Technically Not Slot Machines

The most important developments in the world of gaming devices are not the way the new machines look. Design is important, but it means nothing if you cannot legally operate the game.

Corporate mergers and announcements over the last year – GTECH's acquisition of Spielo, Alliance's of Sierra Design Group, IGT's Sodak launching Class II machines – show that major manufacturers and operators understand that there is going to be significant growth in the market of nontraditional slot machines.

The most interesting developments are the morphing of various forms of gambling into near-slot machines. Most attention has been given to Class II games, bingo and pull-tabs, which are played on linked video gaming devices. But other historically distinctive types of gambling can also be played on a video screen, including lotteries and fixed odds and parimutuel wagering.

Necessity, more than technology, is the mother of these inventions.

Most tribes are in states like Oklahoma, without compacts, and thus are prohibited from operating Class III games. But, even in states with compacts, like California, there is usually a cap on the number allowed, or a requirement of revenue sharing or other state regulation of Class III games.

Tribes sometimes face other restrictions. In Washington state, tribes could not get slot machines, but were able to negotiate compacts allowing them to operate lottery devices. Many of those Class III lottery devices are modified Class II bingo machines, which play like traditional slots.

Charities, feeling the pinch of tribal competition, are prohibited almost everywhere from operating slot machines. But they can play bingo and sell paper pull-tabs. In a few states, charities are beginning to win the right to have their bingo games played on linked video gaming devices and their paper pull-tabs dispensed by machines with coin slots and video screens, just like tribes.

Lotteries have been pushing for video lottery terminals for years. These sometimes require an amendment of the state constitution, as in South Dakota. At other times, authorization has come from the state Legislature, as in West Virginia, or sometimes from only the lottery commission or state attorney general. In Rhode Island, VLTs have evolved over the years from lottery-like games to machines that show three reels and take and pay money, although technically there are no actual "slot machines."

Racetracks have been hard hit by competition from tribal casinos. Tracks fought back by installing true slot machines, when they were able, and VLTs, when it appeared they were the only alternatives.

Now, new gaming devices are appearing at both dog and horse tracks: linked video bingo, but also new parimutuel machines. Arkansas, Wyoming, and Oregon have approved parimutuel gaming devices, which, in their first generation, displayed tapes of historic races. The most recent versions use animations usually seen only in casinos.

Again, statutory limitations may force operators who are allowed to have true slot machines to turn to near-slots. Tracks in New Mexico, for example, may have up to 750 slot machines, even though their markets could support hundreds more.

In England, betting shops, hit hard by the introduction of the U.K. Lottery, are rightfully afraid of the pending adoption of the Budd Report's recommendations, including lifting the present limit of 10 slot machines per casino. Betting shops responded first by creating non-lottery lotteries and then with fixed-odds terminals, which accept coins.

The one common element to all of these inventions is the drive to have gaming devices that play like modern slot machines, without actually being slot machines. Video bingo machines, for example, now can display the exact same symbols as casino slot machines, but the actual game being played must meet the legal definition of bingo.

Changes in the law allowing slot-like play of non-slot games are occurring haphazardly at all levels of the legal system.

Sometimes a machine is introduced and accepted informally by the relevant law enforcement agency. After all, if the cop on the beat says it is OK, who is going to say it is illegal?

Because the penalties for illegal gambling are so severe, more formal approvals are usually sought.

Gaming regulators are the easiest to approach, not only because it is their job, but because they know the way things work, in practice as well as in theory. For example, the state racing boards that approved the introduction of coin-operated parimutuel gaming devices understood that many tracks are in deep trouble. Regulators' first duty should always be to protect the general public. But, it would be a poor regulator who let the very industry he is policing die from being unable to meet new competition.

On the federal level, the National Indian Gaming Commission has been influential far beyond the fairly limited power it was given in the Indian Gaming Regulatory Act. Definitions laid down by the NIGC for what is a Class II gaming device are being adopted, or at least given serious consideration, by regulators and operators of charity bingo halls and racetracks.

The NIGC at first issued regulations that stifled the growth of Class II machines. It held that the Johnson Act, the federal anti-slot statute, applied to all Indian gaming. The federal Department of Justice agreed. Manufacturers and tribes filed court challenges, some failing, but some succeeding. Eventually, the 9th and 10th Circuit Court of Appeals, which contain a large number – probably a majority – of the federally recognized Indian tribes in the nation, ruled that if a game is truly bingo, it can be played on linked video gaming devices. The courts rejected applying the Johnson Act to Class II games, because the Johnson Act has such a broad definition of what constitutes a gaming device that it could conceivably outlaw bingo blowers.

With recent decisions, the NIGC has now become a major force for innovation. In 2002, it completely revised its regulations to conform with the Court decisions. Then, in late 2003, it issued letter opinions of particular gaming devices and what it called "Guidances."

The Department of Justice is now standing almost alone in trying to turn back the tide of non-slot slot machines. The DOJ does not agree that Class II bingo and pull-tab games can be played on devices that look and play like slot machines. There is even talk that the DOJ will sue the NIGC. I have never heard of one federal department suing another, but I suppose anything is possible.

Even if the DOJ succeeds in its fight with the NIGC, it will not stop the development of new gaming devices. There are too many interested parties who want to, and need to, use modern technology to design around outdated laws.

Professor I. Nelson Rose is recognized as one of the world's leading authorities on gambling law. His website is www.GamblingAndTheLaw.com.