Skill game legislation was a hot-button issue in the United States in 2024, and the news coverage surrounding the topic has only increased in as we enter 2025.
Nebraska, among other states, has seen lawmakers propose multiple laws regarding the legality, operational requirements, and taxes on the skill gaming terminals commonly found in convenience stores, bars, and restaurants.
There are many players in this debate, including but not limited to government officials, independent store owners (skill game operators), and the players of these games.
Today, we will break down the most recent updates on skill gaming in the Cornhusker state, as well as provide details on the stakeholders fighting to have their voices heard in this ongoing saga.
An Introduction to Skill Gaming Legislation in Nebraska
Nebraska’s state government has issued multiple pieces of legislation that have impacted the legality of and restrictions for skill gaming terminals in the state.
The Nebraska State Constitution is the basis by which the state of Nebraska determines the legality of certain forms of gambling. The Constitution falls under the Nebraska State Legislature, which proposes and passes gambling laws in the state.
In 2019, the state legislature made a clear distinction between gambling and skill gaming. The state determined that for an activity to be considered gambling, an individual must place a monetary wager on an event where the outcome is solely determined by chance. Because skill gaming involves elements of skill and player decision-making, this ruling officially declared skill gaming terminals to be non-gambling experiences.
Since then, game manufacturers and distributors have been very vocal in their defense of skill gaming terminals. These firms are constantly innovating and advancing the state of skill gaming in the U.S.
Then, there are the store operators and owners who implement skill games in their storefronts. These individuals leverage skill gaming in hopes of increasing foot traffic and their overall revenue generation.
Timeline of Recent Nebraska Skill Gaming Developments
In January 2024, Nebraska Senator John Lowe proposed a 5% tax on all operator proceeds from skill-based games. The proposed legislation also imposed a $5,000 annual fee on manufacturers and distributors.
Many distributors expressed concern that the new policies would force smaller operators, such as taverns, restaurants, and bars, to remove their machines due to the expensive new costs.
In February 2024, Senator Lowe again proposed a second version of the legislation. After considering some of the feedback from distributors and operators, Lowe returned with a new proposal that passed 31-0 and will advance to a second debate.
The new proposal kept the 5% tax rate but required operators to pay a much lighter $100 annual fee for each machine rather than a $5,000 flat fee.
Businesses that operate skill games would still be required to derive 60% of their revenue from sources other than the games, but veterans’ and fraternal clubs were specifically listed as being exempt from this requirement. These organizations would also not be subject to the 5% proceeds tax.
The tax revenue generated by this newly proposed plan would be used for property tax relief, tourism promotion, and other city and state initiatives.
The Approval of Legislative Bill 685
Governor Jim Pillen approved Legislative Bill 685 on April 15, 2024, effectively updating the Mechanical Amusement Device Tax Act. The updates to the act will go into effect on New Year’s Day of next year.
The new legislation will require all Nebraska-based skill gaming distributors to pay an annual license fee of $100 per device up to a maximum of $5,000. Manufacturers must pay $5,000 annually to continue operations in the state as well.
Terminal owners or operators must meet the 60% non-gaming revenue requirement, as well as pay a tax for each device operated each calendar quarter during the taxable year. The tax is equal to 5% of the net operating revenue of each terminal. Fraternal clubs and organizations are the only types of establishments exempt from both the revenue percentage requirement and device tax.
The bill also introduced new regulations regarding the total number of terminals that may be present at a given establishment. Businesses may not have a volume of terminals that exceeds the lesser of two specific criteria:
- The number of terminals needed to generate 40% of the establishment’s gross operating revenue (except fraternal organizations).
- Four total devices, unless the establishment in question exceeds over 4,000 square feet – operators are permitted one terminal for every 1,000 square feet that the establishment exceeds said threshold, with a maximum of 15 total devices.
For more information about skill gaming in Nebraska and the ways storefront businesses are reaping the benefits of customized route gaming strategies, please connect with a member of the INAMAX team by calling us at 770-449-0400 ext. 700, or fill out our contact form to learn more.