Legal and Illegal EGD’s for Gambling Convenience

South Carolina, where video poker has been legal for 8 years, reports by far the largest number of legal, non-casino EGD’s. In that state video poker machines, which can be played 24 hours a day excluding Sundays,15 operate in about 7,500 separate establishments, including bars, restaurants, gas stations, convenience stores, and “video game malls.”16 Video poker machines started as arcade games where players could only win credits to replay the game, but in 1991, the South Carolina Supreme Court ruled that cash payoffs were legal if the money did not come directly from the gaming device. According to recent figures from the South Carolina Department of Revenue, EGD’s in that state generated $2.5 billion in annual gross machine receipts (cash in) and paid prizes (cash out) to players of $1.8 billion, a payout rate of approximately 71 percent.17 Video poker licensing fees yielded $60 million during the most recent fiscal year.18
Although several states have legalized standalone EGD’s, illegal and quasi-legal EGD’s offering a similar if not identical gambling experience to legal EGD’s are common in the bars and fraternal organizations of many other states, including West Virginia, New Jersey, Alabama, Illinois, and Texas. Quasi-legal EGD’s are often referred to as “gray machines” because they exist in a gray area of the law. Typically, they are legal as long as no winnings are paid out¾in fact, they are often labeled “For Amusement Only.” In practice, however, winnings are not paid out directly by the machine, but are instead paid more or less surreptitiously by the establishment in either monetary or non-monetary forms.
The exact number of gray machines available has not been accurately measured, but there are estimates for some states. For example, in West Virginia, there are approximately 15,000 to 30,000 gray machines.19 In New Jersey, it is estimated that there are at least 10,000 machines.20 The Alabama Bureau of Investigation estimated that there were 10,000 illegal EGD’s across that state in 1993.21 Illinois is estimated to have 65,000.22

One controversial feature of legal and illegal EGD’s is their location. Because this form of gambling occurs in close proximity to residential areas and/or at consumer oriented sites, patrons regularly encounter them in the course of their day-to-day activities. Most other forms of gambling take place at gambling-oriented sites, such as casinos and racetracks, which patrons visit specifically for the purpose of gambling and other entertainment. EGD’s proliferate rapidly because they can be purchased and installed quickly at existing sites with a relatively small capital investment. By contrast, casinos and racetracks require substantial capital investment and cannot be built overnight. This form of gambling creates few jobs and fewer good quality jobs, and it is not accompanied by any significant investment in the local economy.
Opponents of convenience gambling argue that electronic gambling creates dependency and should not be widely available or legalized. Robert Hunter, a clinical psychologist in Las Vegas who specializes in problem and pathological gambling, calls electronic gambling devices “the distilled essence of gambling.” He claims that video poker’s hold on people is caused by the game’s rapid pace (an experienced player can play 12 hands a minute), the ability to play for long periods of time, and the