The legality of mechanical amusement devices is raising questions from both Hall County and the state of Nebraska.
At its meeting Tuesday, the Hall County Board of Supervisors discussed the legality of the machines, some of which are BankShot gaming machines. Hall County Attorney Marty Klein investigated the matter at the request of Supervisor Gary Quandt.
Klein told the county board that he did not seek a legal opinion from Nebraska Attorney General Doug Peterson’s office because he didn’t think he needed to.
“From what I can tell from documents that law enforcement provided me, it seems clear that, as far as the BankShot machines, back when they started, there were three possible games they were playing,” he said. “Two of those games, per a Supreme Court ruling, were deemed games of chance and not legal. A third was deemed a game of skill and thus legal.”
Klein said the Supreme Court case ruled that the burden is on the state of Nebraska to prove, beyond a reasonable doubt, that these mechanical amusement devices and the games on them are operating illegally. Due to their technology, he said that in order to prove this burden, the state has to send these machines to one of two locations, one of which is in New Jersey.
“It seems clear to me that if I am prosecuting any of these machines for being illegal, it would be cost-prohibitive and difficult to achieve a prosecution,” Klein said. “So I would be receptive to prosecuting crimes of tax evasion, a law passed in LB70.”
LB70, introduced by then-Columbus Sen. Paul Schumacher in 2015, imposes a tax — 10 percent of the gross revenue derived from the operation of the device — on any business operating such a device.
“It seems as though the more effective prosecution on these machines is to prosecute for tax evasion and not having the proper tax stamp, rather than to send these machines off and pay the amount of money to show that they are, in fact, running illegal games on them,” Klein said.
Board Chairwoman Pam Lancaster said a representative from state Sen. Steve Lathrop’s office contacted her about a bill he introduced in January, LB538, that changes the provisions related to the possession of a gambling device and provides approval of certain “mechanical amusement devices” by the Department of Revenue.
The bill passed 44-0-5 in May and was signed into law by Gov. Pete Ricketts. Grand Island Sen. Dan Quick voted yes on the bill. It becomes law-effective Jan. 1, 2020.
In order to receive a determination that a gaming device is in compliance by being a game of skill, rather than one of chance, the manufacturer must submit an application to state tax commissioner Tony Fulton’s office on the gaming device’s location, software, Internet connectivity and configuration.
The manufacturer will also be required to submit a $500 application fee, provide a specimen of the device and provide an affidavit from the distributor affirming “no functional changes in hardware or software be made to the approved device without approval” of Fulton.
A device shall not be considered a game of skill, but rather one of chance, if one or more of the following apply:
— The ability of any player to succeed at the game played on the device is impacted by the number or ratio of prior wins to prior losses of players playing such device.
— The ability of the player to succeed at the game played on the device is impacted by the ability of any person to set a specified win-loss ratio for the device or by the device having a predetermined win-loss percentage.
— The outcome of the game played on the device can be controlled by a source other than any player playing the device.
— The success of any player is or may be determined by a chance event which cannot be altered by player action.
Upon approval of the application, Fulton’s office will issue a mechanical amusement device decal for the gaming device. No decal will be issued unless the Department of Revenue has determined it is a game of skill and not a game of chance.
The current fee for the decal is $35 per machine, but LB538 will increase that fee to $250 effective Jan, 1, 2020.
Under the provisions of LB538, Fulton or his designee can seize a gaming machine without a warrant if there is reasonable cause that it is a game of chance, rather than a game of skill, which is legal. In addition to having the device(s) seized, a person having such a device will also be fined $1,000 for each day the device is in operation.
In a statement listed on his legislative page, Lathrop said LB538, his priority bill last session, provides the state with an effective way to enforce the law when many of the mechanical amusement devices in the state are “almost certainly illegal.”
“LB538 would fix that,” he said. “Furthermore, these machines aren’t held to the same standards as the state lottery or keno which contribute large sums (of money) to our state and local communities. LB538 is a bill with a simple purpose of ensuring that Nebraska’s Constitution and anti-gambling laws are being followed.”
Klein said, “In my words, the Legislature has punted on this matter, recognizing that it would be costly and difficult to achieve prosecutions on these machines with regularity. They decided to tax the machines instead.”
In the Legislative hearings, Klein said, state senators discussed taxing the gaming machines like marijuana. Doing so would require a tax stamp to sell, even though it is illegal to sell.
“Instead of deciding on the legality of those games being played, it appears to me that the Legislature said to tax these games,” he said. “So, if you want one of these games in your establishment, you have to buy a tax stamp and better have one on these machines.”
Lancaster said she has not actually seen BankShot machines in Hall County, or played one in or outside of the county, but rather has “heard rumors about where they are and what they look like.”
Brandi Bosselman, vice president and corporate counsel for Bosselman Enterprises, spoke on the gaming machines during the public comment portion of Tuesday’s meeting. She said she and her brother, Charlie, own VisionComm Vending, a company specializing in vending and gaming machines, including BankShot machines, which the company has at Fonner Park.
“The company we buy them (BankShot machines) from is out of Omaha,” Bosselman said. “Prior to us buying the games, they provided us with a Nebraska Attorney General’s opinion saying that the games were ones of skill, not of chance, which is the distinction you need to make in the state of Nebraska. If it is a game of chance, it is considered gambling.”
Bosselman said claw machine games at establishments such as Godfather’s Pizza, are considered games of skill as the operator has to properly maneuver the claw to a spot to grab a prize out of the machine.
“The BankShot games are like that in the sense that you can play them, you can push a button at the appropriate time and you create your tic-tac-toe pattern so that you can win,” she said. “But you have to know what you are doing in order to win.”
According to bankshotgame.com, the official website for the BankShot game machines, those who play games on them can win cash or prizes.
Lancaster said the question out there currently is whether Nebraska counties have the right to weigh in on whether they can allow BankShot machines or limit them.
“We don’t have any of those answers at this point,” she said.
No formal vote was taken on the matter at Tuesday’s meeting.