JEFFERSON CITY — The spread of unregulated video gaming machines in Missouri could be diverting $50 million away from the state lottery.
As state lawmakers debate whether to expand gambling, lottery Executive Director May Scheve Reardon said Thursday the growing number of illegal machines is cutting into the amount of money the lottery raises to help fund public schools.
“We really noticed in the last two years the proliferation of the machines,” Reardon said. “We are seeing it is causing an issue.”
“The state is losing money,” added Rep. Dan Shaul, R-Imperial.
The estimate is based on data collected over a six-month period starting in August 2018 on a lottery sales route along Interstate 44 between St. James and Lebanon where the gaming machines have sprouted up.
Reardon said lottery sales on that stretch dropped by $800,000 as compared to the same period a year ago, as people instead spent their money on the machines. That could mean tens of millions of fewer dollars going to education when all of the state’s lottery outlets are accounted for.
The new numbers came during the second of five hearings by a special House committee investigating whether to allow sports betting and video gambling.
The presence of an estimated 14,000 unregulated gaming terminals has become a focal point of the hearings chaired by Shaul.
The terminals are similar to slot machines. A player inserts money, selects a game and decides how much to wager. Players who win money can cash out and get paid by the store cashier.
In July, in the latest attempt to slow the rapid-fire spread of untaxed and unregulated slot machines in Missouri, the lead attorney for the Missouri Gaming Commission ruled that the terminals contain functions that make them “gambling devices,” which are prohibited outside of licensed casinos.
So far, most county prosecutors have not taken steps to prosecute the companies or the businesses hosting the machines.
In Platte County, however, Prosecutor Eric Zahnd has taken a supplier to court in a case that could determine whether the rest of the state can shut down the spread of the machines.
A resolution to that case could take two years, leaving state officials to watch as more machines flow into the state.
What is happening in Missouri has played out in other states with similar results. In Georgia, the state decided to regulate the machines and is now receiving tax dollars from their operation.
“I see more places every day. I believe they are increasing every day. We saw it was a growing problem,” said Reardon. “We need to work together to safeguard the public.”
“It has potential to do more damage to profits for education,” Reardon said.
Officials said legalizing the machines and putting them under the control of the lottery could result in $170 million more for education once the program is fully running after four years.
The lottery, which went live in 1986, transferred over $306 million to public education in 2018, up from $297 million the prior year. That amounts to about 4% of state aid for elementary, secondary and higher education in Missouri.
Reardon said the goal for next year is to transfer $323 million to schools.