Inside Look: Why Georgia’s video gambling machine reforms failed

Woman Playing in the Casino
Photo by welcomia on Deposit Photos

Efforts to reform Georgia’s coin-operated amusement machines (COAM) business will have to wait until next year.

Legislation aimed at cleaning up the industry by offering game winners redeemable gift cards as an incentive to stop illegal cash payouts fizzled on the last night of this year’s General Assembly session.

The bill fell victim to a lack of consensus about whether and how to reform the COAM business.

During the 2021 legislative session that wrapped up at the beginning of this month, the gaming companies that own the machines not only disagreed with the convenience store owners who house the games. The two groups couldn’t even reach agreement within their own ranks.

“You’ve got folks fighting each other. We don’t think that’s good for the industry,” former Georgia House Majority Whip Edward Lindsey, a lawyer representing Norcross-based COAM supplier Lucky Bucks, said during a state Senate committee hearing. “We ought to be taking a little extra time before we move forward.”

While the COAM business is perceived as a poor relation to the Georgia Lottery, the industry has become the biggest revenue-raiser for the Georgia Lottery Corp. since the lottery took it over in 2013, state Rep. Alan Powell, the bill’s chief sponsor, said in a recent interview.

Last year, the machines brought in more than $90 million in proceeds to the lottery under a formula that dedicates 10% of those earnings to the state, and another $12 million in license fees.

“It’s been growing every year because people like to play these games,” said Powell, R-Hartwell.

At the same time, the industry has been plagued by retailers awarding illegal cash payouts to winners, Powell said. Under state law, winners are only supposed to receive merchandise or gasoline sold at the convenience store.

Powell’s bill calls for awarding gift cards to game winners as an incentive for retailers to stay away from cash prizes. As an enforcement mechanism, the measure also would fine violators and – more importantly – ban them from future participation in the COAM business.

“These gift cards should help clean up the paying out of cash in this industry,” Rep. Stacey Evans, D-Atlanta, said during a House floor debate on the bill.

The House passed Powell’s bill on the last night of the General Assembly session. But it had not reached the Senate floor for a vote before lawmakers adjourned minutes after midnight.

The reticence of the Senate to take up the bill on the session’s last night reflected opposition to the legislation aired during a lengthy hearing the Senate Regulated Industries Committee had held the week before.

A key complaint from both senators and lobbyists was over another issue plaguing the COAM business: the payment by gaming companies of illegal inducements to retailers to install a company’s games in their convenience stores.

“Most of the operators in the state want to see it done right,” Powell told committee members. “[But] some of the master license holders continue predatory practices when it comes to inducements or back-door methods of trying to take retailers from [each] other.”

Powell’s bill called for going after the offering of illegal inducements by providing for judicial review of complaints rather than having them heard by the Georgia Lottery Commission.

“It’s not right that if a case is made by the lottery against a retailer or master license holder, it goes to a hearing officer appointed by the … lottery commission,” he said. “There needs to be due process for the sake of fairness and what’s right.”

But state Sen. John Kennedy objected to shifting management of the COAM industry away from the lottery. Kennedy, R-Macon, chaired a Senate study committee on the COAM industry last year and sponsored a bill of his own on the issue this year.

“This bill takes tools away from the lottery that it currently has,” added Paul Oeland, senior counsel for Stockbridge-based United Gaming.

Others who testified before the committee objected to moving forward with the gift card provision.

Lindsey said the lottery commission has yet to assess the results of a pilot project it launched last year testing the concept.

“The gift card ought to be put on pause until after the pilot program is finished,” he said.

On the other hand, Emily Dunn, an amusement game operator from Blue Ridge, gave the gift card a strong endorsement.

“The card is convenient. It is easy to use for players. It is transparent. It is easy to track and audit,” Dunn told the committee. “You cannot track cash. You can track a card.”

The months-long “interim” period before the 2022 General Assembly convenes next January will give the various parties time to try and work out their differences.

“That bill is alive and well over [in the Senate],” Powell said. “A senator or two has reached out to me to say they want to carry it next year.”

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