Missouri Lawmakers Reignite Illegal Gambling Debate
The annual battle over what is and what is not an illegal slot machine began Thursday with a Senate committee hearing on a bill to ban “pre-revelation” games that have proliferated throughout the state.
While several lawsuits are pending and at least two have been resolved with guilty verdicts, many prosecutors are reluctant to press charges – and some don’t think gambling is illegal at all.
State Sen. Dan Hegeman, who is leading the effort in the Senate for the second year, told the Government Accountability and Fiscal Oversight Committee Thursday morning that he was confident that legislation was not needed to that prosecutors act.
He pointed to the fact that a gambling company was convicted, fined and had its machines destroyed in Platte County last year.
“The conviction, lack of appeal and destruction of games in Platte County has removed any sense that these games are legal,” Hegeman said.
But lobbyist Tom Robbins said Hegeman’s bill seeks to bankrupt one of the state’s major gaming providers, Wildwood-based Torch Electronics. Torch games are legal, Robbins explained, because a player can know if they will win the next game before putting money into the machine.
“Our games are not gambling devices because they are not games of chance,” Robbins said.
Gambling deemed illegal in Platte County required a player to deposit money before knowing whether they were winning or losing, Robbins said.
This argument did not convince Senator Bill White, R-Joplin.
“It’s a rather vague and fictitious argument to say that it’s not gambling,” White said. “People selling pot could be considered small business and it’s illegal under our statutes.”
Torch faces charges in Linn County for criminal promotion of the game and is suing the state in Cole County Circuit Court seeking a court declaration that they are operating legally.
The company is also a major political contributor, donating $350,000 in June to six political action committees linked to its lobbyist Steve Tilley, a former Speaker of the House close to Gov. Mike Parson.
Robbins, who works with Tilley at Strategic Capitol Consulting, told the committee that the bill unfairly targets Torch and that other provisions in Hegeman’s bill that would strip liquor licenses from retailers that house the machines would result in redundancies in these companies.
“It is written, designed and targeted to bankrupt a single family business,” he said.
The committee did not vote on Hegeman’s bill Thursday.
Hegeman’s bill is just one of several that would change the landscape of gambling in the state. Bills have also been introduced to allow sports betting at the state’s 13 licensed casinos and to allow the Missouri Lottery to place “video lottery terminals” at truck stops and purpose-group facilities. nonprofits like veterans and fraternal organizations.
There is a non-legislative push to expand gambling from the Osage Nation, which wants to establish a Lake of the Ozarks casino in central Missouri. Tilley and his company are also lobbying for the Osage Nation.
The games offered by Torch Electronics and other vendors referred to as “game without luck” or pre-revelation machines resemble electronic slot machines that take up most of the space in traditional casinos.
Each machine usually offers a variety of games and bets can be placed for 50 cents or more.
It is illegal to operate a slot machine outside of a legal casino, where state taxes take 21% of the net and pay a $2 fee for every two hours a player spends at the casino. There is no reliable information on how many machines offered by Torch and others are operating in the state, but estimates place the number at 20,000.
When a player places money in a slot machine in a casino, they have no way of knowing the outcome of the next spin. The only assurance they have of winning is state law that requires machines to pay out at least 80% of deposited money.
In the fiscal year that ended June 30, players deposited $15.3 billion in Missouri casino slots and earned about 90% back, earning the casinos about $1.5 billion. dollars.
In the absence of state regulation, there is no accounting for money placed in pre-revelation games and no minimum return to players.
Vendors of pre-revealed games believe they have found a loophole because a player can know the outcome of each spin before their money is spent. If it’s not a winner, they can withdraw money from the machine or switch games, looking for a loan to pay.
With only a handful of lawsuits and no appellate court precedent since 1913 on whether this game design is legal, games have proliferated.
The Missouri Gaming Association, which represents legal casinos, supports Hegeman’s bill and opposes any attempt to replace pre-revelation games with video lottery terminals, lobbyist Mike Winter said.
“We’ve been consistent over the past few years that we oppose any expansion of video lottery terminals in the state,” Winter said, “nor do we think legalizing illegal machines is a good idea. “
In his testimony Thursday, Robbins said the casinos were trying to protect their monopoly.
“This is an attempt to change the law to drive an otherwise legal competitor out of the market,” he said.
Since the United States Supreme Court struck down the federal law against betting on sports events in 2018, more than 30 states have legalized some form of gambling. These include all but Kentucky and Kansas among the eight states that border the Missouri.
Sen. Denny Hoskins, R-Warrensburg, is making his fourth attempt to add Missouri to the list. His bill would allow both in-person betting at casino sites and online betting through those casinos.
The casino’s net on bets would be taxed at 21%, like money earned by casinos on other games, but online sports betting would not pay the $2 fee charged to physically present players.
These fees, imposed when casinos were licensed along the Missouri and Mississippi rivers, are split between the Missouri Gaming Commission and the communities where the casinos are located. Any surplus from the state over and above the cost of operating the commission is dedicated to veterans and other programs.
For Hoskins, the question is whether Missouri will capture market share or see players who want to bet on sporting events spend their money in other states.
“Hopefully we can get something across,” Hoskins said. “There are 30 states with sports betting. We have all stakeholders on the same page.
A well-known voice in Missouri is against casinos offering sports betting without charging the $2 fee and raising it for the first time since casinos opened in the 1990s.
Bob Priddy, former Missourinet news director, wants fees to be adjusted for inflation and for casinos to pay them for any bet they handle, whether the bettor visits the casino or uses an online platform .
Priddy estimates an inflation-adjusted fee would be $3.67 and the $55.2 million in admission fees paid by casinos would have been $100 million in the last fiscal year. The net benefit of not indexing fees has been a $978.3 million benefit to casinos over the years, he said.
“We need to bring our 20th century gambling laws into the 21st century,” Priddy said. “The industry is changing and our laws are not.”
Priddy, a trustee of the State Historical Society of Missouri, said the ads used romantic riverboat gambling myths to sell the casino plan. Under current law, casinos must be physically surrounded by water and within 1,000 feet of the two major rivers.
If boarding fees aren’t adjusted for inflation, he said, he’ll push lawmakers to add 50 cents to promote a museum featuring artifacts from the steamship era. The steamer Arabia, which sank in the Missouri River in 1856, was salvaged in 1988 and the artifacts are on display in a Kansas City museum.
The owners of the property want to significantly increase the rent and the museum is looking to move. Priddy and others would like him to move to Jefferson City.
“The casino industry should be a financial partner,” Priddy said. “They capitalized on that legacy in 1992 when voters approved gambling on riverboats.”
Casinos oppose any increase in fees or the application of fees to sports betting made online, Winter said. They also want a tax of less than 21% on net receipts, he said.
“What you have to keep in mind is that sports betting is a low margin business,” Winter said. “If taxes and other charges are excessively high, it will limit our ability to compete with illegal bookmakers.”
The Missouri Lottery generated $345 million in revenue for state education programs last fiscal year. Hoskins is sponsoring one of the bills that would allow for an expansion of lottery operations to allow video lottery terminals in many locations and pull-pull games at all lottery retail sites.
Players could bet as little as a penny and up to $5, with prizes capped at $1,000. His bill would prohibit any company found guilty of violating state gambling laws from becoming a licensed seller of video lottery games.
That would rule out a company like Torch Electronics if it loses the criminal case in Linn County.
Hoskins has sponsored similar bills in the past. Last year it tried to combine provisions that would clarify that pre-revelation gambling was illegal, allow sports betting and allow video lottery. This made allies of anyone who opposed any of the proposals and it was rejected.
This year, Hoskins said, he wants to keep the proposals separate.
Both of Hoskins’ bills went to the Senate Appropriations Committee, chaired by Hegeman. Hegeman is in his final year in the Senate due to term limits, and he said in a December interview that his priority is pre-disclosure machinery.
He’s not sure if he wants to develop the game any further, Hegeman said.
“I’m not a big fan of gambling,” he said. “I just go back and forth.”
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