky area where existing gambling definitions don’t neatly apply.

In many states, including Kansas, traditional casinos have a vested interest in seeing these grey machines either regulated or banned. Commercial casinos typically operate under strict licensing and regulation, paying substantial fees to the state in exchange for the ability to offer legally sanctioned gambling options. As such, these operators often view unregulated machines as unfair competition.

Kansas, which is home to four commercial casinos, has yet to see any significant public opposition from these operators to games like Dragon’s Ascent. However, this could change if these machines become more prevalent in the state. If the machines begin to pose a serious threat to casino revenues, the casinos—operated by companies like Boyd Gaming and PENN Entertainment—could push for legislative or legal action to restrict or outlaw the machines.

While the Kansas Lottery, which oversees the state’s casinos, has not actively sought to ban these games, a push from the casino industry or a shift in the political landscape could prompt more direct action. If the state legislature decides to clarify what constitutes legal gambling, that could provide POM and other operators with the clear standing they currently lack to challenge any potential enforcement actions.

 

The Path Forward for Grey Machines in Kansas

For now, Kansas' grey machines remain firmly in the grey area, with the Kansas Supreme Court’s decision leaving the door open for future legal challenges. While POM has been rebuffed, the company could return to the courts if the legal situation changes or if the state takes more direct action against its operations. Additionally, if the state legislature decides to act, this could provide the necessary legal foundation for POM to make its case more effectively.

The legal uncertainty surrounding grey machines is not unique to Kansas. As innovation in the gaming industry continues to outpace existing regulatory frameworks, more states may face similar challenges. Courts will likely continue to be asked to balance innovation in the gaming sector with the need to ensure that gambling remains under appropriate regulation and oversight.

The issue may also prompt greater involvement from state legislators, as they look to update outdated gambling laws to better address the realities of modern gaming. Whether this debate will tip in favor of more regulation or greater flexibility remains to be seen, but the Kansas case exemplifies how difficult it is for courts to adapt current laws to new forms of entertainment.

 

The court found fault in POM’s argument, as neither the KRGC nor law enforcement had taken any enforcement action.

 

Looking Ahead

As of now, Kansas businesses involved in operating grey machines will continue to face legal ambiguity. While enforcement action against these machines seems unlikely in the immediate future, the lack of clarity leaves both operators and regulators in a holding pattern. Should casinos or lawmakers push for greater regulation, the Kansas Supreme Court may be called upon again to define the future of these machines, marking another chapter in the ongoing evolution of U.S. gambling law.

Until then, the legal status of grey machines remains a complicated issue, and businesses like Pace-O-Matic will have to tread carefully as they navigate the uncertain legal terrain in Kansas and beyond.