I can take you on a tour around the great state of Missouri, you can see illegal gaming is alive and well. – Missouri Lottery Executive Director May Scheve Reardon
Republican senator says lawmakers need to take action on the unregulated gambling machines around the state
The Missouri Lottery tallied records for ticket sales and transfers to education programs in the fiscal year that ended June 30, and if it had authority for internet-based games, the take could be even larger, lottery executives told lawmakers on Tuesday.
Lottery sales were up about 20 percent, to $1.8 billion, netting $345 million after paying prizes, commission and overhead, Lottery Executive Director May Scheve Reardon and Missouri Lottery Commission Chairman Lance Mayfield said in testimony to the Senate Economic Development Committee.
Missouri Gaming Commission General Counsel Ed Grewach also appeared before the committee. He too, said the commission is ready to add new products like sports wagering, and the testimony showed there is some competition between the agencies on which will be given the job.
Missouri’s 13 casinos hosted 27.6 million visitors who lost $1.7 billion on slot machines and table games in the year ending June 30. That is an increase in the casino’s take of about $370 million over the previous year, which included more than two months where casinos were closed due to COVID-19 restrictions.
Even with the closures, more people visited casinos in fiscal 2020 than in fiscal 2021. That continues a pattern of fewer visitors without a corresponding drop in net casino revenue.
“It appears we have fewer people going to the casino but spending more money per patron than they did in prior years,” Grewach said.
The committee session was designed to gather information for possible legislation next year, said Republican Sen. Denny Hoskins of Warrensburg, the committee’s chairman. He wants to legalize sports wagering and take action on the unregulated machines.
Prosecutors around the state have been reluctant, in most cases, to file charges over the machines. Of almost 200 potential cases investigated by the Missouri State Highway Patrol in 2019 and 2020, only about two dozen cases were filed.
Vendors who operate many of the estimated 15,000 machines that pay a cash prize say they are legal because players can view the outcome of the next game and withdraw their money if they wish.
Other forms of the games are patterned on raffles and offered to fraternal and service organizations. The operators of those games contend they are legal because the Missouri Constitution allows charitable groups to conduct raffles.
But Hoskins said he is not convinced by either argument.
“I have a hard time seeing that if you put money in, in hopes of taking money out, that that is not some form of gambling,” Hoskins said.
Reardon provided the committee with photos from 10 locations – including one across the street from lottery headquarters – showing machines crowded into convenience stores.
“I can take you on a tour around the great state of Missouri, you can see illegal gaming is alive and well,” Reardon said.
In failed attempts in the past to regulate the machines, lawmakers have proposed video games controlled by the lottery or the gaming commission as an alternative.
In her pitch for the lottery to regulate new products, Reardon noted that 70 percent of online sports wagering worldwide is conducted by lotteries.
“Lotteries are very very efficient in operating these products in the gaming marketplace,” she said.
She also provided material suggesting the lottery would keep more of the money wagered than the gaming commission.
A chart Reardon provided to the committee showed that 21.2 cents of every dollar spent with the lottery goes to education. Casinos pay a tax on 21 percent of the money lost by gamblers, but that is only about 1.99 cents of every dollar wagered in the state’s 13 casinos, the chart stated.
Internet lottery tickets are a rapidly growing market, Reardon said. There are nine states with internet-based lottery sales, and Virginia recorded $1 billion in sales in 14 months, she noted.
The lottery needs the new games because COVID-19 changed people’s habits, Reardon said.
“If you don’t go to the grocery store anymore you don’t run into our instant ticket vending,” she said. “We definitely need to modernize our channels of distribution.”
Grewach, however, said the issue is as much a question of regulation as it is promotion.
If lawmakers allow sports wagering, he said, only wagers made by a person physically present in the state to a company also residing in Missouri would be legal.
“All the things that you do that drive revenue create some regulatory challenges for us,” Grewach said.