advertising game device's legality amidst gambling prosecutions could violate the Lanham Act

TNT Amusements, Inc. v. Torch Electronics, LLC, 2025 WL947506, No. 4:23-CV-330-JAR (E.D. Mo. Mar. 28, 2025)

The parties compete in the market for “retail amusementdevices.” TNT owns and leases out traditional arcade games and similaramusement equipment (e.g., foosball and pool tables, dart boards, pinballmachines, juke boxes) to various retailers. Torch leases putatively “no-chance”gaming machines. TNT alleged that Torch operates illegal slot machines andtouts them as legal. Here, the Lanham Act false advertising claim survives fora jury, but the RICO claims are tossed out on summary judgment because they’re RICOclaims.

I’m going to try to strip down the extensive regulatory background, butgambling is heavily regulated in Missouri. Relevant definitions include:

(4) “Gambling”, a person engages ingambling when he or she stakes or risks something of value upon the outcome ofa contest of chance or a future contingent event not under his or her controlor influence, upon an agreement or understanding that he or she will receivesomething of value in the event of a certain outcome. …

(11) “Slot machine”, a gamblingdevice 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 theplayer, in such a manner that, depending upon elements of chance, it may ejectsomething of value. A device so constructed or readily adaptable or convertibleto such use is no less a slot machine because it is not in working order orbecause some mechanical act of manipulation or repair is required to accomplishits adaptation, conversion or workability. Nor is it any less a slot machinebecause apart from its use or adaptability as such it may also sell or deliversomething 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, andeach theme offers several play levels. “A game theme is a series of visualimages displayed to entertain the player, revealing a combination of winning orlosing symbols on each turn. A play level dictates the payment required to playthe next turn.”

The record showed that the software for a Torch device has arandomly selected starting point for each theme/play level combo. “From anygiven starting point, for each turn of play, the software cycles throughpre-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 isnothing a player can do to alter the payout amount of a turn before or afterthe 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 thatamount.” Each device has an optional “prize viewer” that allows the player topreview the next payout amount, but only the next payout amount. “So, forexample, if a player selects the prize viewer and sees that the next payoutamount is $0 and she wants to obtain a better result, she must play throughthat $0 turn and continue playing. She cannot skip ahead. If she wants to knowthe payout of the second, third, or any future turn, she must pay for and playthrough those additional turns.” Using the prize viewer doesn’t change theodds, though “Torch devices are configured to enable the commercial operator toadjust the settings to require a player to pay extra to use the prize viewer.” Accordingto a specialist with the Missouri Gaming Commission, absent the previewfeature, 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 arelegal. Torch’s No Chance Game Machines are an innovative non-gambling gamemachine.

Why are No Chance Game Machinesdifferent?

Under Missouri law, a “gamblingdevice” is defined as having three elements: consideration (money in), prize(money out), and chance (unknown outcome).

Torch’s No Chance Games obviouslyhave the elements of “consideration” and “prize”, but have been carefullydesigned to eliminate the element of “chance” (which Missouri law defines asthe material component of a gambling device). If the player does not like thepredetermined outcome, they can choose not to play. If they have a balance onthe machine, they can redeem their balance at any time.  

The “Prize Viewer” option on NCGseliminates chance.

In mid-September 2022, Torch revised its website to stateonly this:

Torch’s No Chance Games are thefirst of an entirely new entertainment concept; a game in which there is noelement of chance.

Importantly, the player may vieweach 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 viewthe result of the game before playing. As such, the player can decide if theywant to play the game or not based on the pre-determined outcome.

Each Torch device bears a disclaimer:

The Amusement Device to which thisdisclaimer is attached provides each player of the device with information onthe specific outcome of each electronic amusement game offered thereon. Theinformation with respect to each such outcome is provided prior to suchplayer’s participation in any such game. Consequently, this amusement device isdesigned to provide no contest and no chance in the games offered to itsplayers.

… In Missouri (as in most states),in order to be considered “gambling,” an element of chance or a contest must bepresent in the activity … As noted above, this amusement device is designed tooffer no contest of chance as the outcome is known by players before anyamusement game is initiated. Therefore, the activity offered by this deviceclearly does not meet the definition of “gambling.” As a result, this amusementdevice does not fit any definition of “gambling device” in the state ofMissouri and is not prohibited for use by you. …

Its ad flyers make similar claims, as do its oral representations.“As such, Defendants have not taken measures to prevent problem gamblers orgambling addicts from playing Torch devices, nor have they taken measures toprevent 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 devicesare current or previous customers of TNT. There have been as many as 15,000Torch devices in Missouri. TNT’s customers have directed TNT to remove at least19 machines from overlapping locations in order to make room for Torch devices.The Torch games displaced TNT games because they made more money (and revenueis split with retailers).

You will not be surprised to learn that the history of evadinggambling regulations is long:  

Over 100 years ago, in City ofMoberly v. Deskin, 155 S.W. 842 (Mo. App. 1913), a Missouri appellate court wasasked to determine whether a slot-machine-like gum dispenser was a gamblingdevice. The machine had a prize preview feature showing in advance what theplayer would receive on the next play. The defendant argued that each turn wasa separate and independent business transaction and there was no chanceinvolved as the player knew in advance what he would receive for his nickel. Thecourt rejected this theory, finding the defendant’s position “unsound” becausethe “contrivance” was clearly intended to “allure” the player into continuingin the hope of a better outcome.

Deskin is still good law; Missouri legalized some gamblingin 1994 but made no change in its definitions that would abrogate its rule. Theparties, other operators, and officials have nonetheless debated the legalityof “no-chance” prize viewer games and proposed various legislative changes specificallydrafted to encompass machines with a preview feature, but nothing has happenedyet. In January 2017, Torch obtained a legal opinion from a Chicago law firmconcluding that “no chance” gaming devices were legal under Missouri law, and Torchmaintained this position in contacts with prosecutors. After Torch’s owner metwith the Phelps County prosecuting attorney, the latter informed local lawenforcement that he would not pursue prosecution involving Torch devices. But,around the same time, local officials in Franklin County warned Torch that theMissouri Gaming Commission deemed the devices illegal and the prosecutor would“absolutely consider prosecution regardless of Phelps County opinion.” TNT alsosecured an advisory opinion from the Missouri Gaming Commission in 2019 that thedevices were indeed gambling devices and slot machines notwithstanding theprize viewer feature. Torch’s lawyer acknowledged the Commission’s position butrecommended that Torch maintain its public stance that that “MGC has nothing tosay about Torch’s games.” In 2023, defendants were denied a business license inBranson based on the Gaming Commission’s position that Torch devices areillegal, and a Platte County prosecutor successfully charged a business with aclass E felony for operating “no chance” prize viewer devices in localconvenience stores in 2019. Other attempted prosecutions were dismissed or areongoing, as are fights over seizures of Torch machines as illegal gamblingdevices. “In their field investigations, Commission representatives observedconsumers playing Torch devices like slot machines without using the prizeviewers.”

Torch’s challenge to TNT’s standing went nowhere; theparties were direct competitors and there was enough evidence for a jury toconclude that there was a causal connection between Torch’s sales and TNT’sclaimed losses. TNT provided evidence of TNT machines that were replaced withTorch devices and its witness also testified that many customers have asked herif TNT offers products similar to Torch games. There were other possibleexplanations why customers removed TNT devices, such as wanting newer equipmentor more profitable devices, but that was a fact question for the jury.

What about falsity? Torch made extensive claims that thedevices didn’t involve chance and weren’t gambling devices. Were these non-actionablestatements of opinion, or potentially falsifiable? Courts sometimes refuse toconsider statements about legality to be falsifiable in the absence of a “clearand unambiguous statement” from the regulator. For example, Coastal AbstractService, 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 oragency of competent jurisdiction, statements by laypersons that purport tointerpret the meaning of a statute or regulation are opinion statements, andnot statements of fact.” The court thought the Eighth Circuit would agree, andcited Dental Recycling N. Am., Inc. v. Stoma Ventures, LLC, No. 4:23 CV 670CDP, 2023 WL 6389071 (E.D. Mo. Oct. 2, 2023) (allowing Lanham Act claim where adefendant represented that its product was compliant with EPA regulations whentechnically it was not; reasoning that “an opinion by a speaker who lacks agood faith belief in the truth of the statement is actionable”).

Under these circumstances, the evidence was sufficient to goto a jury. The representations on Torch’s website and devices were clearlyintended to be “reasonably interpreted as a statement of objective fact” andnot merely opinion. And the anti-gambling law requires only “an element ofchance.” “[I]t is now undisputed that Torch devices contain random entry pointsat each play level in each game theme.” There could be as many as three millionpotential outcomes, reflecting “a material degree of chance such that a jurycould find literally false Defendants’ unambiguous representation that ‘chancehas absolutely no role.’” The law even says “a slot machine is no less a slotmachine when it delivers something of value on a basis other than chance –e.g., large sequential pools.” The court didn’t see a meaningful differencebetween randomly reshuffling each time and “random-entry-point 100,000-outcomepools yielding three million possibilities.” There was absolutely no reason forthe 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’ electroniccircuitry and the player has no control over which combination of objects willappear. Thus, from the player’s point of view, winning is purely a matter ofluck, a matter of chance.”). [Exactly!]

In addition, the decidedly mixed and often unfavorable resultsof Torch devices’ encounters with the law provided context to show “Torch’sactual knowledge that its legal assurances were false, or at least patentlymisleading.” Unlike cases where no clear guidance existed at the time of thestatements, “Defendants have been well aware since 2018 that the MissouriGaming Commission, state and local law enforcement, numerous countyprosecutors, and at least one state circuit court have deemed Torch devicesillegal under Missouri law.” The Platte County conviction, for example, was a“clear and unambiguous ruling from a court … of competent jurisdiction” evenwithout appellate review, and the Gaming Commission’s 2019 opinion was “anequally clear declaration by the competent agency. On this record, Defendantscannot credibly claim that their unambiguous representations of legality –asserted as unequivocal fact on the website and on each device – were mere layopinions lacking the benefit of clarity from a court or agency.”

Even without literal falsity, a jury could readily findmisleadingness/deceptiveness, “especially given that law enforcement officialsexplicitly warned Defendants that their customers would be prosecuted foroperating the devices. Torch was so acutely aware of this real risk that itoffered to fund customers’ legal defense. This belies good faith and at leastcreates a triable issue as to Defendants’ knowledge.”