Proposal to authorize video gambling machines draws mixed reviews in state House committee
Bill would legalize, regulate private “lottery” and “sweepstakes” machines for the first time
House Bill 512 is designed to regulate the illegal video gaming machines that have proliferated across the state. (Photo: Clayton Henkel)
Representative Harry Warren (R-Rowan) has been trying for more than a decade to address the proliferation of video gambling machines that can be found in bars, restaurants and “sweepstakes parlors” across the state. Warren hopes this year with House Bill 512, he’s found a winner.
The “Forgivable Loans/HBCU Supplemental Funding” bill, first discussed Tuesday in the House Commerce Committee, would direct the state Lottery Commission to regulate video gambling (sometimes referred to as “lottery” and/or “sweepstakes” games) that would be tracked and regulated in authorized locations. The manufacturers of the video terminals, licensed operators, and retail locations would pay a per machine tax with the revenues deposited in the General Fund.
The revenue would then be divided in four ways:
- $12 million for six UNC institutions ($2 million each annually),
- $10 million to independent HBCUs,
- $1 million for the state Department of Public Safety to combat illegal gambling, and
- The remaining amount would provide forgivable loans for community college students.
Warren said past efforts to crack down on illegal video gambling have been unsuccessful. Every time the General Assembly has passed a law that defines what is illegal, the industry changes the game or the software it uses.
“But the real reason that these things flourish is because people play them. If there were no money in it, they would not be in business,” said Warren.
Warren believes by creating a new system under the control and oversight of the North Carolina Lottery Commission, with the state Alcohol Law Enforcement Division serving as the primary oversight authority, many of the current video terminals would be regulated out of existence.
“When implemented, a total number of legal certified video gaming terminals in the state would be about 65% or so less than what’s currently operating illegally in the state,” explained Warren.
“We’re going to have to be able to make the case that this is going to be better control,” said Rep. Frank Iler (R-Brunswick County) “I know it’s a secretive thing, any numbers today and any numbers estimated under this bill it’s going to reduce?”
“Over the nine years I’ve been working on this, I’ve had estimates range from 60,000 to over 100,000 or just about 100,000 machines out there,” offered Warren.
Tempering ‘the Wild West’
As Newsline has reported on multiple occasions over a period of several years, the video gambling/sweepstakes industry has a long, controversial and, at times, shady history in North Carolina.
Rep. Jay Adams, a leading voice against a bill under consideration during the current legislative session to legalize online sports gambling, said he inadvertently walked into a video gambling set-up at a gas station and was taken aback by the patrons.
“I walked in to see if I could just pay for my fuel. And there are people sitting around these machines completely mesmerized, almost hypnotized. I left. I didn’t need gas that bad,” the Catawba County Republican told his colleagues. “So, the point I’m saying I guess is I’ll work with you on this to do whatever we can do to make this a stronger bill if we can.”
Rep. Deb Butler (D-New Hanover Co.) had her own ideas for making the bill stronger.
“Many other states do tax this, garner revenue at a higher rate, upwards of 50% even. Have you thought about taking a bigger piece of this pie?”
Rep. Warren said 40% seemed like a reasonable amount.
“We don’t want to stifle the industry while we’re controlling it. We do want to control it and temper it. And we’ll rein it in from the Wild West that it is now.”
Regulating ‘the crack cocaine of gambling’
The promise of greater regulation and money for higher education was not enough to persuade John Rustin, head of the NC Family Policy Council, who spoke against the bill Tuesday.
“Video gambling is known as the crack cocaine of gambling because it is so addictive,” said Rustin. “These machines and games are professionally designed to keep people playing as long as possible. And don’t forget, under the lottery, it’s our state government that is promoting and operating a gambling enterprise for the purpose of separating our citizens from their hard-earned dollars.”
Reverend Mark Creech of the Christian Action League also rejected the promise that the state’s lottery commission could regulate the machines and provide a substantial contribution to education funding.
“North Carolina education lottery has fallen significantly short of the expectations that we were promised,” said Creech. “If the lottery were a person working for state government, he would have been fired for poor performance. Yet this bill asks us to keep investing in something because it’s here and we’ve invested considerable time, money, and effort already spent, even though doing so is most likely not the best action moving forward.”
Two former lawmakers turned lobbyists – Patrick Ballantine and Mike Hager – urged legislators to approve Warren’s legislation.
“This bill sets a framework for the industry to become legitimate and fix the issues in the sins of the past, so to speak,” said Hager.
David Powers, a member of the UNC System Board of Governors who is also a registered lobbyist with clients in the gaming industry, said he was there to speak only as a private citizen.
“If you’re going to deal with the illicit games that are out there, the only way to do it successfully is to set up a regulated regime that is trackable by the state that is regulated consistently statewide.”
Members of the House Commerce Committee could vote on Warren’s bill the next time they convene.
On Wednesday afternoon, the Senate Commerce Committee will take up a separate bill that would legalize mobile sports betting. That bill has already made its way through the House.
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