TNT Amusements, Inc. v. Torch Electronics, LLC, 2025 WL
947506, No. 4:23-CV-330-JAR (E.D. Mo. Mar. 28, 2025)
The parties compete in the market for “retail amusement
devices.” TNT owns and leases out traditional arcade games and similar
amusement equipment (e.g., foosball and pool tables, dart boards, pinball
machines, juke boxes) to various retailers. Torch leases putatively “no-chance”
gaming machines. TNT alleged that Torch operates illegal slot machines and
touts them as legal. Here, the Lanham Act false advertising claim survives for
a jury, but the RICO claims are tossed out on summary judgment because they’re RICO
claims.
I’m going to try to strip down the extensive regulatory background, but
gambling is heavily regulated in Missouri. Relevant definitions include:
(4) “Gambling”, a person engages in
gambling when he or she stakes or risks something of value upon the outcome of
a contest of chance or a future contingent event not under his or her control
or influence, upon an agreement or understanding that he or she will receive
something of value in the event of a certain outcome. …
(11) “Slot machine”, a gambling
device that as a result of the insertion of a coin or other object operates,
either completely automatically or with the aid of some physical act by the
player, in such a manner that, depending upon elements of chance, it may eject
something of value. A device so constructed or readily adaptable or convertible
to such use is no less a slot machine because it is not in working order or
because some mechanical act of manipulation or repair is required to accomplish
its adaptation, conversion or workability. Nor is it any less a slot machine
because apart from its use or adaptability as such it may also sell or deliver
something of value on a basis other than chance.
Possession of a gambling device is a Class A misdemeanor.
Any building used for unlawful gambling is considered a public nuisance.
Torch’s game machines feature at least five game themes, and
each theme offers several play levels. “A game theme is a series of visual
images displayed to entertain the player, revealing a combination of winning or
losing symbols on each turn. A play level dictates the payment required to play
the next turn.”
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| picture of a “no chance” device |
The record showed that the software for a Torch device has a
randomly selected starting point for each theme/play level combo. “From any
given starting point, for each turn of play, the software cycles through
pre-determined and finite sequential pools of 60,000 to 100,000 outcomes,
depending on the game theme,” like a counter (but not in numerical order)
ticking forward one at a time until it cycles back to the beginning. “There is
nothing a player can do to alter the payout amount of a turn before or after
the player inserts money.”
Torch devices only take bills, “so, if there is a balance of
$0.25 when a player decides to stop playing, there is no way to recover that
amount.” Each device has an optional “prize viewer” that allows the player to
preview the next payout amount, but only the next payout amount. “So, for
example, if a player selects the prize viewer and sees that the next payout
amount is $0 and she wants to obtain a better result, she must play through
that $0 turn and continue playing. She cannot skip ahead. If she wants to know
the payout of the second, third, or any future turn, she must pay for and play
through those additional turns.” Using the prize viewer doesn’t change the
odds, though “Torch devices are configured to enable the commercial operator to
adjust the settings to require a player to pay extra to use the prize viewer.” According
to a specialist with the Missouri Gaming Commission, absent the preview
feature, Torch machines “essentially play just like a slot machine.”
Torch advertises that the devices are not gambling machines.
Until September 2022, its website said:
Torch’s No Chance Game Machines are
legal. Torch’s No Chance Game Machines are an innovative non-gambling game
machine.
Why are No Chance Game Machines
different?
Under Missouri law, a “gambling
device” is defined as having three elements: consideration (money in), prize
(money out), and chance (unknown outcome).
Torch’s No Chance Games obviously
have the elements of “consideration” and “prize”, but have been carefully
designed to eliminate the element of “chance” (which Missouri law defines as
the material component of a gambling device). If the player does not like the
predetermined outcome, they can choose not to play. If they have a balance on
the machine, they can redeem their balance at any time.
The “Prize Viewer” option on NCGs
eliminates chance.
In mid-September 2022, Torch revised its website to state
only this:
Torch’s No Chance Games are the
first of an entirely new entertainment concept; a game in which there is no
element of chance.
Importantly, the player may view
each and every outcome which may entitle them a prize before playing the game.
They may simply touch the “Prize Viewer” button on the game console and view
the result of the game before playing. As such, the player can decide if they
want to play the game or not based on the pre-determined outcome.
Each Torch device bears a disclaimer:
The Amusement Device to which this
disclaimer is attached provides each player of the device with information on
the specific outcome of each electronic amusement game offered thereon. The
information with respect to each such outcome is provided prior to such
player’s participation in any such game. Consequently, this amusement device is
designed to provide no contest and no chance in the games offered to its
players.
… In Missouri (as in most states),
in order to be considered “gambling,” an element of chance or a contest must be
present in the activity … As noted above, this amusement device is designed to
offer no contest of chance as the outcome is known by players before any
amusement game is initiated. Therefore, the activity offered by this device
clearly does not meet the definition of “gambling.” As a result, this amusement
device does not fit any definition of “gambling device” in the state of
Missouri and is not prohibited for use by you. …
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| Torch “no chance” ad |
Its ad flyers make similar claims, as do its oral representations.
“As such, Defendants have not taken measures to prevent problem gamblers or
gambling addicts from playing Torch devices, nor have they taken measures to
prevent children from playing other than instructing customers not to allow it.”
Torch doesn’t have a gaming license.
At least 20 locations where defendants operate Torch devices
are current or previous customers of TNT. There have been as many as 15,000
Torch devices in Missouri. TNT’s customers have directed TNT to remove at least
19 machines from overlapping locations in order to make room for Torch devices.
The Torch games displaced TNT games because they made more money (and revenue
is split with retailers).
You will not be surprised to learn that the history of evading
gambling regulations is long:
Over 100 years ago, in City of
Moberly v. Deskin, 155 S.W. 842 (Mo. App. 1913), a Missouri appellate court was
asked to determine whether a slot-machine-like gum dispenser was a gambling
device. The machine had a prize preview feature showing in advance what the
player would receive on the next play. The defendant argued that each turn was
a separate and independent business transaction and there was no chance
involved as the player knew in advance what he would receive for his nickel. The
court rejected this theory, finding the defendant’s position “unsound” because
the “contrivance” was clearly intended to “allure” the player into continuing
in the hope of a better outcome.
Deskin is still good law; Missouri legalized some gambling
in 1994 but made no change in its definitions that would abrogate its rule. The
parties, other operators, and officials have nonetheless debated the legality
of “no-chance” prize viewer games and proposed various legislative changes specifically
drafted to encompass machines with a preview feature, but nothing has happened
yet. In January 2017, Torch obtained a legal opinion from a Chicago law firm
concluding that “no chance” gaming devices were legal under Missouri law, and Torch
maintained this position in contacts with prosecutors. After Torch’s owner met
with the Phelps County prosecuting attorney, the latter informed local law
enforcement that he would not pursue prosecution involving Torch devices. But,
around the same time, local officials in Franklin County warned Torch that the
Missouri Gaming Commission deemed the devices illegal and the prosecutor would
“absolutely consider prosecution regardless of Phelps County opinion.” TNT also
secured an advisory opinion from the Missouri Gaming Commission in 2019 that the
devices were indeed gambling devices and slot machines notwithstanding the
prize viewer feature. Torch’s lawyer acknowledged the Commission’s position but
recommended that Torch maintain its public stance that that “MGC has nothing to
say about Torch’s games.” In 2023, defendants were denied a business license in
Branson based on the Gaming Commission’s position that Torch devices are
illegal, and a Platte County prosecutor successfully charged a business with a
class E felony for operating “no chance” prize viewer devices in local
convenience stores in 2019. Other attempted prosecutions were dismissed or are
ongoing, as are fights over seizures of Torch machines as illegal gambling
devices. “In their field investigations, Commission representatives observed
consumers playing Torch devices like slot machines without using the prize
viewers.”
Torch’s challenge to TNT’s standing went nowhere; the
parties were direct competitors and there was enough evidence for a jury to
conclude that there was a causal connection between Torch’s sales and TNT’s
claimed losses. TNT provided evidence of TNT machines that were replaced with
Torch devices and its witness also testified that many customers have asked her
if TNT offers products similar to Torch games. There were other possible
explanations why customers removed TNT devices, such as wanting newer equipment
or more profitable devices, but that was a fact question for the jury.
What about falsity? Torch made extensive claims that the
devices didn’t involve chance and weren’t gambling devices. Were these non-actionable
statements of opinion, or potentially falsifiable? Courts sometimes refuse to
consider statements about legality to be falsifiable in the absence of a “clear
and unambiguous statement” from the regulator. For example, Coastal Abstract
Service, Inc. v. First American Title Insurance. Co., 173 F.3d 725 (9th Cir.
1999), held that, “[a]bsent a clear and unambiguous ruling from a court or
agency of competent jurisdiction, statements by laypersons that purport to
interpret the meaning of a statute or regulation are opinion statements, and
not statements of fact.” The court thought the Eighth Circuit would agree, and
cited Dental Recycling N. Am., Inc. v. Stoma Ventures, LLC, No. 4:23 CV 670
CDP, 2023 WL 6389071 (E.D. Mo. Oct. 2, 2023) (allowing Lanham Act claim where a
defendant represented that its product was compliant with EPA regulations when
technically it was not; reasoning that “an opinion by a speaker who lacks a
good faith belief in the truth of the statement is actionable”).
Under these circumstances, the evidence was sufficient to go
to a jury. The representations on Torch’s website and devices were clearly
intended to be “reasonably interpreted as a statement of objective fact” and
not merely opinion. And the anti-gambling law requires only “an element of
chance.” “[I]t is now undisputed that Torch devices contain random entry points
at each play level in each game theme.” There could be as many as three million
potential outcomes, reflecting “a material degree of chance such that a jury
could find literally false Defendants’ unambiguous representation that ‘chance
has absolutely no role.’” The law even says “a slot machine is no less a slot
machine when it delivers something of value on a basis other than chance –
e.g., large sequential pools.” The court didn’t see a meaningful difference
between randomly reshuffling each time and “random-entry-point 100,000-outcome
pools yielding three million possibilities.” There was absolutely no reason for
the state to intend to regulate one technology and not the other. See Thole v.
Westfall, 682 S.W.2d 33, 37 (Mo. App. E.D. 1984) (“In the slot machine games,
the objects that appear on the screen are determined by the devices’ electronic
circuitry and the player has no control over which combination of objects will
appear. Thus, from the player’s point of view, winning is purely a matter of
luck, a matter of chance.”). [Exactly!]
In addition, the decidedly mixed and often unfavorable results
of Torch devices’ encounters with the law provided context to show “Torch’s
actual knowledge that its legal assurances were false, or at least patently
misleading.” Unlike cases where no clear guidance existed at the time of the
statements, “Defendants have been well aware since 2018 that the Missouri
Gaming Commission, state and local law enforcement, numerous county
prosecutors, and at least one state circuit court have deemed Torch devices
illegal under Missouri law.” The Platte County conviction, for example, was a
“clear and unambiguous ruling from a court … of competent jurisdiction” even
without appellate review, and the Gaming Commission’s 2019 opinion was “an
equally clear declaration by the competent agency. On this record, Defendants
cannot credibly claim that their unambiguous representations of legality –
asserted as unequivocal fact on the website and on each device – were mere lay
opinions lacking the benefit of clarity from a court or agency.”
Even without literal falsity, a jury could readily find
misleadingness/deceptiveness, “especially given that law enforcement officials
explicitly warned Defendants that their customers would be prosecuted for
operating the devices. Torch was so acutely aware of this real risk that it
offered to fund customers’ legal defense. This belies good faith and at least
creates a triable issue as to Defendants’ knowledge.”
from Blogger http://tushnet.blogspot.com/2025/04/advertising-game-devices-legality.html
Rebecca Tushnet 