The opinion
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Better Bets Ventures, LLC, :
Petitioner : CASES CONSOLIDATED
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 386 C.D. 2022
:
Michael Brozzetti, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 387 C.D. 2022
:
Frank Brozzetti, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 388 C.D. 2022
:
Lendell Gaming, LLC, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 389 C.D. 2022
Richard Teitelbaum, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 390 C.D. 2022
:
: Argued: September 11, 2023
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION
BY JUDGE McCULLOUGH FILED: October 12, 2023
In these consolidated appeals, Petitioners Better Bets Ventures, LLC
(Better Bets), Michael Brozzetti and Frank Brozzetti, Jr. (together, the Brozzettis),
Lendell Gaming, LLC (Lendell Gaming), and Richard Teitelbaum (Teitelbaum)
(collectively, Petitioners or Applicants) seek review of the Pennsylvania Gaming
Control Board’s (Board) orders and Corrected Adjudication issued on March 23, 2022,
and March 24, 2022, respectively. Therein, the Board denied Petitioners’ several
applications (Applications) for both video gaming terminal operator (Better Bets and
Lendell) and video gaming terminal principal (Teitelbaum and the Brozzettis) licenses
pursuant to the act relating to video gaming terminals, also commonly known as the
Video Gaming Act.1 The Board denied the Applications, in essence, because of
Petitioners’ involvement in and association with the “skill games” industry in
Pennsylvania. On appeal, Petitioners argue that the Board committed legal error and
abused its discretion in denying the Applications on that basis. After careful review,
we agree. We accordingly reverse the Board.
1
4 Pa. C.S. §§ 3101-4506.
2
I. FACTS AND PROCEDURAL HISTORY
The facts material to the issues presented in these appeals are not disputed.
The Board made extensive findings of fact in its Corrected Adjudication, a large portion
of which was based on stipulations of fact submitted by the parties. See Reproduced
Record (R.R.) at 80a, 594a. We summarize the Board’s pertinent findings as follows.2
A. Teitelbaum and Lendell Gaming
Teitelbaum is the sole owner, corporate officer, and decision-maker of
Lendell Gaming, a Pennsylvania limited liability company. Teitelbaum also is the sole
owner, corporate officer, and decision-maker of Lendell Vending, Inc., a Pennsylvania
Corporation formed in 2003 (Lendell Vending).3 Lendell Vending operates
amusement equipment, automated teller machines, and jukeboxes in Pennsylvania and
New Jersey. Teitelbaum first became aware of “skill games”4 in 2015 when he was
approached by Lou Miele, the owner of Miele Manufacturing, Inc. (Miele), which
manufactures skill games for vending companies. Miele provided to Teitelbaum a copy
of the Beaver County Court of Common Pleas decision in In re Pace-O-Matic, Inc.
Equipment I.D. No. 142613 (Pa. C.P., Beaver Cnty., No. M.D. 965-2013, filed
December 23, 2014) (Beaver County Case), which held that a skill game manufactured
2
Where noted, we have supplemented the Board’s findings of fact with additional necessary
facts from the Reproduced Record.
3
Although Teitelbaum is the principal of both Lendell Gaming and Lendell Vending, for the
sake of clarity, we note initially that Lendell Vending did not submit any of the Applications at issue
in this appeal. Lendell Vending is not, and has never been, a party to these proceedings.
4
We utilize the term “skill games” to describe the games referenced throughout the Board’s
Corrected Adjudication and the parties’ briefs as “Pennsylvania Skill” or “skill-based” games. In
utilizing the term “skill games,” we render no findings or conclusions regarding the nature of these
games as either predominantly skill- or chance-based. We are cognizant of other litigation pending
in this Court in which that very determination is at issue, and nothing herein should be construed as
the Court’s inclination toward one characterization or the other.
3
by Miele, branded as “Pennsylvania Skill,” was not an illegal gambling device subject
to forfeiture. See R.R. at 963a-75a. Miele also provided Teitelbaum with a copy of
testimony given by Major Thomas Butler, the Director of the Pennsylvania State Police
Bureau of Liquor Control Enforcement (BLCE), before the Pennsylvania House of
Representatives regarding skill games, their distribution throughout the
Commonwealth, and BLCE’s decision not to take action against skill game operators
given the current state of Pennsylvania law.
In 2016, Teitelbaum, through Lendell Vending, began purchasing skill
games from Miele and offering them to customers. Teitelbaum purchased and
marketed only the brand of “Pennsylvania Skill” games found to be legal in the Beaver
County Case. In August 2018, Lendell Gaming applied for a video gaming terminal
operator license, and Teitelbaum applied for an associated video gaming terminal
principal license. In October 2018, during the investigation conducted by the Board’s
Bureau of Investigations and Enforcement (BIE),5 the Board issued Lendell Gaming
and Teitelbaum conditional licenses. BIE confirmed with Teitelbaum that he operated
skill games and requested a list of the names of Teitelbaum’s skill games and their
locations, which Teitelbaum provided.
On June 10, 2019, the Pennsylvania House of Representatives Gaming
Oversight Committee conducted a hearing on electronic gambling devices, at which
Major Scott T. Miller, then-director of BLCE, and Drew Svitko, the Executive Director
of the Pennsylvania Lottery (Lottery), testified regarding the problems they believed
skill games posed in Pennsylvania. Major Miller testified that skill games do not have
5
The BIE is established by Section 1517(a) of the Pennsylvania Race Horse Development
and Gaming Act (Gaming Act), 4 Pa. C.S. § 1517(a), and investigates (1) applications for licenses,
permits, and registrations, and (2) alleged violations of the Gaming Act. DeNaples v. Pennsylvania
Gaming Control Board, 178 A.3d 262, 263 (Pa. Cmwlth. 2018).
4
controls in place to prevent underage gambling like those that are in place at casinos.
He further testified that proceeds from skill games typically are paid to owners in cash,
and, because they are unregulated, the games do not have payout requirements like slot
machines at licensed facilities.
Mr. Svitko gave his opinion regarding the negative impact that skill games
have had on the Lottery. Specifically, he testified that (1) skill games cause an annual
loss of $138 million that otherwise would be spent on programs and services for senior
citizens; (2) skill games are video gambling machines; (3) skill games often resemble
Lottery machines and are placed near Lottery machines in establishments to give the
impression that they are a sanctioned Lottery game; and (4) if skill games remain in
competition with the Lottery, such competition could result in hundreds of millions of
dollars in future lost Lottery revenue. Both Major Miller and Mr. Svitko testified that
skill games are illegal in Pennsylvania.
On June 12, 2019, BLCE notified Teitelbaum and other liquor licensees
that skill games are illegal and that their operation would result in citations against their
liquor licenses. As of July 1, 2019, Lendell Vending had provided 211 “Pennsylvania
Skill” games to 125 businesses in Pennsylvania. On February 27, 2020, the Board’s
Office of Enforcement Counsel (OEC) sent Lendell Gaming and Teitelbaum’s counsel
a Notice of Recommendation of Denial of Initial Application (Lendell Denial Notice)
indicating that OEC would recommend to the Board that their license Applications be
denied. In pertinent part, the Lendell Denial Notice advised as follows:
Please be advised that [OEC] is of the opinion that these [skill
games] are unlicensed and unregulated video gaming
terminals and/or slot machines, skilled slot machines, or
hybrid slot machines that have not been approved by the
Board for manufacturing or distribution in Pennsylvania. As
a result of the unapproved distribution of these unlicensed and
unregulated video gaming terminals and/or [s]lot [m]achines
5
by [ ] Teitelbaum, through Lendell Vending, [OEC] is of the
opinion that [ ] Teitelbaum and/or Lendell Gaming have
failed to meet the character requirements pursuant to 4 Pa.
C.S. § 3502(b) and (f) and/or the overall suitability
requirements of a principal applicant and/or terminal operator
applicant.
....
[OEC] is of the opinion that by providing, and continuing to
provide, these unlicensed and unregulated video gaming
terminals and/or [s]lot [m]achines, without Board
authorization and proper licensure, [ ] Teitelbaum has
violated the Video Gaming Act, the Gaming Act, and the
Board’s regulations. . . .
....
[OEC] is also of the opinion that these violations of the Video
Gaming Act, the Gaming Act, and the Board’s regulations,
along with the underlying facts[,] demonstrate that [ ]
Teitelbaum does not possess the requisite good character,
honesty, and integrity required by the Video Gaming Act, and
is therefore not suitable for a [v]ideo [g]aming [t]erminal
[p]rincipal [l]icense. [OEC] holds the position that
unregulated, untested, and unapproved video gaming
terminals and/or [s]lot [m]achines pose a threat to the public
interest and the effective regulation and control of video
gaming operations. Therefore, it is in the public interest to
deny video gaming terminal applications in such cases. As
such, [OEC] is OBJECTING to [ ] Teitelbaum’s
[A]pplication for a [v]ideo [g]aming [t]erminal [p]rincipal
[l]icense and recommending that the Board DENY [ ]
Teitelbaum’s [A]pplication.
....
[OEC] is of the opinion that denial of [ ] Teitelbaum’s
application for a [v]ideo [g]aming [t]erminal [p]rincipal
[l]icense and Lendell Gaming’s application for a [v]ideo
[g]aming [t]erminal [o]perator [l]icense is consistent with the
requirements of the Video Gaming Act and the Board’s
regulations and is overall in the public interest. . . .
6
(R.R. at 13a-18a) (emphasis in original).
B. Better Bets and the Brozzettis
Better Bets is a limited liability company based in Moscow, Pennsylvania.
The Brozzettis each own a 50% interest in Better Bets. The Brozzettis also each own
a 33.33% interest in another business, Hugo Amusements, LLC (Hugo). Their father,
Frank Brozzetti, Sr., owns the remainder of Hugo. Since 2015, Hugo has been in the
business of providing skill games to Pennsylvania businesses and, as of July 16, 2020,
had provided 155 skill games to 86 businesses in the Commonwealth. Included among
the skill games provided to businesses by Hugo are the “Diamond Choice Skill Game
1” and “Diamond Choice Skill Game 2” games (Diamond Choice Games). On March
23, 2017, the Luzerne County Court of Common Pleas held that the Diamond Choice
Games were illegal gambling devices subject to forfeiture under Section 5513 of the
Crimes Code, 18 Pa. C.S. § 5513 (Luzerne County Case).6 (R.R. at 976a.)
On January 17, 2019, Better Bets submitted Applications for both a video
gaming terminal operator license for itself and a video gaming terminal principal
license on behalf of the Brozzettis. (R.R. at 31a.) In March 2019, the Board issued
conditional licenses to both Better Bets and the Brozzettis, which conditional licenses
were extended in June 2020. On August 19, 2020, OEC sent to Better Bets’ and the
Brozzettis’ counsel a Notice of Recommendation of Denial of Initial Application for
Video Gaming Terminal Operator License (Better Bets Denial Notice) (with Lendell
Denial Notice, the Denial Notices). Id. In the Better Bets Denial Notice, OEC justified
Section 5513(a) pertinently provides that a person who “intentionally or knowingly makes,
6
assembles, sets up, maintains, sells, lends, leases, gives away, or offers for sale, loan, lease or gift . .
. any device to be used for gambling purposes, except playing cards,” is guilty of a first-degree
misdemeanor. 18 Pa. C.S. § 5513(a). See also 18 Pa. C.S. § 5513(b) (“Any gambling device
possessed or used in violation of the provisions of subsection (a) shall be seized and forfeited to the
Commonwealth.”).
7
the recommended license denials on substantially the same grounds as those set forth
in the Lendell Denial Notice. Specifically, OEC concluded that the Brozzettis, through
Hugo, marketed “unregulated” and “unlicensed” skill games to businesses throughout
Pennsylvania and, accordingly, failed to meet the character and suitability requirements
of the Video Gaming Act. (R.R. at 33a.) OEC further concluded that, by marketing
the skill games through Hugo, the Brozzettis also violated the Video Gaming Act, the
Gaming Act, and the Board’s regulations. (R.R. at 36a.) Additionally, OEC relied on
the Luzerne County Case to conclude that the Brozzettis, through Hugo, violated the
Crimes Code by distributing skill games. Id.
OEC finally advised that it “holds the position that unregulated, untested,
and unapproved video gaming terminals and/or [s]lot [m]achines, as well as illegal
gambling devices, pose a threat to the public interest,” and, therefore, “it is in the public
interest to deny these video gaming terminal applications.” Id.7
C. Proceedings Before the Board
Petitioners requested hearings on their Applications, which were
scheduled before a hearing officer from the Board’s Office of Hearings and Appeals
(OHA). The hearing on the Lendell Gaming and Teitelbaum Applications was held on
April 28, 2021. Better Bets and the Brozzettis ultimately waived their right to a hearing
and requested that the Board consider their Applications on stipulated facts. After
hearing, oral argument, and consideration of the parties’ briefs, the Board voted
unanimously on March 23, 2022, to accept OEC’s denial recommendations for all of
the Applications. The Board issued an Adjudication on March 23, 2022, and a
7
OEC concluded that, because the Brozzettis were the sole owners of Better Bets and majority
owners of Hugo, this common ownership and control established that “Better Bets has a business
association with Hugo.” (R.R. at 37a.)
8
Corrected Adjudication on March 24, 2022, in which it provided the reasoning for its
decision.
In its Corrected Adjudication, the Board rejected Petitioners’ arguments
that they had not been adequately advised by OEC that its denial recommendations
would be based on its finding that granting the Applications would be contrary to the
public interest. The Board concluded that the Denial Notices contained specific
findings that denying the Applications would be in the public interest. (Corrected
Adjudication at 25-26.) The Board also noted that, “[u]ltimately, the issue in these
matters is whether [Petitioners’] ties or former ties to [skill games] support a finding
that they lack the good character and integrity required for licensure,” and, “regardless
of the legality of [Petitioners’] conduct, should the Board determine that their actions
are otherwise contrary to the public interest, this could also support such a finding.”
(Corrected Adjudication at 26.)
On the merits, the Board first concluded that, because the Brozzettis were
part owners of Hugo, which distributed the Diamond Choice Games found to be illegal
gambling devices in the Luzerne County Case, there was “substantial evidence” that
Hugo operated illegal gambling devices in violation of the Crimes Code. The Board
secondly concluded that, regardless of skill games’ legality in the Commonwealth, their
“offer for play and operation is contrary to the positions taken by various government
agencies.” Id. at 28. The Board relied on Major Miller’s and Mr. Svitko’s testimony
presented before the Pennsylvania House of Representatives to conclude as follows
regarding Petitioners’ suitability for the issuance of video gaming terminal licenses:
(1) Regardless of skill games[’] legality, their offer for
play and operation is contrary to the positions taken by
various government agencies, namely, BLCE and the
Lottery.
9
(2) Skill games are not regulated and are not operated in a
controlled environment, which makes regulation of
underage and illegal gambling more difficult.
(3) Skill games do not have payout requirements.
(4) Skill games cause millions of dollars of revenue losses
to the Lottery and often are positioned in
establishments to look like sanctioned Lottery
machines.
(5) BLCE considers skill games to be illegal and their
operation may justify a citation against the liquor
licenses of establishments where they are housed.
(6) Skill games do not contain any of the protections that
are required for licensed gambling operations,
including character and suitability requirements,
protections against underage gambling, minimum
payout requirements, and compulsive and problem
gambling protections.
(Corrected Adjudication at 27-31.) The Board contrasted these protections with the
fact that the operation of skill games is unregulated and therefore (1) does not provide
any protections against problem and compulsive gambling; (2) will not necessarily
self-regulate to guard against underage and problem gambling; (3) does not produce
the same level of tax revenue as other regulated gambling operations, such as the
Lottery; and (4) negatively impacts public confidence in, and the operation of, legalized
gambling venues, especially casinos that house licensed slot machines. Id. at 31-36.
The Board ultimately concluded that Petitioners do not possess the
character required for the issuance of video gaming terminal licenses, stating:
Overall, the Board believes that gaming is best conducted in
an environment that is strictly controlled and regulated. Such
an environment requires surveillance and security measures,
protections against underage gaming, protections against
compulsive and problem gambling, the requiring of approved
internal controls to safeguard assets, an overarching body of
law to regulate the conduct, and a government agency to
10
oversee and enforce these protections. [Skill games] in
unlicensed locations do not contain any of these protections.
The Board, therefore, considers [skill games] to be a
substantial public threat.
Collectively, the record shows that [Petitioners] are, or were,
involved in an industry that possesses none of the oversight
and public protection[s] required to ensure the integrity of
their gaming operations. The Brozzettis’ and Teitelbaum’s
continued involvement in this industry casts substantial doubt
on whether they possess the good character and integrity
required for a video gaming terminal principal license.
Additionally, the suitability of the Brozzettis is further
tarnished by their operation of [the Diamond Choice Games]
that were determined to be illegal gambling devices by a
Pennsylvania court. Consequently, the Board finds that [ ]
Teitelbaum and the Brozzettis have failed to establish by clear
and convincing evidence that they are suitable for licensure.
Since the principals of Better Bets [ ] and Lendell Gaming
are unsuitable for a principal license, the Board must find
that these entities are not eligible for video gaming terminal
operator license[s].
Id. at 37. The Board accordingly adopted OEC’s recommendations and denied
Petitioners’ Applications by orders filed March 23, 2022.8 Petitioners thereafter filed
separate petitions for review in this Court on April 21, 2022. We consolidated the
several petitions for decision by order exited July 7, 2022.
II. ISSUES
Petitioners raise five issues on appeal, which we summarize as follows:
(1) whether the Board’s findings of fact and conclusions of law are supported by
substantial evidence; (2) whether the Board erred and abused its discretion in
8
The Board denied the Applications by orders filed March 23, 2022. (R.R. at 1387a-88a.)
The Board issued an original Adjudication contemporaneously with its orders, see R.R. at 1389a-
1427a, and subsequently issued the Corrected Adjudication on March 24, 2022.
11
concluding that Petitioners do not possess the “good character, honesty, and integrity”
required for licensure; (3) whether the Board erred and abused its discretion in
concluding that Better Bets and the Brozzettis operated illegal gambling devices in
violation of 18 Pa. C.S. § 5513; (4) whether the Board erred and abused its discretion
in concluding that granting Petitioners’ Applications was contrary to the public interest;
and (5) whether the Board erred and abused its discretion in concluding that the Board’s
Denial Notices comported with due process by sufficiently informing Petitioners of the
reasons for OEC’s recommendations.
III. SCOPE AND STANDARD OF REVIEW
Our scope review of a Board order is limited to determining whether the
Board’s necessary findings of fact are supported by substantial evidence and whether
the Board committed legal error or violated constitutional rights. DeNaples, 178 A.3d
at 267 n.1 (citing, in part, 2 Pa. C.S. § 704). Our review of questions of law is plenary,
and an administrative agency’s interpretation of an otherwise clear statute, including
its own enabling statute, is not entitled to deference. Crown Castle NG East LLC v.
Pennsylvania Public Utility Commission, 234 A.3d 665, 667-68, 679-80 (Pa. 2020).
An administrative agency’s adjudication is not in accordance with the law if it
represents a manifest and flagrant abuse of the agency’s discretion or a purely arbitrary
execution of its duties or functions. Slawek v. State Board of Medical Education &
Licensure, 586 A.2d 362, 365 (Pa. 1991). However, “[i]n the absence of bad faith,
fraud, capricious action or abuse of power, reviewing courts will not inquire into the
wisdom of the agency’s action or into the details or manner of executing agency
action.” Id.
12
IV. DISCUSSION
A. Pertinent Provisions of the Video Gaming Act
Section 3301 of the Video Gaming Act defines the Board’s powers to
regulate video gaming in Pennsylvania.9 It provides, in pertinent part, as follows:
(a) General powers.--
(1) The [B]oard shall have general and sole regulatory
authority over the conduct of video gaming or related
activities as described in this part. The [B]oard shall
ensure the integrity of the acquisition and operation of
video gaming terminals, redemption terminals and
associated equipment and shall have sole regulatory
authority over every aspect of the conduct of video
gaming.
....
(b) Specific powers.--The [B]oard shall have the power and
duty:
....
(2) At its discretion, to issue, approve, renew, revoke,
suspend, condition or deny issuance or renewal of
terminal operator licenses.
....
(11) To approve an application for or issue or renew a
license, certificate, registration, permit or other
authorization that may be required by the [B]oard, if the
[B]oard is satisfied that the person has demonstrated
by clear and convincing evidence that the person is of
good character, honesty and integrity whose prior
activities, criminal record, if any, reputation, habits
and associations do not pose a threat to the public
interest or the effective regulation and control of video
9
Section 3501 of the Video Gaming Act provides that “[n]o person may offer or otherwise
make available for play in this Commonwealth a video gaming terminal unless the person is licensed
under this part and according to regulations promulgated by the [B]oard under this part.” 4 Pa. C.S.
§ 3501.
13
gaming terminal operations or create or enhance the
danger of unsuitable, unfair or illegal practices,
methods and activities in the conduct of video gaming
or the carrying on of the business and financial
arrangements incidental thereto.
....
4 Pa. C.S. § 3301(a)(1), (b)(2), (11) (emphasis provided).10 Section 3302(a)(1) of the
Video Gaming Act, which establishes the Board’s regulatory authority, provides, in
pertinent part, as follows:
(a) General rule.--The [B]oard shall have the power and
duty:
(1) To deny, deny the renewal of, revoke, condition or
suspend a license or permit provided for in this part if
the [B]oard finds in its sole discretion that an
applicant, licensee or permittee under this part or its
officers, employees or agents have furnished false or
misleading information to the [B]oard or failed to
comply with the provisions of this part or the rules and
regulations of the [B]oard and that it would be in the
public interest to deny, deny the renewal of, revoke,
condition or suspend the license or permit.
....
10
Relatedly, Section 3502(b) of the Video Gaming Act, which governs terminal operator
licenses, requires that terminal operator license applicants include in their applications “information,
documentation and assurances as may be required to establish by clear and convincing evidence of
the applicant’s suitability, including good character, honesty and integrity.” 4 Pa. C.S. § 3502(b).
Section 3502(b) goes on to list the sources of such information, including “family, habits, character,
reputation, criminal history background, business activities, financial affairs and business, [and]
professional and personal associates . . . .” Id.
Section 3502(f) of the Video Gaming Act requires that the principals of terminal operator
license applicants “obtain a license to meet the character requirements of [Section 3502] . . . .” 4 Pa.
C.S. § 3502(f). Section 3504(c) in turn governs principal licenses and similarly provides that “the
[B]oard may issue a principal license if the applicant has proven by clear and convincing evidence
that the applicant is a person of good character, honesty and integrity and is eligible and suitable to
be licensed as a principal.” 4 Pa. C.S. § 3504(c).
14
4 Pa. C.S. § 3302(a)(1) (emphasis provided).
B. Analysis
Because we conclude that they are dispositive, we first address
Petitioners’ second, third, and fourth arguments, although in a modified order. In all
three, Petitioners contend that the Board committed legal error and abused its discretion
in denying the Applications.
1. Character Suitability and the Public Interest
In their second and fourth arguments, which are related, Petitioners argue
that the Board abused its discretion and committed legal error in concluding that (1)
Petitioners failed to establish by clear and convincing evidence that they possess the
requisite “good character, honesty and integrity” for the issuance of video gaming
terminal licenses; and (2) issuing the requested licenses would be contrary to the public
interest. We agree on both counts.
a. Character
As set forth above, pursuant to Section 3301(b)(11) of the Video Gaming
Act, the Board has the power to grant an application for a video gaming terminal license
if it is satisfied that the applicant “has demonstrated by clear and convincing evidence
that the person is of good character, honesty and integrity whose prior activities,
criminal record, if any, reputation, habits and associations do not pose a threat to the
public interest . . . .” 4 Pa. C.S. § 3301(b)(11). See also 4 Pa. C.S. § 3301(b)(2) (the
Board has the discretion to issue or deny issuance of terminal operator licenses). The
Board also has the authority to deny a license if it finds that an applicant, or its officers,
employees, or agents “have furnished false or misleading information to the [B]oard
or failed to comply with the provisions of this part or the rules and regulations of the
[B]oard and that it would be in the public interest to deny . . . the license . . . .” 4 Pa.
C.S. § 3302(a)(1) (emphasis added). See also 4 Pa. C.S. § 3502(f) (principals of
15
potential operators also must obtain necessary licenses “to meet the character
requirements of this section . . . ”); 4 Pa. C.S. § 3504(c) (“[T]he [B]oard may issue a
principal license if the applicant has proven by clear and convincing evidence that the
applicant is a person of good character, honesty and integrity and is eligible and
suitable to be licensed as a principal.”).
We find these provisions of the Video Gaming Act to be clear and free
from ambiguity, and, therefore, the Board’s interpretation of them is entitled to no
deference by this Court. Crown Castle. The Board’s Corrected Adjudication includes
a broad and detailed discussion of the Board’s opinions of, and policy objectives
regarding, the skill games industry. (Corrected Adjudication at 27-37.) The Board
indicates that, overall, it believes that “gaming is best conducted in an environment
that is strictly controlled and regulated” and that skill games are a “substantial public
threat.” Id. at 37. The Board then precipitously concludes that “the Brozzettis and
Teitelbaum’s continued involvement in this industry casts substantial doubt on whether
they possess the good character and integrity required for a video gaming terminal
principal license.” Id.
The Board identifies in its Corrected Adjudication two overarching
problems with the skill games industry: (1) it is entirely unregulated and, therefore, is
not required to, and does not, provide adequate protections against underage and
problem gambling; and (2) its existence causes a substantial decrease in tax revenue
generated by the legalized gambling industry, from casinos particularly. The Board
bases these conclusions on testimony given by Major Miller and Mr. Svitko before the
Pennsylvania House of Representatives and other testimony and evidence submitted to
the Board by casino representatives in unrelated proceedings. Even assuming that the
issues identified by the Board correspond to some degree with the reality of the skill
16
games industry (which we do not, because we need not, address), the General
Assembly has not made any legislative findings in this respect and has not enacted any
legislation to date that attempts to remove the veritable scourge that the Board believes
the skill games industry has left in its wake. Thus, the Board’s findings in this regard
remain its own policy determinations and nothing more.
More importantly, the Board does not indicate anywhere in its Corrected
Adjudication how the problems it finds with the skill games industry denigrate and
render unsuitable the “character, honesty and integrity” of these specific Petitioners.
The Board nowhere in its Corrected Adjudication identifies any criminal convictions
or investigations, tax-evading financial practices, connections with organized crime,
false statements, or other nefarious or even allegedly nefarious conduct by any of the
Petitioners. Nor does the Board indicate anywhere that any of the Petitioners refused
to participate in, or provide information in association with, the extensive licensure
investigations conducted by BIE. As Petitioners point out in their brief, the evidence
suggests quite the contrary. See Petitioners’ Br. at 30-32. The Board’s findings and
conclusions that Petitioners do not have the requisite character, integrity, and honesty
for licensure is based exclusively on their association with the skill games industry and
the problems the Board perceives to be associated with it. We find such association in
itself to be wholly insufficient to support the Board’s denial of the Applications. The
Board’s denunciation of Petitioners’ character by mere association with this industry,
which the Board simply does not like, cannot, without more, constitute a valid and
reasonable exercise of the Board’s discretion in considering and denying these
Applications.11
11
The Board noted, however, that video gaming terminal license applicants can redeem their
character and suitability in the eyes of the Board if they make the “reasonable” decision to exit the
(Footnote continued on next page…)
17
We therefore conclude that the Board erred and abused its discretion in
denying the Applications based on its conclusion that Petitioners lack the requisite
character for the issuance of the requested licenses.
b. Public Interest
Petitioners next argue that the Board committed legal error and abused its
discretion in concluding that granting the Applications would be contrary to the public
interest.
As noted above, there are two relevant provisions of the Video Gaming
Act that empower the Board to deny a video gaming terminal license application based
on the Board’s assessment of the public interest. First, Section 3301(b)(11) gives the
Board the power to grant a license application if the Board concludes that the applicant
has established, by clear and convincing evidence, that (1) it has the requisite good
character, honesty, and integrity, and (2) its “prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the public interest . . . .” 4
Pa. C.S. § 3301(b)(11). Thus, pursuant to Section 3301(b)(11), the Board may not
grant (and therefore must deny) a license application if the applicant fails to satisfy
either or both of those components with clear and convincing evidence.
Second, pursuant to Section 3302(a)(1), the Board affirmatively may deny
a license application, in its sole discretion, if it concludes (1) that the applicant or its
employees or agents have furnished false or misleading information to the Board or
failed to comply with the provisions of the Video Gaming Act, and (2) that denying
the license application would be in the public interest. 4 Pa. C.S. § 3302(a)(1).
skill games industry. (Corrected Adjudication at 38.) But, because the Brozzettis and Teitelbaum
have made the unreasonable decision “to remain in the industry despite the vehement [] public
opposition by government agencies and public officials who rightfully view [skill games] as a threat
to the public,” id., they have foregone the high road to licensure.
18
Here, although it is not clear which of these two sections of the Video
Gaming Act the Board relied upon in denying the Applications, neither supports the
Board’s findings. Under Section 3301(b)(11), we already have concluded that the
Board erred and abused its discretion in concluding that Petitioners did not establish
that they have the requisite character for licensure. Additionally, there is no evidence
in the record, and the Board did not rely on any, establishing that any “prior activities”
or “associations” of Petitioners tend to undermine the public interest. 4 Pa. C.S. §
3302(a)(1). Once again, although the Board made its policy directives clear in the
Corrected Adjudication, there simply is no evidence suggesting that these Petitioners’
activities or associations either threaten the public interest or will negatively impact
the video gaming industry. Rather, the Board concluded that granting Petitioners’
Applications would undermine the public interest because, in the Board’s view, skill
games themselves are contrary to the public interest. This, once again, is guilt-by-
association with an industry that, whatever the Board’s opinion, remains legal and
legitimate in Pennsylvania.
The Board relies heavily on this Court’s decision in Sonic Services, Inc.
v. Pennsylvania Gaming Control Board, 219 A.3d 296 (Pa. Cmwlth. 2019), to argue
that an applicant’s questionable prior activities and business associations may serve as
a legitimate basis to deny the issuance of a license. Sonic Services is easily
distinguishable. In Sonic Services, the Board revoked the Gaming Service Provider
Registration of Sonic Services, Inc. (Sonic) based on its principal’s ties to organized
crime. Id. We affirmed the Board’s adjudication, concluding that substantial evidence
garnered after a year-long investigation into Sonic’s business associations supported
the finding that Sonic had connections to organized crime. Id. at 303-04. We further
19
concluded that such connections would “tarnish the integrity of gaming to the public.”
Id. at 306.
Here, the Board’s finding that granting the Applications would be
contrary to the public interest is based on neither hard facts discovered during an
extended investigation nor on substantial evidence (nay, any evidence) of Petitioners’
associations with criminal activities. Rather, the Board’s finding is based on its own
policy objectives, which have not to date translated into any legislative findings in any
statute criminalizing or otherwise regulating the skill games industry. Those policy
objectives may or may not be accurate, but, in either case, Petitioners’ associations
with the skill games industry does not, as did the associations with organized crime in
Sonic Services, significantly undermine the protection of the public or the integrity of
licensed gaming. Sonic Services, 219 A.3d at 306.
Lastly, regarding Section 3302(a), there is no evidence that Petitioners
either furnished false or misleading information to the Board or failed to comply with
the provisions of the Video Gaming Act. 4 Pa. C.S. § 3302(a). Because the Board
must, and did not, find that one of those prerequisites exists, it had no authority under
Section 3302(a)(1) to deny the Applications. Accordingly, we conclude that the Board
erred and abused its discretion in denying the Applications on the ground that granting
them would be contrary to the public interest.
2. Illegal Gambling Devices
Petitioners next argue that the Board erred and abused its discretion in
denying Better Bets’ and the Brozzettis’ license Applications on the basis that they
operate illegal gambling devices in violation of Section 5513 of the Crimes Code, 18
Pa. C.S. § 5513. We agree.
20
The entirety of the Board’s analysis on this issue comprises three
sentences and is based exclusively on the parties’ stipulation that Hugo, which is
owned in part by the Brozzettis, operates the Diamond Choice Games that were
determined to be illegal gambling devices in the Luzerne County Case. See Corrected
Adjudication at 27; see also id. at 37 (“the suitability of the Brozzettis is further
tarnished by their operation of two games—[the Diamond Choice Games]—that were
determined to be illegal gambling devices by a Pennsylvania [c]ourt”). There are
multiple deficiencies in the Board’s findings in this regard that render it arbitrary and
a manifest abuse of discretion. First, and once again, the Board made no relevant
findings specifically with regard to the Brozzettis or Better Bets. Rather, the Board
found that a separate entity (Hugo), which is owned only in part by the Brozzettis, at
some point operated gaming devices in Luzerne County that were, in a civil forfeiture
action initiated by the Commonwealth, determined to be illegal gambling devices
under Section 5513.12 Even assuming the illegality of the Diamond Choice Games,
such attenuated connections between Hugo’s business activities and the Brozzettis is
insufficient to establish that they or Better Bets operate illegal gambling devices and,
on that exclusive basis, are not suitable for video gaming terminal licensure.
Second, in making its findings, the Board relied on a single common pleas
decision rendered in civil forfeiture litigation that involved only a single type of skill
game. The Board simultaneously ignored several other common pleas’ decisions that
have held various types of skill games to not be illegal gambling devices under Section
5513. See, e.g., Beaver County Case, R.R. at 963a-75a. Two of those decisions
12
The Order in the Luzerne County Case merely granted the Commonwealth’s “Motion for
Order of Forfeiture” and declared the Diamond Choice Games to be forfeited to the Office of Attorney
General. (R.R. at 976a.) Specific findings and analysis regarding those games’ character or legality
are not included in the record.
21
currently are on appeal and are scheduled to be argued seriately before an en banc panel
of this Court in October 2023. See In re: Three Pennsylvania Skill Amusement Devices,
One Green Bank Bag Containing $525.00 in U.S. Currency, and Seven Receipts (Pa.
Cmwlth., No. 707 C.D. 2023); In re: Four Pennsylvania Skill Amusement Devices and
One Ticket Redemption Terminal Containing $18,692.00 in U.S. Currency (Pa.
Cmwlth., No. 761 C.D. 2023).
Finally, the Board’s scant connection between the Brozzettis’ and Better
Bets’ Applications and any criminal gaming activity is only exacerbated by the fact
that the Board has no regulatory authority over skill games and is not empowered by
the Video Gaming Act to conduct criminal investigations, prosecute criminal
violations, or make findings of criminal culpability. See POM of Pennsylvania, LLC
v. Department of Revenue, 221 A.3d 717, 736 (Pa. Cmwlth. 2019); 4 Pa. C.S. §§
3904(a)(3), (7); 3904(b), (d).
In sum, we agree with Petitioners that the Board erred as a matter of law
and manifestly abused its discretion (1) in concluding that the Brozzettis, through
Hugo, operate illegal gambling devices, and on that basis, (2) denying the Brozzettis’
and Better Bets’ video gaming terminal license Applications.
3. Substantial Evidence
In their first issue, Petitioners argue that the Board’s findings of fact and
conclusions of law are not based on substantial evidence because they (1) are based on
the opinion testimony of Major Miller and Mr. Svitko; and (2) are outside evidence
and testimony the Board has received from casino representatives in other proceedings.
Because we already have assumed the competency of this evidence and the propriety
of the Board’s consideration of it to conclude that the Board erred and abused its
22
discretion in denying the Applications, we need not consider these issues. In light of
our conclusions above, they are moot.
4. Due Process
In their fifth issue, Petitioners challenge OEC’s Denial Notices on due
process grounds, arguing that they did not sufficiently advise Petitioners that denial
would be recommended based, in part, on a finding that granting the Applications
would be contrary to the public interest. This issue likewise is moot. We already have
determined in any event that the Board erred and abused its discretion in concluding
that granting the Applications would be contrary to the public interest.
V. CONCLUSION
Because we conclude that the Board erred and abused its discretion in
denying the Applications on the grounds set forth in its Corrected Adjudication, we
reverse and remand to the Board with instructions to issue the requested licenses.
________________________________
PATRICIA A. McCULLOUGH, Judge
23
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Better Bets Ventures, LLC, :
Petitioner : CASES CONSOLIDATED
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 386 C.D. 2022
:
Michael Brozzetti, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 387 C.D. 2022
:
Frank Brozzetti, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 388 C.D. 2022
:
Lendell Gaming, LLC, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 389 C.D. 2022
:
Richard Teitelbaum, :
Petitioner :
:
v. :
:
Pennsylvania Gaming Control :
Board, :
Respondent : No. 390 C.D. 2022
:
ORDER
AND NOW, this 12th day of October, 2023, the March 23, 2022
orders, as amended on March 24, 2022, of the Pennsylvania Gaming Control Board
(Board) are hereby REVERSED, and this matter is REMANDED to the Board with
instructions to issue the requested licenses.
Jurisdiction relinquished.
________________________________
PATRICIA A. McCULLOUGH, Judge