Lottery Cuts Off Vending Devices

In a move to rid California’s lottery of any gaming devices that resemble slot machines, the state Wednesday ordered the immediate shutdown of 4,000 vending machines that dispense Scratcher tickets.

Lottery Director Maryanne Guilliard issued the order and said the removal of the machines could cost the lottery about $200 million a year in revenue and could mean a loss to California schools, which receive lottery profits, of about $68 million.

Guilliard said her decision was prompted by a state attorney general’s office recommendation that said that, in its view, the Scratcher vending machines fit the legal definition of a slot machine. Under California law, slot machines are illegal.

“As we speak we are sending out notifications to our retailers to cease and desist the use of vending machines for Scratcher sales,” Guilliard said in an interview. “My charge at the lottery is to run a legal lottery, and that’s what I intend to do.”

Guilliard, who took over as director June 12, said lottery players will still be able to buy Scratcher tickets over the counter at 18,000 retail outlets in California. Guilliard’s decision affects the additional 4,000 outlets that sell only through vending machines.

To try and recoup some of the lost revenue, lottery spokeswoman Jeanne Winnick said officials will begin contacting each of the retailers that used vending machines to ask them whether they want to sell at least the two biggest Scratcher games over the counter.

The vending machines, she said, were first installed in 1992 and have been used primarily by supermarkets, bowling alleys and restaurants, which do not have the manpower or desire to sell tickets manually.

The shutdown of the vending machines is the second major financial setback to befall the lottery in recent weeks.

Last week, the California Supreme Court, in a unanimous decision, held that Keno was illegal because it did not fit the definition of a lottery game.

The court ruled that payoffs from the games were not distributed from a pool of wagers--as required to be considered a lottery game--but instead were based on a predetermined schedule of payments.

The loss of Keno, which is expected to cost the lottery about $400 million a year in revenue, together with the shutdown of the Scratcher machines, could produce a total revenue loss for the agency of as much as 25%.

Guilliard said that, in anticipation of a possible adverse court ruling on Keno, officials had already begun work to devise new games that they hoped could make up for the lost revenue.

She said those games are now being tested by focus groups.

“We’re hoping to make up for the lost revenue with legal, legitimate games that the public will be interested in playing,” she said.

The attorney general’s opinion, she said, was an outgrowth of a request she had made after the Supreme Court’s Keno decision for a top-to-bottom legal review of all the lottery’s games of chance.

Although the attorney general’s office declined to release the opinion, citing attorney-client privilege, it clearly followed the same legal reasoning that Atty. Gen. Dan Lungren used in a recent letter to U.S. attorneys on the subject of slot machines.

Lungren said in the letter that under California law “any device that involves some element of chance and is triggered by the player” can be construed to be an illegal slot machine, said Lungren’s spokesman, Steve Telliano.

The latest opinion involving the Scratcher machines is expected to play into the attorney general’s legal case against slot machines on Indian reservations.

Lungren has said the Keno decision shows that slot machines are illegal on Indian reservations, but tribal lawyers have contended that any legal problems could be cleaned up by reconfiguring the machines so that payoffs are directly linked to players’ wagers.

Federal law allows Indians to operate any form of gambling that is permitted by the laws of the state in which a reservation is located. Indians have set up video slot machines, arguing that they are legal because they are similar to the state’s lottery games.

Lungren is expected to argue now that they are not legal under any configuration.