Lawmakers renew debate on illegal gaming, sports wagering in Missouri

The annual battle over what is and what is not an illegal gambling machine began Thursday with a Senate committee hearing on a bill to ban “pre-reveal” games that have proliferated throughout the state.

While several prosecutions are pending and at least two have been resolved with guilty verdicts, many prosecutors are reluctant to file charges — and some do not think the games are illegal at all.

State Sen. Dan Hegeman, who is leading the effort in the Senate for the second year, told the Government Accountability and Fiscal Oversight Committee Thursday morning that he’s convinced legislation isn’t needed for prosecutors to act.

He pointed to the fact that a gambling company was convicted, fined and had their machines destroyed in Platte County last year.

“The conviction, lack of appeal and destruction of games in Platte County have taken away any impression that these games are legal,” Hegeman said.

But lobbyist Tom Robbins said the Hegeman’s bill is intended to put one of the main vendors of games in the state, Wildwood-based Torch Electronics, out of business. Torch games are legal, Robbins argued, because a player can find out if they will win the next game before they put any money into the machine.

“Our games are not gambling devices because they are not games of chance,” Robbins said.

The games found to be illegal in Platte County required a player to deposit money before learning whether they win or lose, Robbins said.

That argument didn’t convince Sen. Bill White, R-Joplin.

“It is a rather loose and fictitious argument to say this is not a game of chance,” White said. “People who sell pot could be considered a small business and it is illegal under our statutes.”

Torch faces prosecution in Linn County for felony promotion of gambling and is suing the state in Cole County Circuit Court in an effort to get a judicial declaration they are operating legally.

The company is also a significant political contributor, giving $350,000 in June into six political action committees tied to its lobbyist Steve Tilley, a former House speaker who is close to Gov. Mike Parson.

Robbins, who works with Tilley at Strategic Capitol Consulting, told the committee that the bill unfairly targets Torch, and other provisions in Hegeman’s bill that would strip liquor licenses from retailers that host the machines would force layoffs at those businesses.

“It is drafted, designed and targeted to put a single, family-owned business out of business,” he said.

The committee did not vote on Hegeman’s bill Thursday.

Hegeman’s bill is just one of several that would change the landscape of gambling in the state. Bills have also been filed to allow sports wagering through the state’s 13 licensed casinos and to allow the Missouri Lottery to place “video lottery terminals” in truck stops and the facilities of not-for-profit groups like veterans and fraternal organizations.

There is a non-legislative push to expand gambling from the Osage Nation, which wants to establish a casino at the Lake of the Ozarks in central Missouri. Tilley and his firm are also lobbying for the Osage Nation.

Pre-reveal games

The games offered by Torch Electronics and other vendors designated as “no chance gaming” or pre-reveal machines look like electronic slot machines that take up most of the space in traditional casinos.

Each machine typically offers a variety of games and bets can be placed for 50 cents or more.

It is illegal to operate a slot machine outside of a legal casino, where state taxes take 21 percent of the net and pay a $2 fee for every two hours that a gambler is on the casino floor. There is no reliable information about how many of the machines offered by Torch and others are operating in the state, but estimates place the number as high as 20,000.

When a player puts money in a slot machine at a casino, they have no way of knowing the outcome of the next spin. The only assurance they have that they may win is the state law that requires the machines to pay out at least 80 percent of the money deposited.

In the fiscal year that ended June 30, gamblers deposited $15.3 billion into slot machines at Missouri casinos and received back about 90 percent, netting the casinos about $1.5 billion.

With no state regulation, there is no accounting for money placed in the pre-reveal games and no minimum return to players.

The pre-reveal game vendors believe they found a loophole because a player can know the outcome of every spin before their money is spent. If it is not a winner, they can take money back out of the machine or switch games, looking for one ready to pay.

With only a handful of prosecutions, and no appellate court precedents since 1913 on whether that game design is legal, the games have proliferated.

The Missouri Gaming Association, which represents the legal casinos, supports Hegeman’s bill and opposes any attempt to replace the pre-reveal games with video lottery devices, lobbyist Mike Winter said.

“We have been consistent over the last few years that we are opposed to any expansion of the video lottery terminals around the state,” Winter said, “nor do we believe that legalizing illegal machines is a good idea.”

In testimony Thursday, Robbins said casinos are trying to protect their monopoly.

“This is an attempt to change the law to remove an otherwise legal competitor from the market,” he said.

Sports wagering

Since the U.S. Supreme Court struck down the federal law against wagering on sporting events in 2018, more than 30 states have legalized some form of the gambling. Those include all but Kentucky and Kansas among the eight states that border Missouri.

Sen. Denny Hoskins, R-Warrensburg, is making his fourth attempt to add Missouri to the list. His bill would allow both in-peron wagering at casino sites and online wagering through those casinos.

The casino’s net on the wagers would be taxed at 21 percent, like the money won by casinos from other games, but the online sports books would not pay the $2 fee charged for players who are physically present.

That fee, imposed when casinos were authorized along the Missouri and Mississippi rivers, is split between the Missouri Gaming Commission and the communities where casinos are located. Any surplus in the state’s share in excess of the cost of operating the commission is dedicated to veterans and other programs.

For Hoskins the question is whether Missouri will capture a share of the market or see gamblers who want to wager on sporting events spend their money in other states.

“Hopefully we can get something passed,” Hoskins said. “There are 30 states with sports books. We have all the stakeholders on the same page.”

A well-known Missouri voice is raising objections to allowing the casinos to offer sports betting without charging the $2 fee and for increasing it for the first time since casinos opened in the 1990s.

Bob Priddy, formerly the news director for Missourinet, wants the fee adjusted for inflation and for the casinos to pay it for any wagering they handle whether the bettor visits the casino or uses an online platform.

Priddy estimates that an inflation-adjusted fee would be $3.67 and the $55.2 million in admission fees paid by the casinos would have been $100 million in the most recent fiscal year. The net benefit of not indexing the fee has been a $978.3 million benefit to the casinos over the years, he said.

“We need to bring our 20th century gambling laws into the 21st century,” Priddy said. “The industry is changing and our laws are not.”

Priddy, a trustee of the State Historical Society of Missouri, said advertisements used the romantic myths about riverboat gambling to sell the plan to establish casinos. Under current law, the casinos must be physically surrounded by water and within 1,000 feet of the two major rivers.

If the boarding fee isn’t adjusted for inflation, he said, he will push for lawmakers to add 50 cents to promote a museum displaying artifacts from the steamboat era. The steamboat Arabia, which sank in the Missouri River in 1856, was recovered in 1988 and the artifacts are on display in a Kansas City museum.

The owners of the property want to vastly increase the rent, and the museum is looking to relocate. Priddy and others would like it to move to Jefferson City.

“The casino industry should be financial partners,” Priddy said. “They capitalized on that heritage in 1992 when voters approved riverboat gambling.”

The casinos oppose any increase in the fees or applying the fees to sports wagering conducted online, Winter said. They also want a tax lower than 21 percent on the net receipts, he said.

“What you have to keep in mind is that sports betting is a small margin business,” Winter said. “If taxes and other fees are excessively high, it will limit our ability to be competitive with illegal bookmakers.”

Video lottery

The Missouri Lottery produced $345 million in revenue for state education programs in the most recent fiscal year. Hoskins is sponsoring one of the bills that would allow an expansion of lottery operations to authorize video lottery terminals in many locations and pull-tab games in all lottery retail sites.

Players could bet as little as one cent and as much as $5, with prizes capped at $1,000. His bill would prohibit any company convicted of violating state gambling laws from becoming an authorized vendor of video lottery games.

That would exclude a company like Torch Electronics if it loses the criminal case in Linn County.

Hoskins has sponsored similar bills in the past. Last year, he tried combining provisions that would clarify that pre-reveal games were illegal, authorize sports wagering and allow video lottery. That made allies of anyone opposed to one of the proposals and it was defeated.

This year, Hoskins said, he wants to keep the proposals separate.

Both of Hoskins’ bills have been assigned to the Senate Appropriations Committee, chaired by Hegeman. Hegeman is in his last year in the Senate because of term limits and he said in a December interview that his priority are the pre-reveal machines.

He’s not sure he wants to expand gambling any more, Hegeman said.

“I am not a big fan of gambling,” he said. “I just go back and forth.”

Missouri Independent is part of States Newsroom, a network of news outlets supported by grants and a coalition of donors as a 501c(3) public charity. Missouri Independent maintains editorial independence.

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