Amid a rancorous legislative debate over the prospect of legalizing slot machines, Maryland lottery officials are looking into whether they could license machines that look and play like slots but are legal under current laws.
Lottery officials say they would prefer to legalize slots but could follow the lead of other states, using games that fall under the same regulations as lottery scratch-off tickets while sporting the flashing lights and sounds of a slot machine.
"There's no doubt that the two technologies are converging, meaning slots and lottery, where we can as a lottery do so much more with interactive machines than we could in the past," said lottery director Buddy Roogow. "We can create machines that, I think, fall under the technical definition of lottery but look and play like slots."
One kind of quasi-slot machine already is in commercial use at a Calvert County restaurant and has been declared legal by Maryland courts under state bingo statutes.
The prospect of slot machine clones installed by the state without legislation could be political dynamite - even slots supporters say they're nervous about such a possibility.
But with hundreds of millions of dollars at stake and leaders in the state Senate and House of Delegates seemingly as divided as ever on expanded gambling, such an alternative could provide an attractive fallback for the pro-slots administration of Gov. Robert L. Erhlich Jr.
"It's not a reasonable way to go," said Senate President Thomas V. Mike Miller, the most powerful slots advocate in the General Assembly. "But it's inevitable that people are going to do that."
Ehrlich spokesman Henry Fawell said the governor is focused on legislation that would legalize slot machines and hasn't taken a position on their clones. But he said the lottery's interest is appropriate.
"I wouldn't say it's part of any broad strategy or anything like that," Fawell said. "It's merely a function for the lottery agency doing its job in terms of keeping up with the latest in lottery technology."
The machines Ehrlich prefers are traditional, Las Vegas-style slots, which rely on a set of spinning reels that create random combinations of bars, cherries, oranges or other symbols that determine whether a player wins or loses. Newer, computerized machines do essentially the same thing but rely on a microchip to create the random combinations.
But in jurisdictions where full-fledged, or "class III," slots are illegal, gambling companies have devised ways to make machines fit the definition of games that are allowed. Some of these machines are in use in Calvert County, where a restaurant owner has made use of local laws allowing commercial bingo.
The machines at the Rod 'n' Reel in Chesapeake Beach are similar to those in many Native American casinos where class III slots aren't allowed but where bingo is legal. Game companies have devised machines that, in effect, pit players against one another in a virtual drawing. But what the player sees on a video screen are spinning reels, as in a slot machine.
Roogow said Maryland might be able to employ machines that rely on different technology. The machines would look like slots but operate on the same principle as scratch-off lottery tickets - a central database would hold a predetermined number of winning and losing combinations, which would be randomly distributed to players.
The New York option
A similar system is in operation at racetracks in New York, which Maryland lottery officials visited in January. Officials in New York adopted the system after their Legislature failed to endorse an amendment to the state constitution that would have allowed full-fledged slots.
Frank Bonaventure, chairman of Maryland's lottery commission, said no decisions have been made about whether the lottery should pursue slot-like machines.
'Putting in quarters'
But he said he went on the fact-finding mission to New York and saw no real difference between the New York machines and slots.
"People were sitting there and putting in quarters," he said.
Roogow said the lottery would need to determine what is allowed under Maryland law but such a system could help the lottery keep its share of the market.
"It provides entertainment and amusement that some of the more traditional lottery games don't provide, and that's the competition we face from slot machines," Roogow said.
Scott Milne, the government relations manager for International Game Technology of Reno, Nev., the nation's largest manufacturer of slot machines, said his company can tailor its most popular games to fit within state and federal regulations.
"From a manufacturer's standpoint, it's just a little different technology, but the same marketing applies, and you have the same themed games," Milne said. "You couldn't really tell by looking at the machine."
Blurring the lines
Other states also are blurring the lines between the lottery and slot machines.
Aimee Marcel, a gambling industry analyst for Jeffries & Co. in New York, said racetrack owners in Ohio are exploring a strategy similar to New York's in an effort to implement slots without a constitutional amendment.
This winter, the Iowa lottery tested a kind of electronic scratch-off ticket. When a player pushes a button on a card the size of a driver's license, numbers scroll on three small screens, as on a slot machine, to show whether the player won and how much.
Roogow said the Maryland lottery is under pressure to develop electronic games because of competition from slot machines in bars and restaurants in West Virginia, which he said are "killing to a great extent the bars and restaurants on the Maryland side."
Illegal slot machines in bars in Maryland also have cut into lottery business. Last week, Prince George's police began investigating reports by county liquor control officers and others of at least 63 locations where slot-like machines were in use, and slots labeled "for amusement only" are found in many Baltimore bars.
"Who would go out and play a machine to see if you can get three cherries as fun? Give me a break," Roogow said.
Downside of machines
But if slots fail again this legislative session, Maryland could face serious pitfalls in pursuing electronic lottery machines, lawmakers and industry officials said.
Analysts say racetrack slots haven't taken off in New York because high gambling taxes there discourage investment in facilities. Some industry officials say there is a perception among some players that the machines aren't as good as true slots.
Brennen Lawrence, vice president and general manager of gaming systems for Scientific Games, which makes support software for slot machines, said systems such as New York's can cause delays or "hiccups" in game play, which makes them less appealing.
William Rickman Jr., a Montgomery County businessman who owns a racetrack and slots parlor in Delaware and has said he would apply for a slots license in Maryland, said New York's revenues prove that its kind of slots does not interest players.
According to figures from the New York lottery, slots brought in about $230 million in the year they've been open, of which the state's share is $140 million. Each machine nets on average $133 a day, less than half of what legislative analysts say full-fledged slot machines could produce in Maryland.
"The reality is that the state of Delaware, with proper machines, is making that much, and the state only has 700,000 people," Rickman said. "They're just not the same. They're not as exciting. They're not the same games."
Allowing New York-style machines in Maryland without the approval of the General Assembly would create large political problems, said House Speaker Michael E. Busch, who has been one of the legislature's strongest opponents of slots.
Where to put them
The lottery would have to decide whether to put slots in large facilities. That prospect has caused difficulties in the Assembly as delegations balked at proposals to put thousands of machines in their communities or to allow them in the thousands of places where lottery tickets are sold.
"I think there would be a tremendous outcry from the general citizenry that before [Ehrlich] can get four venues passed in the legislature, he's trying to put it in 30,000 locations across the state," Busch said. "Suddenly, we've got the governor of West Virginia, not Maryland."
Two legislative bills
The House of Delegates and state Senate have passed different slot machine gambling bills that would have to be reconciled and approved by Gov. Robert L. Ehrlich Jr. before slots are allowed in Maryland:
House bill: Would allow a total of 9,500 slot machines at four locations in Allegany, Anne Arundel, Frederick and Harford counties. Locations and operators to be decided through competitive bids by a commission controlled by the legislature. House Speaker Michael E. Busch has said any changes to the bill would cause it to fail in his chamber.
Senate bill: Closely follows governor's proposal, would allow total of 15,500 machines at four racetracks and three other locations statewide. Locations and operators would be decided by a commission controlled by the governor. Senate President Thomas V. Mike Miller has referred the House bill - which he calls deeply flawed - to the Budget and Taxation Committee for a hearing.Copyright © 2015, Los Angeles Times