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Iowa's Touchplay Market Collapses; Operators Say They'll Sue

Posted On: 7/4/2006

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DES MOINES, IA -- Iowa's 6,400 gambling-type TouchPlay machines went dark on May 4, despite last-minute pleas, lobbying efforts and lawsuits by equipment operators who have spent millions of dollars buying machines in good faith that they were participating in a legal market.

The Iowa Legislature adjourned on the same day the shutdown took effect, without passing any reprieve for operators. The House had approved delaying the ban until Sept. 1, but the Senate refused to consider it. Operators meanwhile filed lawsuits in numerous federal district courts asking judges to issue emergency injunctions to freeze the ban. Without exception, all the judges who heard these cases responded with rulings that amounted to saying, in effect: "Tough luck, buddy."

In the wake of the shutdown, many former TouchPlay operators were "considering bankruptcy," according to the Des Moines Register. Some operators say they plan to sue the state for damages. The Register quoted Bob Lentz of Bob's Amusement Co. (Altoona) as saying he'd spend "every last penny" on such a lawsuit. Lentz also told the paper that he's "in shock" and is considering bankruptcy, unable to pay the $180,000 owed on 30 TouchPlay machines. The Iowa state attorney general's office had no comment on the possibility of such lawsuits.

Lentz is not alone. Hawkeye Commodity Promotions (Cedar Falls) invested $5.7 million for 724 TouchPlay machines placed in more than 200 locations. Operators collectively spent a reported $70 million on TouchPlay machines, and the state was expected to receive $45 million in taxes from TouchPlay earnings next year.

Hawkeye was one of several companies filing a lawsuit that failed to stop the ban. Co-plaintiffs in another unsuccessful case were J&B Amusement Co. (Atlantic), Bob's Amusement (Altoona), and B&B Games (Ankeny). In the latter case, Polk County District Judge Glenn Pille issued one of the last rulings upholding the May 4 ban.

Explaining his decision, Pille agreed that operators would be financially "devastated" by the shutdown. But because there was no binding contract between operators and the Iowa Lottery, he said that operators would find it difficult to establish in any trial that the state blocked parties from executing legal contracts. He added that they would also find it difficult to prove that the state had unlawfully seized private property without due compensation, or had taken away fundamental constitutional rights, including rights to due process, equal protection under the law and the power to seek redress of grievances.

According to the Sioux City Journal, Iowa attorney general Tom Miller said the court applied the law properly and made the correct decision.

The Iowa Legislature approved TouchPlay machines for operation in 2002. Last year, the state lottery commission expanded the allowable locations from taverns and adult clubs to commercial locations, some of which are frequented by children and families. This created public outcry that prompted the legislature to declare the machines illegal in March of this year. Gov. Tom Vilsack signed the bill outlawing the devices that same month.

Observers commented that Iowa's TouchPlay fiasco is only the latest retelling of an old story: uncontrolled greed that results in killing the goose that laid the golden eggs. The Register quoted operator Lentz as saying: "Certain people got greedy...and all of a sudden the machines were all over the place. They were putting them in ice cream places and Laundromats and they just don't belong in places like that...We had a nice supplement to our existing business, and now we have nothing."

However, at least one source close to the situation put the blame squarely on Iowa's powerful casino industry. According to Mike Triplett, a lobbyist for TouchPlay manufacturer Bally Gaming Systems, Iowa's casinos generate $1 billion annually and did not want to risk having leisure revenues siphoned away by gambling devices in street locations. "The casinos decided that was not something they wanted to compete against," Triplett told the Register.

Gambling opponents claimed, incorrectly, that their victory in Iowa was the first statewide shutdown of a previously legal gaming market. In point of fact, South Carolina allowed the operation of a multi-billion dollar video poker market for several years before shutting it down in 2000.