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Issue Date: Vol. 52, No. 10, October 2012, Posted On: 9/25/2012

Texas Increasingly Winks At Eight-Liner Gambling While Collecting Millions In License Fees

Marcus Webb
TAGS: Texas gambling machine, prize video games, 8-liner games, eight-liner operators, Austin American-Statesman, gambling machine license, illegal gambling device, gray area gambling, Amusement and Music Operators of Texas, risk-reward game, Dave & Buster's, redemption game, prize game, prize vending

AUSTIN, TX -- For more than a decade, Texas has collected nearly $10 million a year in license fees from eight-liner operators. Now a growing number of city and county governments in south Texas are getting into the act, according to a recent series of stories and editorials in the Austin American-Statesman.

Eight-liners have earned nearly $600,000 this year alone for Duval County; $800,000 for the city of Gregory; about $500,000 for Zapata County; $100,000 for the city of Sinton; and $175,000 for the city of Taft, according to the paper.

County and city fees on eight-liners in these jurisdictions range from $500 to $1,000 a machine.

According to a 2003 ruling by the state Supreme Court, eight-liners are legal for amusement purposes only in the Lone Star State. But many operators illegally offer cash prizes, knowing that enforcement is spotty at best.

Eight-liners in Texas were estimated to be a $2 billion a year business in a 2004 study by the Texas Lottery Commission.

As official tolerance grows for eight-liner gambling with cash prizes, so does the apparent size of the sector itself. Eight-liner gamerooms are opening in some jurisdictions with hundreds of machines per venue and some locations are generating $300,000 per week, said the Statesman.

Occasional efforts are made in the state Legislature to legalize cash payoffs for eight-liners, or to outlaw the machines entirely. But so far, both types of measures have always been defeated.

Legalization efforts reportedly fail, at least in part, because out-of-state gambling interests mount costly lobbying campaigns, designed to persuade Austin lawmakers to oppose legalization. Keeping it unlawful to pay cash prizes for eight-liners helps reduce competition for gambling dollars in the region. Texas is adjacent to Oklahoma and Louisiana, where casino gambling is legal.

A strong religious lobby also opposes eight-liner gambling legalization.

Efforts to outlaw eight-liners entirely fail for several reasons, it appears. The most important is money: no one appears eager to turn off the tax revenue spigot that is generating tens of millions of dollars for state and local governments.

According to the Amusement and Music Operators of Texas, as far back as 2003 the state was raking in as much as $60 million a year when sales taxes on eight-liner prizes were taken into account, in addition to per-machine license fees.

As recently as two years ago, the state government was running some $4 billion in the red, making eight-liner tax revenues especially valuable to public officials.

The Texas state government expects to see a record surplus of tax revenues this year due to skyrocketing profits in the oil and gas industries. But the notoriously boom-and-bust nature of these resource-based businesses means that state tax revenues remain unreliable and unpredictable … and that eight-liner tax revenues continue to be welcome in Austin.

Meanwhile, many rural counties and cities in Texas have a weak local tax base, prompting a growing number of lower level officials to turn a blind eye toward illegal gambling that generates local revenues.

Finally, another reason that some legislators are reluctant to change Texas gambling laws is confusion over the distinction between gambling and legitimate amusements, including such risk-reward games as redemption and merchandisers.

New regulations could increase the complexity of the law and add to confusion over its enforcement -- potentially causing harm businesses like Dave & Buster's, the national location-based entertainment chain headquartered in Dallas. Neither lawmakers nor AMOT wish to see such an outcome.

Whatever the reasons for the ongoing impasse on eight-liner gambling in Texas, "It's a safe bet that nobody at either the county or state level will be rushing to enforce the [current] law," concluded the Statesman.

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