Illinois Gov. Signs Video Lottery Bill Into Law

Posted On: 7/15/2009

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Illinois Coin Machine Operators Association, Illinois Video Gaming Act, Ohio Coin Machine Operators Association, video lottery, slots, video poker, coin-op, amusements, taverns, coin-op news, operator-run video poker, lottery terminal, coin machine operator, gaming news

SPRINGFIELD, IL -- Facing a $9 billion budget deficit, Illinois Gov. Pat Quinn on July 13 signed HB 255, a hybrid bill that includes the Video Gaming Act, which creates a new video poker market under the auspices of the Illinois Lottery.

Quinn's signature follows lopsided votes in favor of the VGA by both the Illinois House and Senate last May. The bill's passage represents a historic victory for the Illinois Coin Machine Operators Association, which had sought a legalized market for video lottery terminals (VLT) over the two decades.

Despite the hard-fought achievement, antigambling forces are expected to attempt to repeal the Video Gaming Act in upcoming legislative sessions, according to Zack Stamp, a lobbyist for ICMOA. However, Stamp said he did not anticipate that lawsuits would be filed in an attempt to block the measure's implementation.

"You never know what surprises are coming; we just have to be prepared," Stamp said. He appeared confident that, regardless of what political or legal challenges may arise, the Video Gaming Act will be defended successfully and the market will go forward.

The actual launch of the state's VLT market may take up to one year, according to the Illinois Gaming Board. The legislature must first craft regulations and policies to govern its implementation. In addition, VLT machines must be designed, licensed and built. Finally, hundreds of Illinois businesses must undergo thorough investigations by state regulators before obtaining VLT business licenses.

Regulations call for separate roles for video poker manufacturers, distributors, operators, technicians and locations. The act permits up to five video lottery terminals to be installed in licensed bars, restaurants and truckstops, among other venues, that permit on-premise alcohol consumption. Some 21,000 Illinois bars and restaurants serve liquor.

While the VGA sets no maximum daily, weekly or monthly payouts by machines, it does cap cash winnings at $500 on a single play with a $2 bet maximum. VLT revenues will be taxed at 30%. Operators will collect 35% of adjusted gross receipts, and licensed establishments will receive 35%.

The gaming terminals are expected to generate $375 million in annual revenues for the state. If the maximum number of machines per location is installed, state revenue could represent an average $100 in taxes a day, by one VLT, on as many as 105,000 machines, each earning more than $300 per day in gross revenues.

Stamp said ICMOA has projected that the VLT market may comprise only 45,000 to 50,000 units. Many locations will not justify the installation of five machines, he said. If the market is limited to 50,000 units, then VT estimates that daily per-machine earnings would have to average $600 a day, systemwide, in order to achieve the state's revenue targets.

Under terms of the act, VLTs for the Illinois market must be brand-new, conform to state regulations, support connectivity, and be equipped with data tracking software. The cost of one machine to the operator could be between $12,000 and $15,000, Stamp said.

To participate in the Illinois VLT market, businesses must meet a state residency requirement or must have been doing business in the state for a specified minimum period of time.

The nonrefundable application fee is $5,000 for VLT manufacturers, distributors and operators, and $2,500 for components suppliers. Once a license is granted, each licensee must also pay an annual renewal fee. Annual fees are $10,000 for manufacturers and distributors, $5,000 for operators and $2,000 for component suppliers.

The Video Gaming Act is also designed to phase out existing video pokers. Law enforcement officials have long estimated that some 30,000 gray-area poker machines are operating in downstate Illinois alone. The new law requires that all amusement-only devices that currently have a valid state license shall remain legal for non-wagering use, but only for a limited time. Such devices may be operated until the sticker expires (June 1, 2010) or 30 days after the state's new VLT system becomes operational -- whichever is sooner.

A little-remarked provision of the bill also allows the state's citizens to go online and purchase lottery tickets from the Illinois Lottery, 24 hours a day. This market is not connected to the newly legalized video poker market.

Legalization of video poker under the state lottery remains a controversial issue in Illinois. The move is widely viewed as a way for the state to control and financially benefit from a previously illegal activity that is popular and widespread, yet difficult to stamp out. Operators view legalization as a matter of fairness for small businesses, since casinos are already legal in Illinois.

Ohio Governor OKs Racetrack Video Slots; OCMA Backs Bill

COLUMBUS, OH -- Gov. Ted Strickland signed an executive order on July 10 allowing seven Ohio racetracks to install up to 17,500 slot machines, labeled video lottery terminals, which will be regulated by the state lottery.

The move is part of a last-minute deal between the governor and the state legislature, which agreed to include legal definitions and regulations for the permitted slots in this week's budget bill. The slots are expected to raise $933 million in tax revenues over Ohio's next two-year budget cycle.

The Ohio Coin Machine Operators Association had hoped to see a slots bill passed that could be expanded to include the legalization of operator-run video poker in liquor-licensed locations. As an alternative, OCMA is now supporting an expected bill by Rep. Joe Koziura (D-Lorain) that will allow VLTs in 10,000 liquor-licensed establishments statewide.

Koziura will introduce the VLT measure this week, said OCMA executive director David Corey. The OCMA executive advises members to contact their state representatives and urge them to become co-sponsors of the VLT bill.

Corey said lawmakers have assured OCMA that Strickland's legalization of racetrack slots is the beginning -- not the end -- of negotiations for Ohio's future VLT market. The Democratic governor's executive order permitting racetrack slots will probably be challenged in the courts, Corey added.