Casinos may be on hold, but NC lawmakers could act on another gambling issue this year

While state lawmakers may forgo action on casinos during this year’s legislative session that starts next week, they could act on a related issue: video gambling.

The controversial proposal to sanction four new casinos in North Carolina was shelved last year after it emerged as a major sticking point in budget negotiations. While addressing the bill in February, GOP leaders indicated that it’s unlikely to be taken up during this year’s short session as well.

But separate action to legalize and regulate the tens of thousands of video gambling machines that have proliferated across the state could still be in the cards this year.

A standalone bill to legalize these machines was filed by Rep. Harry Warren, a Salisbury Republican, in May 2023. That bill was heard by a committee at the time, but stalled as Senate leader Phil Berger and other Republicans tried to build support for a bill that would include both casinos and video gambling.

Why do lawmakers want to act on video gambling?

The state has been trying to crack down on video gambling for years.

Lawmakers passed legislation in 2008 and 2010 to ban the possession of terminals that simulated slot machines or allowed people to play electronic sweepstakes games, The Associated Press reported in 2013.

Makers of sweepstakes software fought the ban in court until the N.C. Supreme Court upheld the ban in December 2012, ruling that the argument by manufacturers that the ban violated their First Amendment rights was unconvincing, The AP reported.

Despite the ban, video gambling machines have remained available to play at sweepstakes parlors and cafes across the state. That’s in part because the operators and software companies have reconfigured how the games work to try to bring them within the law, which has led to more court battles.

And while police departments and sheriff’s offices have raided and shut down parlors in some parts of the state, enforcement of the law has been uneven, since it’s not always the top priority for departments that lack resources or are busy dealing with more serious crimes, Warren said during the committee meeting on his bill last May.

But the other reason lawmakers have failed to put an end to video gambling is demand, Warren said.

“The real reason these things flourish is because people play them,” Warren told the House Commerce Committee. “If there were no money in it, they would not be in business.”

Although it’s hard to pinpoint an exact figure, Warren told committee members that he had heard estimates that 60,000 to 100,000 machines are still out there.

Since banning the machines hasn’t worked, Warren said that lawmakers should legalize and regulate them instead, requiring their operators to be licensed by the state.

What was in the bill filed last year?

Under the legislation Warren filed last year, video gambling machines would only be permitted at bars, restaurants and other businesses that have active off-site or on-site ABC permits.

Operators would also need to obtain a license to run the machines from the state lottery commission. The bill would also require that 40% of every dollar generated by licensed and legally operated machines be collected by the state.

Within five years, up to 20,000 video gambling machines could be licensed and up and running, generating more than $1 billion in net income, of which almost half — $438 million — would go to the state, according to an analysis by the legislature’s nonpartisan Fiscal Research Division.

While lawmakers would decide where most of those funds would be spent, the bill as it was originally written would direct some of the money to be spent on funding forgivable scholarship loans for eligible community college students.

It would also set aside an annual appropriation of $2 million for five public historically Black colleges and universities (Elizabeth City State University, Fayetteville State University, N.C. A&T State University, N.C. Central University and Winston-Salem State University), as well as UNC Pembroke.

Each college would receive the money for “improving graduation rates and student success or sustainability of the institution.” An additional $10 million would be available for similar grants for private HBCUs.

A version of the bill included in a draft of casino and video gambling legislation obtained by The News & Observer last September before the casino proposal was shelved did not include funding allocations for community college scholarships or HBCUs, however.

What have Berger and Moore said about video gambling?

Speaking to reporters in February, Berger said that there had been some discussion about video gambling, but that he didn’t know details.

Among House Republicans, Moore said, there had been more discussion about video gambling than casinos, which he said “just kind of went totally off the rails” last year.

Moore also said he didn’t believe legalizing video gambling would be “much of a leap” since North Carolina already has a lottery and scratch-offs, WRAL reported. Last year, the lottery also started selling “Digital Instant” games that can be played online or on phones.

Then there’s mobile sports betting, which was passed last year and launched last month.

Still, Berger cautioned that lawmakers may not have enough time during the short session, which is supposed to only last a few months, to address video gambling.

“It strikes me that in many respects some of that may need a little more runway than what we’ll have for the short session,” Berger said.

In the Spotlight designates ongoing topics of high interest that are driven by The News & Observer’s focus on accountability reporting.