State will further regulate specific games; fees added

State will further regulate specific games; fees added

(July 25, 2014) Despite some media hyperbole in the past two weeks, big brother isn’t coming for our arcade games – yet.

The only certain thing for now is that machines dispensing prizes worth $30 or more will be required to have a $50 license, if the proposed state regulations go into effect as-written in 2016.

What is unclear is exactly what kind of regulation the state’s Lottery and Gaming Commission will actually be doing on such games, which problematically blur the line between amusement and gambling.

“There are regulations on the books already that are not being enforced,” noted Jerry Greenspan, owner of the Sportland and Fun City arcades on the Boardwalk. “But now we feel like we’re the scapegoats, even though we were the most up-front about it to begin with.”

“The new regulations are just burdensome and not directed at the people they want to go after.”

The proposal, on which a public hearing was slated to be held today in Baltimore, would add a new subtitle to Title 36 of the Maryland Code, which controls gambling operations under the Lottery and Gaming Commission.

But while the current subtitles deal strictly with established lotteries and casino games – right down to the rules for Blackjack and Pai Gow – the proposed Subtitle 6 would comprise a catch-all for “electronic gaming devices,” a purview which the commission was empowered with by a 2012 act of the state legislature.

The new language was intended to crack down on web-based gaming parlors operating under the guise of Internet cafes, as well as the ever-evolving screen games found in bars.

However, the proposal would also encompass the increasing number of so-called “merchandiser” devices found in arcades, including those on the Boardwalk.

The archetypical merchandiser is the claw machine, although these rarely contain prizes over the $30 threshold which the commission has established as the line between electronic gaming devices and mere “amusement devices.” Newer machines, however, typically feature high-dollar electronic prizes, such as headphones or tablet computers.

These games are usually some variation on the user pressing a button and then releasing it at the exact right moment – in order to have blocks stacked to a precise level, or to get a mechanical rod to go through a hole just right to knock down a prize.

While there is a certain level of skill involved, the minute margins of error in the game make it more a matter of chance past a certain learning curve.

As this reporter can attest, the fun of the game comes not from the activity itself, which is rather mundane, but from the expectation of getting closer and closer each time.

By Greenspan’s own admission, the merchandisers appeal less to children and families and more to older patrons. Most youngsters would rather throw Skee-balls or shoot zombies than bet their money on the slim chance that a stick will fit through a hole just right and knock down a gadget.

“It’s mostly older teenagers and adults that play them,” Greenspan said. “They’re not really as popular as they used to be. It’s a trend, like anything else.”

But, he contended, players surely must know they’re playing for the thrill and not for the scant possibility of a reward.

“There has to be an entertainment value, or people wouldn’t play them,” Greenspan said. “If you really wanted any of these prizes, you could go to Wal-Mart or some other big box electronics store and buy them. People aren’t stupid.”

Greenspan estimated he spends about $250,000 on prizes each season for Sportland, and another $175,000 for Fun City.

The two facilities have roughly two dozen merchandiser machines between them, meaning Greenspan would be on the hook for about $1,200 in “electronic gaming device” licensing fees under the proposed rules.

Further, merchandisers with prizes under $30, and so-called “redemption devices” that dispense tickets or tokens, would still be required to register with the commission and display a valid sticker – although there would be no set cost. This would apply to virtually every game in a given arcade.

“It was originally just supposed to be crane machines and merchandisers when it came down from the legislature,” Greenspan said. “Now it’s every machine, although you only have to pay for the high-value ones. But it seems like they’re searching for a problem that doesn’t exist.”

“Once regulations start, where do they stop?,” asked Stephanie Meehan, owner of Funcade. “This could just be the beginning. We’ve already seen the slippery slope.”

Additionally, the commission’s proposal is remarkably vague in terms of what regulatory services will actually be provided.

If a $50 license is required just for the sake of having a license, then the regulation is not a regulation – it’s a tax. To be an actual regulatory scheme, legally, the state should be providing in return a service that controls industry fairness.

However, despite seven dense pages spelling out definitions and the application process itself, there is virtually no mention of actual regulating other than a paragraph which declares that gaming machines may be tested for any function “that the commission determines may be necessary to validate the proper functionality and performance of the devices and equipment”

To be approved, new games would have to go through a trial period, which may be cancelled if “the electronic gaming device is not performing as expected.” What those expectations are remain undefined.

“We showed them a game recently called ‘Road Trip,’” Greenspan explained. “It’s a pure skill game, and they still disapproved it. So then we send them third-party testing, but that’s not enough.”

Currently, Worcester County provides a regulatory service for gaming machines. Meehan said she pays $1,370 per year to the county for approval of her machines. Greenspan estimated he pays twice that for each of his facilities.

“It’s not like we’re not already paying licensing on our machines,” Meehan said. “The county actually does send out an inspector periodically.”

Under the proposed regulations, it appears that the state could actually waive its right to regulate any given county, if the commission determines that “the county’s licensing and regulatory process for electronic gaming devices is equivalent to a license from the commission.”

On the other side of the coin, gambling addiction advocates have said they would like to see some sort of centralized tracking by the state to determine how many merchandiser games exist, how frequently they’re used, and what the return is.

“From a public health perspective, we would like to monitor what the impact is,” said Dr. Lori Rugle, Program Director at the University of Maryland’s Center on Problem Gambling. “Our goal is to try to gather as much information on folks in their individual and community decision-making.”

The issue with grey-area games like merchandisers is that they accustom young people early on to the practice.

“We’re starting kids pretty early on,” Rugle said. “The younger somebody starts playing these kind of games and making these kinds of wagers, the more likely they are to have a problem.”

While the potential impact of the proposed regulations would be state-wide, it causes a particular fear in Ocean City, where the many blame existing regulatory schemes – particularly regarding land use – for the withering of unique businesses and the proliferation of cookie-cutter condos and t-shirt shops.

“Years ago, there were 14 arcades on the Boardwalk,” Meehan said. “Now there are four. People won’t come here just to eat and buy t-shirts. This is a really important part.”

 

So-called “merchandiser” machines with prizes over $30 are at the center of proposed state regulations.

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