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With gambling machines spreading through Missouri, lottery officials concerned about revenue loss

With gambling machines spreading through Missouri, lottery officials concerned about revenue loss

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Digital Slot Machines

Dave McCall of St. Louis plays a digital slot machine game in South Public Market on Wednesday, Nov. 6, 2019. An estimated 52 such machines, made by Torch Electronics, are in gas stations, restaurants and small grocery stores across the city. Photo by Troy Stolt, tstolt@post-dispatch.com

JEFFERSON CITY — Missouri lawmakers dealt the state Lottery two blows this spring that could affect how much money the agency collects in the coming year, the director said Wednesday.

The Legislature’s failure to address the spread of illegal gambling during the most recent legislative session could siphon off dollars that people might otherwise pay for Lottery games.

And lawmakers slashed the Lottery’s advertising budget for the fiscal year beginning July 1 from $1.5 million to $400,000.

“It will really be difficult to tell people about our new products. It could really impact our sales,” Director May Scheve told members of the Lottery Commission.

Scheve said the lottery will counter the reduction in ad money by ramping up its use of social media to try to boost the lottery’s profile.

“We’re going to do as much as we can any way that we can,” Scheve said.

Scheve’s comments follow a legislative session that resulted in no action being taken to regulate or eliminate thousands of slot machines that have been placed in gas stations and liquor stores across the state.

Estimates have put the total number of machines in the state at 14,000, but industry observers say more are likely out there, including at convenience stores that have built special rooms to house multiple devices.

“Anecdotally, our sales reps say they are seeing more and more of them,” Lottery legal director Jay Boresi said.

In addition to questions about the legality of the devices, the state sees no financial benefit from the unregulated expansion. No proceeds are diverted to education. There are also no government-sanctioned resources for addicted gamblers nor rules to protect consumers from low payouts.

The Missouri Gaming Commission and the Missouri State Highway Patrol have said the slot machines are gambling devices, which are prohibited outside of licensed casinos.

A handful of county prosecutors also have filed charges against businesses that have the machines.

But that hasn’t brought any clarity to the debate in the Capitol.

Senate President Dave Schatz, R-Sullivan, sponsored legislation seeking to outlaw the games, but it failed to advance. He also attempted to attach his proposal to a larger gambling expansion plan that included legalizing sports betting and allowing regulated slot machines at truck stops and bars.

The expansion proposal also failed to advance amid disagreements between casino operators, sports betting proponents and video poker companies.

Following the legislative session, two companies that are suing the state to stop the Missouri State Highway Patrol from targeting their unregulated machines contributed $350,000 to campaign funds linked to lobbyist and former House Speaker Steve Tilley, who worked the Capitol corridors this spring to stop Schatz’s legislation from advancing.

Tilley, who is a close ally and fundraiser of Republican Gov. Mike Parson, represents Wildwood-based Torch Electronics, which has provided machines to businesses. Warrenton Oil is a gas station operator where some of the machines are located.

Torch contends its machines are not gambling devices, even though players insert money in hopes of winning a cash prize.

In February, the companies asked a Cole County judge to issue an order stopping the highway patrol from seizing machines as part of a crackdown on illegal gambling.

“The Highway Patrol has engaged in a long running campaign of harassment of stores, like Warrenton Oil’s stores, that house Torch amusement devices,” the lawsuit notes.

The suit was filed three days after the Highway Patrol seized three machines from a St. Clair location owned by Warrenton Oil.

In addition, the lawsuit said state and local police “have intimidated and harassed convenience stores in Linn, Crawford, Barry, Vernon, Camden, Henry and Webster counties that license space for the Torch amusement devices.”

The lawsuit also said Torch amusement devices were seized from Warrenton Oil convenience stores in Franklin County and from other convenience stores in Henry and Linn counties.

Boresi said the lottery is tracking lawsuits against Torch, as well as the one filed by Torch.

“We are watching that one closely,” Boresi said.

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