Washington Slot Machine Law Suit 1994

  

Florida is Now the Center of Attention

The David Watkins case was brought up during a lawsuit between the state of New York and leading daily fantasy sports (DFS) sites. The reason why is because Washington is the only American state to have prosecuted a fantasy sports site.

“Here’s the Ticket”

There are currently 21 states that have enacted prize value per play limits (ranging in each of the states from 75 cents to $35) and the list keeps growing with 3 more states considering prize limiting legislation. The target in almost every case has been sweepstakes and Internet café gaming places, but traditional redemption and merchandise dispensing games have gotten entangled in the wide sweeping net of these new laws. In April Florida passed a law banning the gaming machines but redefined a slot machine in a very broad manner. In the past three months more than 1000 internet cafes and 200+ senior arcades have been closed across the state.

Breaking News— Everyone in the amusement game industry should be extremely concerned about the damage that the new Florida Gaming Law (Statute 551.102) with its ban on sweepstakes games, senior arcades (video gaming machines) and internet café gaming is causing. The intent of the law was to limit the value of a prize to 75 cents per game play and insure that games that issue prizes, tickets, receipts, or gift cards would ‘be held to a skill predominance standard.’ The new law also redefined a slot machine (gambling machine) in such a broad sense that could include several types of traditional redemption and merchandising dispensing games. Note that the lawful games are still only permitted in arcades with 50 or more games or truck stops’ and can only be operated by coins, according to previously existing Florida state law. A strict interpretation could mean that debit card systems may be illegal.

Machine

What happened next was logical–two of the senior arcade business through their attorney filed for a preliminary injunction in federal court to stop the enforcement of the new law and have the two facilities re-opened. The injunction was denied by a federal judge and law enforcement continues to force the closure of the many senior arcades and sweepstakes parlors throughout Florida.

What happened next is disturbing–The same attorney, now representing the Florida Arcade & Bingo Association and at least two Florida senior arcade businesses has filed a law suit against two Palace Entertainment owned Boomer’s FEC’s alleging that they are operating games that ‘were banned by the state’s recently enacted anti-sweepstakes law,’ according to the West Palm Beach Post.

The quotes that were reported by RePlay should be taken very seriously by the amusement industry:

“Listen, if senior arcades are subject to the new law, so is everyone else.”…”There’s no carve-out in the law for Boomers or Dave & Buster’s or Chuck E. Cheese or even Disney.” – Attorney Michael Wolf as quoted by West Palm Beach Post.

“Selective enforcement is illegal.”…”So grandma can’t win anything worth more than 75 cents, but her grandson can win an Xbox?” – Gale Fontaine, President, Florida Arcade & Bingo Association.

And now comes the ‘reason’ for the law suits — According to the Post, “The lawsuit was filed in hopes of forcing entertainment firms like Palace Entertainment, which owns Boomers, as well as other large FEC operators, to join the fight against the law.”…”We think when they come to the realization that the law does apply to them, they’ll be screaming bloody murder,” Wolf told the paper.He also stated that he will be filing more law suits against Florida FEC’s.

What this could mean:

This is the first time that TRR is aware of that the sweepstakes and senior arcade owners have filed lawsuits against owners/operators of traditional amusement redemption and merchandise dispensing games. The coin-op trade press refers to the sweepstakes and senior arcade games as ‘gray area games’ (sometimes as video slot machines) because in some states a model(s) were alleged to be legal while in other states that same game would be considered an illegal gaming machine. The traditional amusement game industry has taken a ‘hands off’ attitude towards the video slot games, as the manufacturers of these games continue to design their games to allegedly comply with the laws of individual states and challenge the laws where they felt they could win acceptance. TRR research shows at least one state is considering taxing a category of video slot games and explicitly making them legal. There are also legalized video lottery games in several states where game operators participate with the state and the locations where the games are placed. So it is not always clear to the public that traditional redemption and merchandise dispensing skill based games are entirely separate from video slot machines.

Look where this ‘hands off’ policy has brought us. Isn’t it logical that if video slot gaming is shut down in half the states, that these games will soon start showing up in other states? Doesn’t it follow that these new states will also impose prize limits as the ‘easy fix’ to ridding their state of these video slot games?

It is pretty late in the game but now that a line has been drawn in the sand between the video slot games and the traditional redemption and merchandise dispensing games, it is time for our industry to take a stand and fight for our ‘skill’ based games and make sure that our amusement industry is distinctly separated from the games of ‘chance’ games.

For more than two hundred years our state laws have used the term ‘predominantly’ to distinguish between games of skill and games of chance. Predominantly has always meant more than 50% but judges and jurists each have their own interpretation of the word. Some might feel that 90% skill and 10% chance is the definition of a skill game. In any case, it is much easier today to demonstrate if the outcome of a game is based on skill or chance by showing that a very skilled player can consistently win over an unskilled player. And we know who these very skilled players are because they have the most points or prizes won among our customers. We know that the huge majority of redemption and merchandise dispensing machines are skill based. Those few that may contain a small but noticeable element of chance can be modified to have a very low element of chance.

To fully grasp the above paragraph, we must understand that there is really no game to date that is 100% skill. Even an unskilled player can throw a basketball through the hoop once in a thousand attempts even if he/she is blindfolded. That one time event can be considered ‘chance’ or by another term, ‘luck.’

Yes, I believe the family entertainment industry in Florida will be screaming bloody murder when each FEC learns about the new law and about the lawsuits filed against the Boomers FEC’s. What I hope will not happen is that the skill game industry will join forces with the video slot industry to lobby together to get the law changed, as the video slot industry hopes will be the case. What I see happening once the FEC industry, Disney, and even the bowling industry realize that the new law was put in place as a simple means to shut down the non-legalized video slot industry in Florida, is that all of the skill based industry will come together and fight for ‘itself’ and its survival.

More Breaking News

On July 4th the Miami Herald reported that the same plaintiffs filed an identical lawsuit against Dave & Buster’s stating that the family entertainment center represents illegal gambling operations. The suit also contends that Dave & Buster’s and Boomers are ‘gambling houses’ and ‘public nuisances’ and challenges the constitutionality of the new law.

Attorney Michael Wolf told the Herald: The law is a lawyer’s haven, a lawyer’s orgasm. You’re going to see a lot more litigation before this is finished.”

Miami Herald:“Wolf’s strategy, he said, is to force the well-heeled chains, which so far haven’t been targeted by police and prosecutors seeking to enforce the law, to join forces with the senior arcades, which have been closed by the hundreds. He also thinks closing some of the broadly popular upscale video parlors will gin up public resistance to the law.”…“Abraham Lincoln said it best — the best way to repeal a bad law is to strictly enforce it,” he said.

What this could mean:

As the lawsuits continue against the traditional family entertainment centers and other sectors such as bowling centers, waterparks, mall game rooms, amusement parks, hotels, etc., it may be tempting to join forces with the Florida Arcade & Bingo Association to get the law repealed, but this may not be in the long term best interests of our skill based amusement industry. There is little doubt that the Florida lawmakers will amend the current law as the vast majority in the state of Florida desire to ban games of chance that include sweepstakes, internet gaming cafes, and video slot/poker machines. What we can work towards is that our industry has a seat at the table to make sure that predominantly skill based redemption and merchandise dispensing games are exempted, there is a reasonable minimum prize limit per play that increases over time, the 50 game minimum goes away, and that the games can be operated by coins, currency, debit card, credit card, or any other form of legal payment.
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And More Breaking News

A Philadelphia newspaper reports, ARCADE GAMES MAY AMOUNT TO GAMBLING – “A woman in California has sued [a] Denny’s restaurant which has an arcade section with games including the Claw. She says that by offering the Claw game, Denny’s is violating the gambling laws. The claim is that a game like the Claw isn’t a game of skill, it’s primarily a game of chance.”

“Unlike many other arcade games (e.g. Pac-Man, Skeeball, pinball, etc.) which require hand-eye coordination, concentration, and physical skill, the outcome of claw machines is based entirely or at least predominantly on chance. In other words, the player has no ability to control the outcome so under California law, where this lawsuit was filed – and under most other state laws – that meets the definition of gambling which is illegal. And it’s not just the Claw that could potentially be affected – games that require the player to insert money or tokens into the machine and offer the player a chance to win stuffed dolls, toys, or tickets to redeem for other prizes by luck and not by skill would fall into the same category.”

What this could mean:

It is obvious that the traditional amusement industry is going to be attacked in multiple states and in the press by state and even nationally as more lawsuits are filed. It took decades for amusement games to rebound from the period following prohibition when even pinball free play wins were outlawed in several states. Our industry then worked hard to educate the public that amusement games are completely separate from gambling machines. All that hard work may go down the drain. A pretty savvy politician, who knows the amusement industry, gives this advice: “This isn’t the first time your industry has been under attack and it won’t be the last. As long as you are commingled with the gaming and sweepstakes industry in the public eye, you will have these issues. You need to promote your Industry again to illustrate a clear delineation from these other industries. It will have to start by committing to skill based games.” This advice should be taken seriously. The FEC sector came alive when that sector evolved from the ‘arcade’ sector. The word arcade (as in arcade games) still has a negative connotation as it reminds the public of the time when they were dark places where teens hung out. Now the word is associated with senior arcade and the Florida Arcade & Bingo Association. The word arcade should no longer apply to our industry. Perhaps that is a starting point.

Almost all of the merchandise dispensing game manufacturers are on board and realize that they must submit their games for testing at an approved testing laboratory to have documentation that they are predominantly skill based games and not games of chance. This process is costly but it is a necessary step. TRR has seen one of the test results from a well-known amusement game manufacturer and it is quite impressive. TRR will be following all major developments with great interest.

Bullseye Distributing, LLC v. State, Gambling Com'n, 110 P.3d 1162 (Wash. Ct. App. 2005)

Court of Appeals of Washington


110P.3d1162 (2005)
No. 31584-0-II.

Court of Appeals of Washington, Division 2.

April 26, 2005.

Mark Anthony Wheeler, Evans Craven & Lackie, Patrick Mark Risken, Spokane, WA, for Appellants.

Paul O. Goulding, Olympia, WA, for Respondent.

PART PUBLISHED OPINION

ARMSTRONG, J.

¶1 Bullseye Distributing, LLC sought a declaratory order that the slot machine-like game in its sports card vending machine was a promotional contest of chance exempt from regulation by the State of Washington Gambling Commission. The Commission adopted an administrative law judge's determination that the game was a gambling device subject to regulation rather than a promotional contest. Bullseye appeals. Because the game meets at least one definition of 'gambling device' under RCW 9.46.0241, we affirm.

FACTS

I. Procedural History

¶2 In February 2002, Bullseye Distributing, LLC petitioned the Washington State *1163 Gambling Commission for a declaratory order that its Freespin II machine was a promotional contest of chance (PCOC), and not a gambling activity under Washington's gambling laws. The Commission referred the matter to an administrative law judge (ALJ) to develop the facts, hear argument, and enter an initial order.

¶3 The ALJ determined that the Freespin II was a gambling device under RCW 9.46.0241. The Commission adopted the ALJ's findings of fact, conclusions of law, and the initial declaratory order. The Thurston County Superior Court affirmed the Commission; Bullseye appeals to this court. It does not challenge any factual findings.

II. The Freespin II Machine

¶4 The Freespin II is a patented electronic vending machine designed to dispense collectible sports cards. The machine is also designed to emulate a casino's eight-line video slot machine. The machine is housed in a stand alone cabinet and has a video monitor display with three rows of three pictures and simulates slot machine play by aligning these pictures in winning or losing combinations when the game is played. It has a 'clear switch' that allows an operator to remove game credits, a bill acceptor,[1] and a port for dispensing the sports cards. The cabinet contains electronic devices that govern the machine's operation, including circuit boards that generate the video display and keep track of the number of cards sold, promotional points awarded, and any prizes won.

¶5 The video monitor displays the game's official rules and the game itself. The simulated video reels have pictures of fruits, bells, bars, and '7s' that align in winning or losing combinations when the game is played. The circuit board can be programmed to display other objects or characters, but the game's designer believed that the game must emulate the spinning fruit on casino slot machines as closely as possible in order to promote collector card sales. These alignments are determined by a pseudo-random number generator in the game software. The video display is generated by a specially designed circuit board with a 36-pin connector with harnessing equipment that allows monitoring of various meters, including one on the bill acceptor. The Freespin II emits the 'attractor' sounds associated with casinos.

¶6 The Freespin II may be played in two ways. A person may insert money into the machine's bill acceptor; for each dollar inserted, the person receives one sports card. The person receives 20 free play points for each card purchased. A person may insert up to $20 at one time. After receiving his card(s), the person may then enter the contest or walk away. If the person walks away, his play points remain in the machine and available for use.

¶7 A person may also play the game without purchasing a card by using a promotional play voucher. These vouchers may be obtained via mail from a Freespin distributor, by asking at a Freespin II location, from the internet, or by calling a toll-free telephone number. When a person presents a voucher, an attendant enters the play points into the machine. Vouchers are limited to one per person per day per location.

¶8 A person must play a minimum of eight points. They begin play by pressing a 'start' button. The machine then deducts the points played from the person's credits. If the person wins, the machine gives them the option to 'double down,' i.e., take the points they have won or to play again and double the winnings. Points won by playing the game are displayed in a 'prize pool' on a separate part of the video screen. Prize points can be converted back to play points if a person uses all of his available play points. If a person has fewer than eight play points remaining, they must purchase more cards or use a voucher to continue playing.

¶9 The Freespin II game is available only if the machine is stocked with cards; it becomes inoperable if it runs out because an interrupt circuit on the bill acceptor prohibits it from receiving money. If a person accumulates a predetermined target number of prize points, he has won the game and can redeem the prize target for cash or merchandise. Play and prize points are not redeemable *1164 at any other time or in any other circumstances. Once the prize target is reached, the person playing must either claim his prize or walk away; the prize points cannot be replayed.

¶10 At the hearing, Bullseye representatives demonstrated the Freespin II. The ALJ determined that RCW 9.46.0241, the gambling device statute, contained four independent definitions of 'gambling device' and that the Freespin II machine met three of these definitions.

ANALYSIS

I. Gambling Device or PCOC?

¶11 Because Bullseye has not challenged the agency's findings, they are verities. Hertzke v. Dep't of Retirement Sys., 104 Wash.App. 920, 927, 18P.3d588 (2001) (citing Davis v. Dep't of Labor & Indus., 94 Wash.2d 119, 123, 615P.2d1279 (1980)). But it argues that the Commission erroneously interpreted and applied the gambling device and PCOC statutes, RCW 9.46.0241 and RCW 9.46.0356.

¶12 Specifically, Bullseye argues that the ALJ (1) applied the wrong definition of 'consideration,' (2) erroneously interpreted RCW 9.46.0241 to include four separate definitions of 'gambling device,' and (3) erroneously concluded that the Freespin II machine is a 'gambling device' under three of these definitions. Bullseye's arguments about the definition of 'consideration' are relevant to the issue of whether the Freespin II is a gambling device under RCW 9.46.0241(1). We first consider whether RCW 9.46.0241 contains four definitions of gambling device or just one. If the statute contains four separate definitions, we must affirm the Commission if the Freespin II meets any one definition.

1. Standard of Review

¶13 Under the Administrative Procedures Act,[2] the party challenging the agency action bears the burden of demonstrating its invalidity. RCW 34.05.570(1)(a). When reviewing an agency's decision, we sit in the same position as the trial court and apply the appropriate standard of review in RCW 34.05.570 directly to the agency record. Brighton v. Dep't of Transp., 109 Wash.App. 855, 861-62, 38P.3d344 (2001) (citing Tapper v. Employment Sec. Dep't, 122 Wash.2d 397, 402, 858P.2d494 (1993)). We will grant relief if an agency has misinterpreted or misapplied the law — an issue we review de novo. RCW 34.05.570(3)(d); Thurston County v. Cooper Point Ass'n, 148 Wash.2d 1, 8, 57P.3d1156 (2002).

2. Four Definitions or One?

¶14 We give considerable weight to an agency's construction of a statute it administers. St. Joseph Hospital and Health Care Ctr. v. Dep't of Health, 125 Wash.2d 733, 743, 887P.2d891 (1995) (citations omitted). But courts have the ultimate authority to interpret statutes and will not defer to an agency's interpretation that conflicts with the statute. Waste Mgmt. v. Wash. Util. & Transp., 123 Wash.2d 621, 627-28, 869P.2d1034 (1994). The Commission is charged with administration and enforcement of Washington's gambling laws. See RCW 9.46.040;.070.

¶15 'Gambling' is defined as 'staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the person's control or influence, upon an agreement or understanding that the person or someone else will receive something of value in the event of a certain outcome.' RCW 9.46.0237. Under RCW 9.46.0241, a 'gambling device' is:

(1) Any device or mechanism the operation of which a right to money, credits, deposits or other things of value may be created, in return for a consideration, as the result of the operation of an element of chance, including, but not limited to slot machines, video pull-tabs, video poker, and other electronic games of chance; (2) any device or mechanism which, when operated for a consideration, does not return the same value or thing of value for the same consideration upon each operation thereof; (3) any device, mechanism, furniture, fixture, *1165 construction or installation designed primarily for use in connection with professional gambling; and (4) any subassembly or essential part designed or intended for use in connection with any such device, mechanism, furniture, fixture, construction or installation.

¶16 But PCOCs are authorized by the legislature and are not considered gambling. RCW 9.46.0356(2). These contests involve the elements of prize and chance, but not consideration. RCW 9.46.0356(1). A PCOC may not require that a person pay consideration or purchase merchandise to participate in the contest. RCW 9.46.0356(4)(a), (b). But the PCOC promoter may give additional entries upon the purchase of merchandise, provided the promoter provides an alternate entry method that does not require consideration. RCW 9.46.0356(4)(b). Unless authorized by the Commission, a gambling device may not be used in a PCOC. RCW 9.46.0356(6). Common examples of PCOCs include promotions that rely on sweepstakes, drawings, and instant win scratch-off or peel-off tickets.

¶17 Bullseye argues that RCW 9.46.0241 contains four elements that must all be met for a machine to qualify as a gambling device. Although the statute is not written in the disjunctive, we hold that it contains four separate definitions of 'gambling device.'

¶18 If the meaning of a statute is clear from its plain language, we give effect to that meaning. McGinnis v. State, 152 Wash.2d 639, 645, 99P.3d1240 (2004) (citing Fraternal Order of Eagles Tenino Aerie No. 564 v. Grand Aerie of Fraternal Order of Eagles, 148 Wash.2d 224, 239, 59P.3d655 (2002)). A statute is ambiguous if it is susceptible to more than one reasonable interpretation. McGinnis, 152 Wash.2d at 645, 99P.3d1240.

¶19 In certain circumstances, the conjunctive 'and' and the disjunctive 'or' may be substituted for each other if it is clear from the plain language of the statute that it is appropriate to do so. Mt. Spokane Skiing Corp. v. Spokane County,86Wash. App.165, 174, 936P.2d1148 (1997) (citing State v. Tiffany,44Wash.602, 604, 87P.932 (1906)). In Mt. Spokane, Division Three interpreted the following language in a former version of RCW 35.21.730(4), which concerned the powers of municipal governments:

Create public corporations, commissions, and authorities to: Administer and execute federal grants or programs; receive and administer private funds, goods, or services for any lawful public purpose; and perform any lawful public purpose or public function.

Former RCW 35.21.730(4) (1997).

¶20 Division Three rejected the argument that the public authority created by Spokane County had to perform all three functions listed in former RCW 35.21.730(4). Mt. Spokane, 86 Wash.App. at 174, 936P.2d1148.

¶21 Here, the different subsections of RCW 9.46.0241 begin with similar phrases, such as 'any device or mechanism' or 'any device' or 'any subassembly.' This language plainly refers to separate devices, each of which meets the remaining conditions of each subsection. If all the subsections of RCW 9.46.0241 referred to the same device, the legislature would have started the statute with 'any device' and then added the separate sections with only the additional qualifying conditions that make the device a gambling device. And the device would have to meet all the qualifying characteristics. But the legislature clearly specified three separate devices in subsections one through three and a separate fourth device that consists of the inner workings of devices one through three. We find RCW 9.46.0241 unambiguous in defining four separate devices, any one of which is a gambling device.

¶22 We next consider whether the Freespin II is a gambling device under at least one of the statutory subsections.

II. RCW 9.46.0241(1)

¶23 RCW 9.46.0241(1) defines 'gambling device' as

[a]ny device or mechanism the operation of which a right to money, credits, deposits or other things of value may be created, in return for a consideration, as the result of the operation of an element of chance, including, but not limited to slot machines, *1166 video pull-tabs, video poker, and other electronic games of chance.

¶24 Bullseye first argues that the ALJ should have used the definition of 'consideration' in the PCOC statute instead of the definition of 'thing of value' in RCW 9.46.0285. The Commission responds that the definition of 'consideration' in RCW 9.46.0356 is expressly limited to the PCOC statute. The Commission is correct.

¶25 RCW 9.46.0356(5)(a) provides:

As used in this section, 'consideration' means anything of pecuniary value required to be paid to the promoter or sponsor in order to participate in a promotional contest. Such things as visiting a business location, placing or answering a telephone call, completing an entry form or customer survey, or furnishing a stamped, self-addressed envelope do not constitute consideration.

(Emphasis added.)

Washington Slot Machine Law Suit 1994 Full

¶26 In contrast, RCW 9.46.0285 provides:

Washington slot machine law suit 1994 full
'Thing of value,' as used in this chapter, means any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise, directly or indirectly, contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.

(Emphasis added.)

¶27 Thus, the 'thing of value' definition applies to the entire chapter 9.46 RCW; the 'pecuniary value' definition of consideration applies only to the PCOC section. And in deciding whether the Freespin II is a gambling device, we look to the broader definition first. Otherwise we would have to assume the device qualifies as a PCOC device to apply the narrower definition. This would beg the question.

¶28 Applying the 'thing of value' definition, the ALJ reasoned that the play points obtained when one buys a sports card from the Freespin II are 'things of value' because they extended a service or privilege of playing the game without charge. See RCW 9.46.0241(1).

¶29 RCW 9.46.0285's 'thing of value' concept is similar to dictionary definitions of 'consideration.' For example, the definition of 'consideration' in Black's Law Dictionary is not limited to things of pecuniary value. It defines 'consideration' as '[s]omething (such as an act, forbearance, or a return promise) bargained for and received by a promisor from a promisee.' BLACK'S LAW DICTIONARY, (8th ed.) at 324. And because 'consideration' is not defined in the Gambling Act except in the statute applicable only to PCOCs, we may resort to such definitions. See Concerned Ratepayers Ass'n v. Clark County Pub. Util. Dist. No. 1, 138 Wash.2d 950, 959, 983P.2d635 (1999) (resort to dictionary definition proper where statute does not define the word).

¶30 Under the definition of 'gambling device' in RCW 9.46.0241(1), the play credits received after a person inserts a dollar may be used, by playing the Freespin II game, to create a right to money, credits, or other things of value, pending the result of the operation of chance. The original consideration is the money inserted in the machine, which results in a card being dispensed and an award of play points. A player receives the credits by inserting a dollar or by presenting a promotional voucher. If a person wins, he may attempt to increase his points by risking them with the double down feature. If the prize point target is reached, the person can redeem the points for cash and/or merchandise. The consideration actually exchanged in the attempt to create a right to money or a thing of value by the operation of chance is the chosen number of play points. Although they may lack pecuniary value on their own, these points fall within the definition of 'thing of value' because they extend the privilege of playing the game without charge. See RCW 9.46.0285.

¶31 The Commission rejected the argument that the 'no purchase necessary' option removes the element of consideration because accepting it would mean that one could combine the operation of any slot machine with the sale of a product, thus separating the consideration from the gambling device and marrying it to the product sale. *1167 And although a person could receive promotional play points without purchasing a sport card, it could not purchase a card without receiving play points. We conclude that the Commission did not err in finding the Freespin II to be a gambling device under RCW 9.46.0241(1).

Washington Slot Machine Law Suit 1994 1996

¶32 A majority of the panel having determined that only the foregoing portion of this opinion will be printed in the Washington Appellate Reports and that the remainder shall be filed for public record pursuant to RCW 2.06.040, it is so ordered.

We concur: MORGAN, A.C.J., and HOUGHTON, J.

NOTES

Washington Slot Machine Law Suit 1994 Topps

[1] The place to put money into the machine.

[2] Chapter 34.05 RCW.