By Rudi Keller
But opponents of a bill, which was debated by the House Emerging Issues, said legalizing video gambling in convenience stores, bars and fraternal halls would drain money from poor communities and create other problems that would outweigh any benefits.
For nearly a decade, what vendors call “no chance gaming” has survived massive enforcement efforts by the Missouri State Highway Patrol and local governments by filing lawsuits and stretching out criminal prosecutions. Part of that effort has been massive political contributions that at one point forced then-Attorney General Andrew Bailey to withdraw from defending the highway patrol in a lawsuit challenging its enforcement efforts.
Tolerance of the machines is growing thin in some communities. Springfield successfully defended an ordinance banning the machines, and Kansas City has followed suit with an ordinance banning them as a public nuisance and health hazard.
“For years, we were patient and we waited, but we’ve had enough,” Shannon Cooper, a lobbyist for Kansas City, said in testimony to the committee Tuesday night.
Under the latest plan to legalize video lottery terminals, state Rep. Bill Hardwick, a Republican from Dixon, wants to put the Missouri Lottery in charge of the games, require licenses for all retailers and vendors, and tax the profits after prizes at 34%.
Of that tax, 31% is for state education programs, split between public schools and higher education and 3% is for local governments. The official estimate is that the taxes could generate $291 million for education programs within two years, with licensing and other fees generating $55 million more for veterans programs.
Smaller amounts would be set aside to provide pensions for elected county prosecutors and support a new enforcement bureau in the attorney general’s office.
The question before lawmakers, Hardwick told the committee, is not whether there will be gambling in retail locations, but whether it will be regulated and taxed.
“There’s gaming all over the state right now, various types of games,” Hardwick said. “There’s what you call the gray machines, and no chance machines. There’s also just illegal slot machines operating. In the state of Missouri, this gaming is happening throughout the state with no rules regulations.”
Opponents of the bill argued that enforcement of current law, and perhaps a stronger law banning the games, would solve the problem.
“The General Assembly should not reward illegal activity by acting to make that activity legal after the offender has continually exploited the market,” said Ray McCarty, executive director of the Associated Industries of Missouri.
'Gray market'
They have come to be called “gray market” machines because the vendors argue that feature means they do not violate Missouri anti-gambling laws.
The argument has started to crumble. In October, a federal jury ordered Wildwood-based Torch Electronics, the biggest vendor of the games in the state, to pay $500,000 to a competitor that provides traditional arcade games for unfairly forcing them out of 20 locations.
The jury found that the Torch games fit the state’s definition of an illegal gambling device.
And Attorney General Catherine Hanaway, who replaced Bailey after he was appointed to a top FBI job, told Missourinet that she intends to crack down on the machines.
Platte County Prosecutor Eric Zahnd scored the only felony conviction of a “gray market” game vendor in 2020. On Tuesday night, he testified in favor of Hardwick’s bill because no other prosecutor has followed up on that success.
“The law today, sadly, just doesn’t work,” Zahnd said.
Constitutional questions
In testimony Tuesday, committee members were told by one attorney that by giving responsibility for the games to the Missouri Lottery, the bill would fit in the constitutional exceptions.
“This is a constitutional bill, period,” said Scott Pool, a lawyer from Jefferson City.
The key element of an unconstitutional game is that there is no element of skill needed to play and nothing the player can do will enhance their chances of winning. When Missourians first approved casino gambling by statute, courts ruled games like poker or craps were games of skill, and therefore legal, while slot machines violated the lottery ban.
Only a second vote, on a constitutional amendment providing an exception, allowed the casinos to offer slot machine games.
The constitution also earmarks all tax proceeds from gambling to education programs. Casinos generated $363 million for education programs in fiscal 2025 and the lottery provided $337 million.
No revenue figures are yet available for sports wagering, launched late last year after voters approved a 2024 constitutional amendment.
Attorney Marc Ellinger, speaking for casino lobbying group the Missouri Gaming Association, said Hardwick’s bill violates the ban on laws authorizing games of chance. And, he added, it unconstitutionally diverts money from education by adding a tax for local needs.
“It cannot survive under the precedent of the Missouri Supreme Court, under the express words of the constitution,” he said.
How it would work
Hardwick’s bill would impose requirements similar to those on casino slot machines and lottery retailers who sell physical lottery tickets.
Like casino slot machines, the games would have to return at least 80% of the money bet as prizes. Casino profits are taxed at 21%.
Records produced at the federal trial showed Torch games returned about 65% of money wagered as prizes. That money is taxed as ordinary income.
Retailers would be given a year to transition from the gray market games to machines licensed by the Missouri Lottery. The machines currently in place would be removed, in part because only machines connected to the lottery’s computer system to monitor play would be legal after the year expired.
The current machines do not have that capability.
No retailer who currently has gray market machines would be excluded from being licensed as a video lottery retailer.
“That allows us to get rid of the gray machines, replace it with the licensed program, and we can still have a non-interruption in business,” Hardwick said.
He said he would be open to changes but he wants to protect the revenue of retailers who have come to depend on the money generated by the machines.
“I want your views about what you think is fair and not fair, from the small business owners point of view, from the point of view of businesses who have not participated in the gray market, from the point of view of our schools, of our police, of our veterans,” Hardwick said. “I want it to be something that’s a fair and just bill, and I know that it’s a really complicated bill.”
The bill would require retailers to put all the games in a designated location on their premises, divided from other business operations, with video surveillance and monitoring to make sure no one under 21 plays.
In past years, the legislation required that area to be enclosed and off-limits to non-players.
The loosening of those restrictions raised questions among committee members. State Rep. Josh Hurlbert, a Republican from Smithville, described what he saw when he was taking his young children to Poplar Bluff for the eclipse last year.
During a restroom stop, he said he saw a child sitting in front of one of the games.
“That kid wasn’t playing,” Hurlbert said. “He was sitting at it, watching. But that is probably something we don’t want to encourage, either.”
He made an excuse about needing to keep on the road rather than explain the machines were gambling devices when one child asked to play, he said.
An entirely separate room could be financially impossible for small retailers, Hardwick said.
“If a small business has to have a separate space, and an inability to get a construction project funded, they are disadvantaged.” Hardwick said. “So I’d like to come up with wording that doesn’t necessarily disadvantage them, that gets after the social problem.”
Communities that don’t want video lottery could, under the bill, pass ordinances prohibiting the games or banning cash prizes, said Troy Stremming, a lobbyist for J&J Ventures, an Illinois company that is a video lottery vendor.
“They could use the two provisions together, like a shield and a sword,” he said. “If they choose, by passing an ordinance, they can shield their community from lottery issuing any VLT licenses in their local jurisdiction and you’re also giving them a sword to go after the illegal operators.”
The new voices in the years-long debate over the games are state business lobbies, who see the games as a drain on the financial stability of families and employees.
Lawmakers should resist any legislation except bills to ban the games, said Jared Hankinson, vice president of government affairs for the Missouri Chamber of Commerce and Industry.
“It creates unequal regulation within the same industry,” Hankinson said. “It retroactively legitimizes unlawful operators, and it expands high risk gambling and for vulnerable communities without safeguards.”
And, he said, the bill sends the wrong message to lawbreakers.
“This is a signal from the General Assembly that compliance with laws is optional,” Hankinson said, “and that if you operate long enough, outside of the law, eventually the legislature may change the law to accommodate you.”
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