State Regulations of Convenience Gambling
State regulations also dictate the qualifications and specifications of convenience gambling machines that are permitted. Some states also limit the amount of money played and the value of prizes. In Montana, each video draw poker or keno machine is not allowed to credit more than $800. In Oregon, to ensure age-controlled access to video lottery, locations are off-limits to minors.
The fees that convenience gambling operators have to pay to the state government vary state by state. For example, Oregon collects excise taxes from retailers who operate the video lottery games and since 1992, the EGD’s excise taxes have provided $8.5 million to the state. 39 In Louisiana, license fees paid to the state and local governments for the period of July 1998 through March 1999 were $148,848,000. 40
Attempts to regulate legal convenience gambling in South Carolina have been marginally successful. In an attempt to curb the growth of gambling, state officials decreed that no business could have more than five EGD’s and limited daily payouts to $125. However, these attempts at regulation are easily circumvented by establishments that partition their outlets into separate rooms, each containing five machines and an attendant. 41 Video poker outlets often advertise and offer jackpots much greater than the $125 limit allowed by law. In addition to being difficult to regulate, convenience gambling revenues are not evenly distributed. One quarter of South Carolina’s machines are owned by just three operators: Collins, McDonald’s Amusements of Little River, and Tim’s Amusement of Greenville. 42
Illegal and quasi-legal EGD’s (or so-called gray machines) are often considered a challenging yet low-priority law enforcement problem. Some states report bribery of police and other law enforcement officers. Confiscation is one method of enforcement but has proven ineffective since the confiscated machines are easily replaced. Moreover, penalty fees are usually low in comparison to the profit or “payoff.”
In Illinois, with an estimated 65,000 illegal or quasi-legal EGD’s, 43 video slot machines are classified as games of chance and are banned throughout the state. Supporters of video poker machines, however, claim that since poker requires some skill and does not rely on chance alone, the machines are therefore not illegal under existing law. The distinction is clear to the many bar and club owners who earn significant, largely untaxed profits from video poker machines. Owners of competing establishments contend that illegal gambling devices give some businesses an unfair advantage because the profits can be used to subsidize prices on food, drinks, or even gasoline. 44 Some states have considered replacing the EGD’s with state-approved machines provided by commercial distributors. This would allow the regulation and taxation of the machines. In South Dakota, the state government gets 49.5 percent of the profits from the machines, while local bar owners and machine operators split the other 50.5 percent. 45 In Oregon, a 1992 law gives the state, which owns the machines outright, 67 percent of the profit. Local proprietors get 33 percent. 46 Some recommendations in improving the regulation of illegal convenience gambling include that of improving the local licensing, numbering and tracking of machines. Also targeting the manufacturers and distributors as well as organized crime and shop-owners could improve the regulation of convenience gambling.
39 Source: Response from Governor Kitzhaber on April 26, 1999. 40 Source: Response from Governor foster on April 28, 1999. 41 “Industry Stirs Money, Controversy: South Carolina Illustrates How Video Gambling Can Impact a State,” Sarasota Herald-Trib., February 22, 1999, p. 1A. 42 “Video Poker generates millions for some South Carolina entrepreneurs,” The State, March 21, 1999. 43 Cam Simpson, “Gambling raid in west suburbs,” Chicago Sun-Times, November 17, 1997. 44 “Bars warily consider return of video poker: Court has struck down ban on the machines.” St. Louis Post-Dispatch, February 10, 1999. 45 “Video Poker: Why reward vendors.” The Charleston Gazette, March 5, 1999, P. 4A. 46 Ibid. 12