Companies Look To Overturn Kentucky Gray Machine Ban With Lawsuit

Written By Adam Hensley on May 16, 2023 - Last Updated on May 17, 2023
lawsuit over Kentucky gray machines

Gray machines are illegal in Kentucky, but a lawsuit strives to change that soon.

Several plaintiffs sued the state earlier this spring, hoping to overturn Kentucky’s ban on their machines. One of those is Pace-O-Matic, a Georgia-based software company that helps build these machines.

“Legislation banning skill games is unconstitutional and we are prepared to defend the legality of our games in court,” Pace-O-Matic Chief Public Affairs Officer Michael Barley said in a statement. “Our priority is, and always has been, protecting the rights of Kentucky small businesses and fraternal organizations who rely on legal games of skill for income.”

But the lawsuit faces an uphill battle, clashing with the Kentucky horse racing industry.

What are gray machines?

Think of them as slot machines that require some skill. They’re called gray machines because they fall within a murky area of Kentucky gambling law. They’re often found in gas station convenience stores, restaurants or other small businesses.

With slots, all a customer needs to do is push a button. Slots are games of chance. But that’s not the case with gray machines.

For instance, let’s say there’s a game that requires a gambler to match three symbols in a row. If that patron matches two symbols, they can manually change a row to get a third matching symbol.

Earlier this year, the Kentucky legislature enacted a law banning these games.

According to John Cox, the Kentucky Chamber of Commerce’s director of public affairs, there were machines in 110 of the state’s 120 counties.

“The total number of machines statewide is well into the thousands,” he said.

Pace-O-Matic: Kentucky Horse Racing Commission gives racetracks too much power

Barley thinks the horse racing industry is one of the main reasons his machines aren’t legal in Kentucky.

“That’s the story of Kentucky,” Barley told WCPO 9 News. “(Horse racing) has a lot of power in Frankfort. And they push and are successful in getting a very lax regulatory structure.”

According to him, the state’s horse racing tracks have too much power and need checks and balances.

“They’ve systematically set up the racing commission to really allow the tracks to regulate themselves, which is not a good situation for the taxpaers,” Barley said.

Why did Kentucky ban gray machines?

Well, for starters, slot machines are illegal in Kentucky. Broadly speaking, there aren’t any Kentucky casinos. Kentucky’s only licensed gambling locations are at horse racetracks and historical horse racing venues.

It’s also worth noting that gray machines are not regulated under Kentucky’s gaming laws. In turn, Kentucky can’t collect any tax dollars from these machines. That’s different from typical gambling tax revenue, which goes toward Kentucky’s education programs.

And those who oppose gray machines say they threaten the funding pipeline that would normally go toward education.

“(Gray machines are) threatening education funding via the Kentucky Lottery and harming our signature equine industry, which the General Assembly has worked hard to protect and grow,” Kentucky Chamber of Commerce president Ashli Watts wrote in a letter.

HB 594 banned these machines in Kentucky earlier this spring

On March 16, Gov. Andy Beshear signed HB 594 into law, banning gray machines.

Republican Rep. Killian Timoney was one of HB 594’s sponsors. He said the bill was about regulating the industry — plain and simple.

“(These machines) represent the single largest gambling expansion in Kentucky history,” he said. “Yet, they are unauthorized, unregulated and unaccounted for. We must restore proper order, empowering the legislature to lead by drafting laws that precede the addition of gaming in the Commonwealth.”

Virginia has a similar ban on these machines

Gray machines are not legal in one of Kentucky’s neighboring states.

Virginia elected to ban these machines back in 2020. However, small businesses claimed these machines were vital to revenue during the COVID-19 pandemic.

In turn, Virginia enacted a one-year reprieve, essentially like a test run. Gray machines thrived during this timeframe. Queen of Virginia Skill & Entertainment, which brandished nearly 6,000 machines at the time, generated more than $6.8 million. And most of that money went toward pandemic relief.

Virginia still decided it would ban these machines when that one-year trial ended. Sen. Bill Stanley and former NASCAR driver Hermie Sadler sued to lift the ban in 2022.

Virginia has not lifted its ban on these machines.

Will Kentucky legalize gray machines any time soon?

It’s not likely.

Kentucky does not offer legalized slots, the closest thing to these gray machines. And casino gambling as a whole isn’t legal, either.

It would not make sense for Kentucky to soften its stance on gray machines before it legalized the entire casino gambling sector.

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Adam Hensley

Adam Hensley is a staff writer for PlayKentucky. His byline has appeared in the Associated Press, Sports Illustrated and sites within the USA Today Network. Hensley graduated from the University of Iowa in 2019 and spent his college career working for the Daily Iowan’s sports department, both as an editor and reporter.

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