Limits on Industry-Wide Character Judgments in Video Gaming License Denials

Introduction

This commentary examines the Supreme Court of Pennsylvania’s decision in Brozzetti, M. v. Pennsylvania Gaming Control Board (2025), in which the Court clarified the proper scope of the “good character, honesty and integrity” requirement for video gaming licensing under the Video Gaming Act (4 Pa.C.S. §§ 3101–4506). Five consolidated appeals arose after the Gaming Control Board (“the Board”) refused to grant principal or terminal operator licenses to individuals and entities active in the “skill games” industry—despite conflicting judicial rulings on the legality of such devices. The applicants included Todd Teitelbaum and Lendell Gaming, LLC; Michael and Frank Brozzetti and Better Bets Ventures, LLC; and Brent Mayes and Venture Gaming, LLC. The central issue was whether the Board could categorically deny licenses based solely on an applicant’s association with an industry the Board viewed as unregulated and potentially illegal, without any individualized evidence of unfitness.

Summary of the Judgment

Justice Wecht, writing for a unanimous Court, affirmed in part and reversed in part the Commonwealth Court’s decision. The Supreme Court agreed that the Board had “painted with too broad a brush” by finding every applicant unfit solely because of their participation in the skill‐games industry. However, it also held that the Commonwealth Court erred by ordering the Board “to issue the requested licenses” outright, without permitting further licensing steps. The Supreme Court remanded to the Board for individualized disposition of each application, emphasizing that discretion remains with the Board but must be exercised with reference to particularized evidence of each applicant’s character, honesty, and integrity.

Analysis

Precedents Cited

Blumenschein v. Pittsburgh Housing Authority (109 A.2d 331 (Pa. 1954)). Early articulation that a court may overturn an administrative exercise of discretion only where there is a “manifest and flagrant abuse of discretion or a purely arbitrary execution” of duties.
Slawek v. State Board of Medical Education & Licensure (586 A.2d 362 (Pa. 1991)). Incorporated the Blumenschein standard into the “not in accordance with law” prong of 2 Pa.C.S. § 704 review of agency adjudications.
Fraternal Order of Police v. Pennsylvania Labor Relations Board (735 A.2d 96 (Pa. 1999)). Restated that agency decisions must not be “arbitrary or capricious” and must rest on competent factual findings and proper exercise of discretion.
POM of Pennsylvania, LLC v. Department of Revenue (221 A.3d 717 (Pa. Cmwlth. 2019)). Commonwealth Court decision holding that “skill games” operated in unlicensed premises fell outside the Pennsylvania Gaming Act’s regulatory reach.
In re Three Pennsylvania Skill Amusement Devices (306 A.3d 432 (Pa. Cmwlth. 2023) (en banc)). Commonwealth Court ruling that the Gaming Act’s definition of “slot machine” does not apply to Section 5513 of the Crimes Code, and that specified skill machines were not illegal gambling devices.

These cases shaped the Supreme Court’s understanding of agency discretion and appellate review, as well as the unsettled state of Pennsylvania law on the legality of skill games at the time of the license applications.

Legal Reasoning

1. Scope of Discretion and Standard of Review. The Court reviewed the Board’s licensing decisions under 2 Pa.C.S. § 704, which requires appellate courts to affirm administrative adjudications unless they are (a) in violation of constitutional rights, (b) not in accordance with law, (c) procedurally defective, or (d) unsupported by substantial evidence. The Court emphasized that an agency’s discretionary acts can be overturned only for “manifest and flagrant abuse of discretion” or “arbitrary or capricious decision making,” and that a reviewing court must not substitute its own discretion for that of the agency.

2. Character Requirement in the Video Gaming Act. Under Sections 3502(b) and 3504(c) of the Video Gaming Act, applicants must prove by clear and convincing evidence that they possess “good character, honesty and integrity.” The statute entrusts the Board with “sole regulatory authority” and discretion to grant, deny, or condition licenses. Nonetheless, the Legislature mandated an individualized assessment of each applicant’s personal qualities.

3. Board’s Broad-Brush Approach. The Board denied the Brozzettis’ and Teitelbaum’s applications based solely on their involvement in the skill‐games industry, which the Board deemed unregulated, contrary to public interest, and harmful to licensed casinos and the Lottery. The Board contrasted this with Mayes, who promptly exited the industry upon inquiry, reasoning that his willingness to comply signaled proper character.

4. Supreme Court’s Rejection of Industry-Wide Findings. The Court agreed with the Commonwealth Court that the Board’s “denunciation of Petitioners’ character by mere association with [the] industry” was arbitrary and capricious. The Board offered no evidence—criminal records, fraudulent conduct, uncooperativeness, financial improprieties—linking any individual applicant to personal unfitness. Economic harms to other sectors and general policy objections cannot satisfy the clear‐and‐convincing burden for “good character.”

5. Remand Without Mandate to Grant Licenses. While the Commonwealth Court ordered the Board simply to issue licenses, the Supreme Court held that this frustrated the Board’s remaining regulatory prerogatives (financial reviews, background checks, technical approvals). The Court therefore remanded for individualized consideration, without directing a specific outcome.

Impact

Administrative Licensing: Agencies cannot rubber-stamp the opinions of legislative hearings or public testimony as proof of an individual’s bad character. They must tie denials to individualized evidence.
Future Challenges: Applicants previously denied for industry-wide reasons may seek rehearings or judicial relief. Other regulated industries (e.g., liquor, real estate boards) may face similar challenges if they apply “guilt by association” to all participants in a contested business sector.
Clarification of Review Standard: The Court reaffirmed the “manifest and flagrant” abuse of discretion test as the proper metric under Section 704, rejecting any notion that unreviewable discretion permits arbitrary denials.
Pending Skill Games Litigation: This decision does not resolve whether skill games are lawful; that question remains before this Court in separate appeals. However, license denials based on contested legal theories must await final adjudication of legality.

Complex Concepts Simplified

Section 704 Review: Court review of agency adjudications is limited. A decision survives unless it is illegal, unsupported by evidence, procedurally flawed, or infringes constitutional rights.
Manifest and Flagrant Abuse of Discretion: This phrase means an agency must not act arbitrarily or without reasonable basis. Courts will intervene only when a decision is plainly irrational or capricious.
Clear and Convincing Evidence: A higher burden than “preponderance of the evidence” but lower than “beyond a reasonable doubt.” It requires a firm belief in the truth of the evidence presented.
Good Character, Honesty & Integrity: Personal qualities reflecting trustworthiness, fairness, and adherence to law and moral standards. The Board must evaluate each applicant’s background, reputation, associations, and conduct.

Conclusion

The Supreme Court’s decision in Brozzetti v. PGCB reinforces that licensing authorities must ground adverse decisions in specific facts about an applicant’s personal fitness—not on broad policy objections or generalized criticisms of an entire industry. While the Video Gaming Act affirms the Board’s discretion, that discretion is cabined by statutory mandates for individualized, evidence-based character assessments. Going forward, the Board must re-examine each application against the requisite statutory criteria, free from impermissible “guilt by association” reasoning. This ruling thus strikes a balance between regulatory prerogative and procedural fairness, ensuring that license applicants receive decisions rooted in the merits of their own conduct and qualities.