Gambling In Illinois: Now We Know (also, Lootboxes!)

You may recall this post from a few years back about fantasy sports in Illinois:

In that post, I talked about why I though Fantasy Sports betting was illegal gambling under the law of the state of Illinois, and pointed out that the Illinois Attorney General’s office agreed with me.

Well, scratch that.

On Thursday April 16, 2020, the Illinois Supreme Court ruled by a vote of 5 – 1 (with one abstention) that Illinois uses what is called the “Predominate Factor” or “Predominate Element” test to determine whether a game is a game of chance or skill. As the Court explained quite well, there are three common tests of skill versus chance when making this kind of evaluation:

To address these difficulties and determine whether a contest is one of skill and, hence, exempt from gambling laws, courts have applied three general tests. See Marc Edelman, Regulating Fantasy Sports: A Practical Guide to State Gambling Laws, and a Proposed Framework for Future State Legislation, 92 Ind. L.J. 653, 663-65 (2017).

DEW-BECKER v. Wu, 2020 IL 124472 – Ill: Supreme Court 2020 (Paragraph 22)

These three tests are:

  1. The “Any Chance” test, which says that if a game or contest has any element of chance whatsoever, it is a game of chance. The Court here ruled that such a test is no test at all, citing examples such as the draw of white versus black in chess and the possibility that an opponent is ill or distracted and thus not playing to their full potential. I am not an advocate of the “Any Chance” test, for the general reasons the court cites.
  2. The “Material Element” test, which says that if chance is a “material element” of the outcome of a game or contest, it is a game of chance. For example, while poker is often cited to be a game of skill in that experienced players usually beat inexperienced players, the deal of the cards, which is random, materially affects the possibility of winning or losing, and thus under this test poker is a game of chance. This is my preferred test for skill versus chance evaluation, but I respectfully concede that the court’s argument that can be very arbitrary is sound. In my opinion, it should be approached with caution and the existence of a zone of uncertainty, meant to keep people from being incautious in offering or entering into games of chance, is a desirable policy. (Oh, and as far as poker: my opinion is that a hand of poker is a game of chance, but a poker tournament is a contest of skill, and yes, I know that sounds weird.)
  3. The “Predominate Factor” test, which should be spelled “Predominant” but don’t get me started, who am I to argue with the Supreme Court, in which chance is the predominate factor in determining the outcome of a game, it is a game of chance. That is, if the single most important factor as to whether a player wins or loses is chance, the game is a game of chance. If not, it is not. A good simple example of this is Pachinko.
A pre-war Pachinko machine, courtesy Wikpedia.

If you’re not familiar with Pachinko, it’s like pinball, except that a) it’s usually vertical or nearly vertical, and b) there are no flippers. There is some skill involved, in that releasing the ball in a certain way makes it somewhat more likely to fall into a slot which is worth more points/money/a better prize. But by far, with most Pachinko machines, the outcome of any given play is determined by random chance as the ball bounces amongst the pins and other play features. So by this test Pachinko is a game of chance, and wagering on it would be illegal gambling.

On the other hand, the very reason pinball machines have flippers is that they evolved from games like Pachinko. With the addition of the flippers, a skilled player can keep the ball in play for an almost indefinite length of time, and control which play features are activated by the ball. That makes pinball, under the Predominate Factor test, a game of skill, and paying out on it would not be illegal gambling. Perhaps Illinois will see a resurgence of pinball parlors!

Applying this test to Daily Fantasy Sports contests, the Court found that scholarly research indicates that like poker, experienced players do better at DFS than inexperienced players, and it is possible to improve your outcomes by practice and study. The evidence suggests that skill in picking players overall is the predominate factor in the outcome of such contests, and the random (in this context “random” means “outside the player’s control,” not “random” in the pure mathematical sense) factors of any individual roster player’s actions during the contest is less important than that skill. Therefore, DFS is not illegal gambling because it is not a game or contest of chance.

Now, that does not mean that all bets, you should pardon the expression, are off. These games are still subject to things like consumer protection laws and anti-fraud laws, as well as being subject to taxation. The power of the State to control, regulate, and tax is alive and well. Also, the Legislature could overturn this decision with the stroke of a pen: this was not a Constitutional finding, just a statutory interpretation. The Legislature could pass a law establishing any test it wants as the proper evaluation of skill versus chance. Or it could simply outlaw DFS wagering in particular (probably.)

But, for the moment, not only do we have a definitive ruling on whether DFS is unlawful gambling, but we have a definitive ruling on which of the three tests Illinois uses, which we did not have before. So whether you agree or disagree with the Court’s selection, it is nice, if you are interested in gambling/gaming as far as the law of Illinois, to know what the test is for sure.

But wait! This blog is about technology. And Video Games. So what about…

LOOTBOXES?

Well, that’s easy: lootboxes are probably still gambling under IL law. “Here’s some money, give me a randomly selected item of a non-fixed value,” is not a game of skill. This fails all three tests. It wouldn’t matter which one they had applied. So watch out if you are planning to offer lootboxes in Illinois, says I.

As always, thanks for reading! Comments and questions are welcome either in the comments below or via email.

– Marc

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