Pennsylvania Casinos Lose Online Games Lawsuit Against State Lottery

  • The casinos sued the lottery body because its internet games were too similar to theirs
  • A judge ruled that the game features were the result of tech advances and shared inspiration
  • The casinos said nine of the lottery’s games had the same name or theme as theirs
  • Casino operators have generated $707m in online gambling revenue so far this fiscal year
Pennsylvania lottery logo
Pennsylvania’s casinos sued the state lottery two years ago, claiming that the lottery’s online games infringed on theirs. This week, a judge ruled in the lottery’s favor. [Image: Shutterstock.com]

Judge said lottery’s games were fine

The Pennsylvania Lottery has successfully defended itself against a lawsuit from the state’s online casino operators. This week, Judge Renee Cohn Jubelirer, ruled that the lottery’s internet games do not step on the toes of the licensed online gaming operators. The operators had asked the court to either forbid the lottery from offering games that they believed infringed on those that they paid a licensing fee to host or at least create new restrictions on said games.

The gist of the August 2019 lawsuit – before any of the operators had even launched their platforms in Pennsylvania – was that the lottery’s internet-based games were too similar to the ones the operators were going to offer and already did have available at their casinos or online in other jurisdictions.

not signature, iconic, or key features particular to casino slot machines”

In her ruling, Judge Jubelirer wrote: “The features of iLottery games challenged by petitioners are not signature, iconic, or key features particular to casino slot machines.”

She added that the features in dispute were the result of technological advances and the themes were based on the same sources – television shows or board games, for instance – that the online gambling used. The similarity was not copying, but rather shared inspiration.

Casinos thought similarities couldn’t be coincidence

The seven casinos that filed the lawsuit were Mohegan Sun Pocono, Valley Forge Casino Resort, Stadium Casino, Harrah’s Philadelphia Casino & Racetrack, Hollywood Casino, Parx Casino, and the Meadows Casino Racetrack Hotel, forming a group called the Pennsylvania Casino Gaming Coalition (PCGC).

In trying to make their case that the lottery was effectively encroaching on their territory, they laid out that nine of the iLottery games had the same name or theme as slot machines already offered by the operators. As mentioned, the judge didn’t buy this argument.

They also showed that a normal lottery instant-win game (for instance, a scratch-off ticket or online equivalent) had a payout percentage of 61% to 77%. The casinos are required to have a payout of at least 85% on their slot machines. The Pennsylvania Lottery’s online games in question had a payout of 81.6% to 89.1%, much more in line with the casinos’ games than with a regular lottery game. The PCGC used this to try to argue that the lottery body is intentionally making its new games look like the casinos’ games.

The operators also cited an alleged agreement that the Pennsylvania Department of Revenue had with the lottery in which the lottery would not sell any of its games to the casinos. This, the PCGC said, was the lottery admitting that its games are the same as the casinos’.

iGaming has been boon for casinos

If the casino operators have been harmed by the existence of the Pennsylvania Lottery’s online offerings, they certainly are not showing it. There are currently ten online gaming operators in the Commonwealth. During the 2019-2020 fiscal year, they earned about $241m in internet gaming revenue (amount bet by customers minus amount paid out).

That’s a lot of money. For the 2020-2021 fiscal year, however, the casinos have generated $707m in online gambling revenue, which includes slots, table games, and online poker. And there are still two months left in the fiscal year. Of that, $194m has gone to the state in the form of taxes.

The lottery has done well for itself, too. In a statement on Thursday, Pennsylvania Lottery Executive Director Drew Svitko said: “Because the Lottery’s online games have been an incredible success — generating more than $170 million in profit since their launch in May 2018 — we have another popular product in our portfolio that helps us responsibly generate funds for programs that benefit older Pennsylvanians.”