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Arcade owners express concern over regs

(Aug. 15, 2014) With the public comment period for Maryland’s new arcade game regulations officially passed, the state’s amusement industry association fears that their concerns over the new rules will only be given lip service by the Maryland Lottery and Gaming Control Commission, instead of the full rewrite the industry desires.

“As of July 28, the 45-day post-publishing period is over. It’s now in the lottery commission’s court,” said Larry Bershtein, President of the Maryland Amusement and Music Operators’ Association. “They can enact these regulations as written – that’s entirely up to them.”

“We’re not going to strategize our next step until we see what their next step is.”

When first revealed, the commission’s proposed regulatory language caused a scare amongst arcade operators who would be subject to a $50 annual fee on each “electronic gaming device” they owned, as well as transfer and testing costs.

But despite the fiscal hysteria, the real issue with the regulations, Bershtein said, is the lack of procedural clarity and precision for operators to know what will be expected of them.

In fact, the regulations contain two competing definitions of what an “electronic gaming device” actually is, something that MAMOA has not yet gotten a resolution on from the state.

Under Chapter 1 of the state’s proposal, an electronic gaming device specifically excludes a “skills-based amusement device,” which is later defined as a machine which awards tokens, tickets, or prizes of less than $30 in value.

But in Chapter 2 of the proposal, an electronic gaming device is defined as “lawful” if it is a “skills-based amusement device that is operated in compliance with this subtitle,” implying that such a device is de-facto an electronic gaming device.

This throws into question what devices will then be subject to the $50 per-device fee. If all skills-based amusement devices are electronic gaming devices, and not just those with prizes over $30, the economic impact would be massive.

“That’s a contradiction in their own definitions,” Behrstein said. “I don’t think, at this point, that they [the commission] really understand what it is they’ve written.”

While acknowledging that it is aware of MAMOA’s confusion, the LGCC was not prepared to comment on any possible revisions.

“The agency is still reviewing those written public comments and we’d like to give them the attention they deserve,” said commission spokesperson Carole Everett. “Therefore, we are not able to discuss them at this point. The review should be complete sometime in early fall.”

But MAMOA is also challenging not just the language, but the legal right that the proposed regulations are based upon.

In 2012, the Maryland General Assembly amended Article 12 of the state’s criminal code, which deals with gambling. This allowed the creation of the proposed regulations, which appear under Title 36 of the civil code.

The legislative amendment added a new definition to what is not a “slot machine,” specifying such games may be “a skills-based amusement device that awards prizes of minimal value approved by the State Lottery and Gaming Control Commission through regulation.”

Thus, MAMOA argues, any such device with prizes of minimal value is de-facto legal and not subject to regulation, per the intent of the Assembly.

However, every device – even those with prizes under $30 – would still be required to register with the commission under the proposed regulations, although no fee has been set. Thus, the association maintains, the commission has essentially set “minimum value” as “no value.”

“One of the biggest hurdles we admitted we each had to deal with was what does ‘minimal value’ mean,” Bershtein said. “The one thing the commission insisted on was that we’re going to nail that down with a dollar value. But now it apparently means everything. Each iteration has gotten to be a worse and worse deal.”

Additionally, vagaries such as “other standards defined by the Commission” or “other information required by the Commission” essentially eliminate due process or any reasonable expectation as to what will and will not be satisfactory, Bershtein said.

“Nobody is going to be coming in with new games because there’s no way to know going in if you even have a chance,” he said. “It’s not worth the risk to develop something that’s ultimately up to the whim of the commission.”

This could complete stagnate the industry in Maryland, with particular impact to amusement-centric locations such as Ocean City’s Boardwalk. This is admittedly a worst-case scenario, but one that could be borne out if a reasonable regulatory framework is not developed.

“For all the push-back we’ve gotten on this, no one’s ever said ‘you’re wrong,’” Bershtein said.

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