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A Look at Two Video Poker Approaches

13 December 2004

OREGON – As reported by the Louisville Courier-Journal: "Facing a budget crisis 13 years ago, Oregon lawmakers gave up the fight against an estimated 10,000 illegal video gambling machines across the state.

"They decided the government should legalize and operate them instead.

"Today the Oregon Lottery owns nearly as many video poker machines as once had been illegal, raking in $528 million annually for the state's budget, money that goes to education, economic development and state parks. Illegal machines have all but disappeared.

"…Across the country, South Carolina took the opposite approach.

"Fourteen years after legalizing the machines, the state was awash in them — roughly 34,000 in such places as coin laundries, convenience stores, restaurants and bars. Authorities were having a hard time regulating them.

"In 2000, the state reversed itself, banning the machines outright — and putting teeth in the law.

"…Increasingly, some are arguing that states should either legalize, regulate and tax the games — the Oregon approach — or come down hard on those who operate them illegally, as South Carolina has done.

"…The [Oregon] lottery runs the video gambling program and owns all of the machines. Bars and restaurants where they are located get a cut of the profits according to a sliding scale based on the revenue they generate. The total cut was $164 million last year.

"…Chuck Baumann, spokesman for the Oregon Lottery, said the 1991 decision to legalize video gambling has protected the public, the retailers and the state. Under the old system, when the machines were illegal but abundant, players never knew if they were receiving a fair payoff, he said.

"…Today the machines are networked so lottery officials know exactly how much money is coming and going. Payoffs have averaged more than 92 cents on every dollar wagered since 1996, but players are still losing more than $700 million a year.

"…In 1986, a [South Carolina] senator slipped a provision into a budget bill that made video gambling payouts legal. Soon after, the games were seemingly everywhere, and what amounted to video poker casinos cropped up, especially along the state's borders.

"…Initially there was almost no regulation of the machines, though the state later attempted to license and limit them. It restricted each retailer to no more than five machines and said they couldn't pay out more than $125.

"…But the state never connected the machines to any centralized monitoring system, so retailers flouted the rules, [Robert Stewart, chief of the State Law Enforcement Division] said.

"…Finally, the state decided to ban the machines.

"…Enforcement remains a struggle, according to Stewart.

"The machines' manufacturers constantly try to develop devices that will circumvent the law, which forbids games of chance…"

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