Court of Appeal for Ontario
Date: August 8, 2019
Docket: C65943
Judges: Juriansz, van Rensburg and Miller JJ.A.
Parties
Between
Play for Fun Studios Inc. Applicant (Respondent)
and
Registrar of Alcohol, Gaming and Racing Respondent (Appellant)
Counsel
For the Appellant: Sunil S. Mathai and Ananthan Sinnadurai
For the Respondent: Scott C. Hutchison and Gabriel Edelson
Heard: June 18, 2019
On appeal from: The order of Justice P. Andras Schreck of the Superior Court of Justice, dated September 4, 2018, with reasons reported at 2018 ONSC 5190.
Decision
Juriansz J.A.:
[1] Introduction
[1] The Registrar of Alcohol, Gaming and Racing ("the Registrar") appeals from the application judge's declaration that the "GotSkill" gaming system is not a game as defined under s. 197(1) of the Criminal Code, R.S.C., 1985, c. C-46. Section 197(1) defines a "game" to mean "a game of chance or mixed chance and skill".
[2] Play for Fun Studios Inc. ("Play for Fun"), the owner of GotSkill, applied for the declaration. GotSkill is played in almost 200 bars in Ontario. Section 45(1) of R.R.O. 1990, Reg. 719 under the Liquor License Act, R.S.O. 1990, c. L.19, prohibits "unlawful gambling" at licensed premises. The parties to the application agreed that "unlawful gambling" includes the playing of a game within the meaning of s. 197(1) of the Criminal Code. There was also no dispute that GotSkill is not a game of pure chance; the issue was whether GotSkill was a game of mixed chance and skill.
[3] The application judge concluded that GotSkill was not a game of mixed chance and skill. For the reasons that follow, I believe the application judge was incorrect. I would allow the appeal.
A. How GotSkill Works
[4] On appeal, neither party took issue with the application judge's description of how the game functions and is played. I simply adopt his description, which is as follows:
(i) Introduction
GotSkill consists of a terminal with a touch screen. A person wishing to play GotSkill must purchase game tokens, which are provided electronically on a card which the player can swipe on the terminal. When the card is swiped, the game's terms and conditions appear on the screen. The player must accept these in order to play. At the commencement of the game, the player is asked to choose one of a number of different "themes", which are cosmetic and which have no impact on how the game is played.
(ii) The "Potential Next Win" and the "Amusement Phase"
Once a theme is chosen, the terminal displays the "potential next win", which represents the amount the player can win if she chooses to place a wager. Whether or not the player wins will depend on her ability to complete the "skill task" described below. Of note, the value of the potential next win is pre-determined and the player is aware of it before deciding whether or not to play.
If the player chooses to play, he or she must decide how many credits to wager. The amount of the wager depends on the value of the "base entry", which will be between eight and 25 credits, and the "entry level", which is a number by which the base entry is multiplied. Each theme has a fixed base entry which may vary between themes. The player is able to increase or decrease the entry level and thereby choose how much to wager. Thus, before deciding whether or not to play, the player is aware of the potential next win and has chosen how much she wishes to wager.
After the player has determined how much to wager, the game proceeds through an "amusement phase" which consists of various onscreen animations resembling a slot machine. This has no impact on the outcome of the game.
(iii) Where the Potential Next Win is Greater than Zero — The "Skill Task"
If the potential next win is greater than zero, the player is given an opportunity to perform the "skill task". This consists of a cursor moving back and forth at a constant speed across an area with 21 bars. Each bar is assigned a percentage value of between 55% and 110%. Once the player presses the "stop button", the cursor stops moving. The challenge is to stop the cursor as close to the middle of the area as possible. The closer the cursor is to the middle when it stops, the greater the percentage. The outcome depends entirely on the player's hand-eye coordination. Once the game is complete, the player's "actual win" is the product of the percentage value and the amount wagered.
There does not appear to be any dispute that this aspect of the game is dependent solely on skill and not chance.
(iv) Where the Potential Next Win is Zero
If the potential next win is zero, then the player can choose whether to continue playing. If she does, then she must wager the minimum number of credits. Doing so will result in the amusement phase, but the player will not be provided with any opportunity to complete the skill task and will necessarily lose the amount she has wagered. The player will then be presented with a new potential next win.
B. How the Game is Programmed to Work
The value of the potential next win is pre-determined. The values come from "tickets" which the game selects from a list of 1,000 tickets contained in a "file". Files are arranged in groups of 1,000, which are known as "pools". Each theme on each terminal has its own set of pools.
The first ticket is randomly selected by the game the first time it is played. Thereafter, the tickets are selected in the sequence in which they appear in the file. When one player finishes playing, the next player's potential next win will be based on the next ticket in the sequence. The sequences of the tickets is initially randomly generated, but steps are taken to avoid there being too many zero-value tickets in a row.
Players do not have access to the tickets. As a result, while a player knows the potential next win for the round she is about to play, she does not know what the potential next win will be for the following round or any after that.
C. Possible Outcomes over Multiple Plays
Files are designed in such a way that if a player were to play all 1,000 tickets and score 100% on the Skill Task every time, she would receive an overall pay out of 94% of the amount wagered. A player who scores 110% each time will win more than she wagers. As described in the affidavit of the applicant's Chief Executive Officer, "[i]f the player consistently obtains 110% on the Skill Task then they can 'beat' the game and receive a profit." The respondent did not challenge this evidence.
B. Decision of the Application Judge
[5] At the outset of his analysis, the application judge set out the governing legal principles that the Registrar recognizes are correct.
[6] First, drawing on the Supreme Court of Canada's decisions in R. v. Riesberry, 2015 SCC 65, [2015] 3 S.C.R. 1167, and R. v. Ross, [1968] S.C.R. 786, the application judge stated the principle for determining when a game is a "game of mixed chance and skill" under s. 197:
There must be a "systematic resort to chance" to determine outcomes, not merely the "unpredictables that may occasionally defeat skill".
[7] The application judge explained that the "unpredictables" contemplated in this principle were matters outside the game itself. He gave the example of a gust of wind affecting the outcome of a tennis game. The "systematic resort to chance" to determine outcomes must be part of the game itself. For example, card games such as poker, where the outcome depends on the initial deal and the cards a player happens to draw, have a built-in systematic resort to chance.
[8] Citing Ross, the application judge further explained:
Any game that is based on mixed chance and skill will fall within the definition in s. 197, regardless of which element is dominant. In other words, as long as there is any element of chance, the game will meet the definition in the Code.
[9] Second, the application judge stated the principle that "[i]n determining whether there is an element of chance, it is the perspective of the player that must be considered." He cited R. v. Topechka, [1960] S.C.R. 898, for this principle, and heavily relied on this case for his ultimate conclusion described below. He applied a line of authority rooted in the dissent of Harvey C.J. in R. v. Stubbs (1915), 24 C.C.C. 303 (Alta. S.C.), adopted by this court in R. v. O'Meara (1915), 25 C.C.C. 16 (Ont. C.A.); see also R. v. Gerasse (1916), 26 C.C.C. 246 (Man. K.B.).
[10] Stubbs and O'Meara concerned a type of gum dispenser machine. The user would insert a coin, pull a lever, and then receive a prize, such as gum or tokens that could be used to purchase items at the store in which the dispenser was located. The user would know what prize the machine would dispense at the time they inserted the coin, but would not know the prize available for the next round of play. In his dissent in Stubbs, Harvey C.J. pointed out:
As it is, with the privilege of operating the machine more than once, the operator's game is to put in nickels or checks for the purpose of getting back something more valuable, and that is not gum. Having control of the machine and thereby the right of the next operation, there is a chance in a single throw, not a chance of what will be discharged from the machine, but a chance of what may be shewn on the indicator as what the operator will receive in the next operation. In that is the chance, and that is the game he is playing.
[11] The application judge analogized that "[t]he player of GotSkill who is presented with a potential next win of zero is in the same situation as the person who must decide whether to spend a nickel in order to obtain gum worth a penny." He explained:
As described in one of the older cases, "[t]he bait is the hope springing 'eternal in the human breast' that he will, sooner or later though not immediately, receive . . . more than he has paid" … The incentive in continuing to play is in order to gain an opportunity to win a greater prize which may or may not be available, depending on chance.
[12] The application judge went on to conclude that the game was not one of mixed chance and skill under the Criminal Code.
[13] First, the application judge noted "the fact that some elements of the game are out of the player's control does not necessarily make GotSkill a game of mixed chance and skill", citing R. v. Balance Group International Trading Inc. (2002), 162 C.C.C. (3d) 126 (Ont. C.A.).
[14] Second, the application judge found there was one significant difference between GotSkill and the gum dispenser machines at issue in Stubbs and O'Meara. He explained, "[t]he player of the gum dispenser machines was completely "at the mercy of the machine": Topechka, at p. 900. No matter how many times he played, he could (and probably would) ultimately end up losing more than he gained and could do nothing to prevent this."
[15] The application judge reasoned that GotSkill was different:
[A] player of GotSkill who continuously obtained 110% on the skill task would ultimately win more than she lost. While how much a player is able to win over the next few plays is a matter of chance, a very skilled player will always be able to come out ahead if she plays long enough. Put another way, the player who has enough skill can "beat" the machine, so the machine cannot "defeat the ability of the player to obtain favourable results": Topechka, at p. 900.
[16] This reasoning led the application judge to issue a declaration that GotSkill was not a game of mixed chance and skill.
C. Analysis
[17] The chain of the application judge's reasoning is correct until the last link.
[18] The application judge correctly found that "[t]here must be a 'systematic resort to chance' to determine outcomes, not merely the 'unpredictables that may occasionally defeat skill'", and he succinctly explained that such unpredictables were those external to the game itself.
[19] The application judge also correctly concluded that "in determining whether there is an element of chance, it is the perspective of the player that must be considered", and this meant that GotSkill had to be considered from the perspective of the player who plays multiple times (the "ordinary person likely to play it": Balance Group International Trading Inc., at para. 1). It is worth noting the evidence in this case was that players in Ontario play approximately 25-30 minutes, and on average use $16 of credits (not including any credits awarded for successful completion of the skill task) when they first try the game.
[20] This conclusion disposes of the argument Play for Fun repeatedly stressed in its submissions: namely, that a player knowing the potential prize in the particular instance of the game could decide to play or not play, and that the focus should be on "each round or instance" of GotSkill gameplay. The argument has no relevance to a typical player of the game, who plays multiple times and does not know the potential win of the next game. In any event, a person's decision not to play a game does not change the game's character.
[21] The application judge went on to correctly state the principle on which this appeal turns. He said, "[a]ny game that is based on mixed chance and skill will fall within the definition in s. 197, regardless of which element is dominant. In other words, as long as there is any element of chance, the game will meet the definition in the Code" (emphasis added). He cited Ross for this principle.
[22] The accused in Ross were officers of a bridge and social club. The issue before the Supreme Court was whether the game of contract bridge was a game of mixed chance and skill per s. 168(1)(f) of the Criminal Code, S.C. 1953-54, c. 51, such that the accused, who charged players fees that exceeded the statutory maximum, were keeping a common gaming house.[1]
[23] Writing for the majority, Pigeon J. observed that the cards in the hands of each of the four players in bridge are determined by chance, but afterwards the outcome of the game depends in substantial measure upon the skill of the players in bidding and in playing their hands. He noted that the expert evidence was that the element of skill significantly outweighed the element of chance. In this context, Pigeon J. rejected the argument that "mixed games in which skill is a dominant element" were games of pure skill for the purpose of the Criminal Code. Pigeon J. said that to do so would "deprive of any effect the words 'or mixed chance and skill'" and "would be contrary to Parliament's clearly expressed intention." It was clear, he said, "that Parliament intended to avoid the uncertainties involved in determining what is the dominant element and deliberately chose to include in the definition of 'game' all mixed games as well as games of chance."
[24] The question, then, is not whether skill predominates over chance or chance predominates over skill. The question is whether the game is one of "mixed chance and skill": any degree of chance that is part of the game, will suffice.
[25] The application judge lost sight of this principle when he found there was a significant difference between GotSkill and the gum dispenser machines because "[t]he player of the gum dispenser machines was completely "at the mercy of the machine" (emphasis added). He lost sight of his earlier comment that "as long as there is any element of chance, the game will meet the definition in the Code". And, in determining whether there is a "systematic resort to chance" to determine outcomes, it is essential to consider the normal course of play of an "ordinary player" of the game.
[26] The application judge recognized that chance was present in GotSkill. For example, he observed the player chooses to spend their money "for the opportunity of being able to obtain something of greater value the next time. Whether or not [they have] that opportunity depends on chance." And he said "[t]he incentive in continuing to play is in order to gain an opportunity to win a greater prize which may or may not be available, depending on chance." These findings should have led the application judge to conclude that there is a systematic resort to chance in GotSkill and it is a game of mixed chance and skill.
[27] It is worth observing that the application record included a technical review of the game by Gaming Laboratories International. The review stated, "[t]aken as a whole, a random element of game play does exist when considering multiple games being played, as determined by the ordering of tickets within the finite pool."
[28] The application judge further erred in his use of Topechka and Balance Group International Trading Inc. Neither case applies the "dominant element" test or displaces Ross as the controlling authority. In concluding GotSkill is not a game of mixed chance and skill because a very skilled player can "'beat' the machine", the application judge erred by applying the "dominant element" test rejected in Ross.
[29] As the application judge recognized at the outset of his reasons, if there is a "systematic resort to chance", then chance is an element of the game. If skill is also an element, it does not matter which is dominant: the game is one of mixed chance and skill. As there is a systematic resort to chance in GotSkill when it is played multiple times, GotSkill is therefore a game of mixed chance and skill.
[30] Finally, I add that the application judge's finding that very skilled players could beat the machine if they played long enough is true only in a carefully defined and highly improbable circumstance. The application judge should have based his assessment on how GotSkill is intended to be played by the ordinary person: Balance Group International Trading Inc., at para. 1.
[31] The application judge's finding is based on the notion that if a player played all 1,000 tickets in a file and scored 110 percent on the skill task every time, they would win more than they wagered. However, a number of circumstances make such an occurrence unlikely. The player would not know when the run of 1,000 tickets begins, because some tickets would have been played by a previous player. The player would not know that if they changed themes, a new ticket in a new file in a new pool would be played, restarting the necessary run of 1,000 tickets. The player would also not know a run of 1,000 tickets is necessary, but even if they did, they would still not know when to stop playing, as they have no way of knowing what ticket in the file is being played at any time. It would thus be a highly improbable happenstance that a player would begin with the first ticket in a file, play 1,000 games without changing themes, score 110 percent consistently, and then stop playing.
D. Conclusion
[32] The appeal is allowed. A declaration shall issue that GotSkill is a game of mixed chance and skill for the purpose of s. 197(1) of the Criminal Code.
[33] The parties may make written submissions regarding costs, no longer than five pages, within 14 days of the release of this decision.
Released: August 8, 2019
"R.G. Juriansz J.A."
"I agree. K. van Rensburg J.A."
"I agree. B.W. Miller J.A."
Footnote
[1] Some of the players taking part in the games exchanged money, although this does not appear to have played a role in the court's determination of whether the game of bridge was a "game of mixed chance and skill".