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Legislators reject attempt to clarify regulation of slot machines

State gambling regulators are in a bind.

They have indirectly authorized the expansion of gambling in the past six months as lawyers for parimutuels found holes in state laws and opened the door to slot machines at parimutuels across the state and table-game look-alikes at existing racinos.

Now state regulators worry that Florida’s porous gambling laws also might come with a cost: the loss of the $233 million annual check from the Seminole Tribe of Florida under its gambling compact with the state.

Tuesday, lawyers for the Florida Department of Business and Professional Regulation asked the Legislature for help in closing one of the loopholes that, they fear, threatens the compact with the tribe. They were turned away.

The Senate Regulated Industries Committee voted 7-3 to kill a bill that would have given the department the authority to decide what constitutes a slot machine and would have specifically excluded copy-cat games intended to simulate roulette wheels, craps tables, blackjack and other table games at the state’s parimutuels.

The bill, by Sen. Thad Altman, R-Viera, attempted to target new games that come in “under the ruse of being defined as a slot machine,” he said.

After the Department of Business and Professional Regulation, which regulates gambling, ruled that all slot machines must require a random number generator inside a slot machines -- the technology that produces the outcome of a slot machine -- a state hearing officer said the department did not have the authority to issue the rule.

Altman’s bill would have allowed them to issue the rule and potentially ban any future casino game look-alikes.

“We don’t believe the legislature ever authorized them,’’ said Tim Nugesser of the Department of Professional Regulation, which regulates gambling. “We believe that they may violate the compact.’’

Under the 2010 compact signed by the state and the Seminole Tribe, the Tribe has the exclusive right to operate slot machines outside of Miami-Dade and Broward or it can withhold payments to the state. This year, the tribe is set to write monthly checks that amount to $233 million.

It’s not the only potential threat emerging to the compact.

In the last six months, a barrel racing track as opened in Gadsden County and voters have approved installing slot machines. More than 1,000 Internet Cafes are in operation in strip malls throughout the state, operating slot-machine like games under a loophole in the state’s sweepstakes law. 

State regulators have issued a  summer jai alai permit under another loophole in the law that could open the door to another slot machine permit in Miami Dade. And a bill to revoke the requirement that dog tracks with poker rooms no longer have to race dogs was broadened to include a provision that allows counties to ask voters for permission to operate slot machines at local horse and dog tracks.

Pinellas County became the latest county to consider a referendum, following a request by Derby Lane dog track. Voters in Gadsden and Washington counties have already approved referendums allowing slot machines to be operated at their horse and dog tracks, and Palm Beach, Brevard and Lee counties have announced referendums are underway as well.

A legal opinion by the tribe's lawyers says that a Senate proposal to regulate the slot machine look-alikes will violate the compact but, adds Barry Richard, the tribe is not ready to withhold its checks. If the Tribe stops payment, it also loses it monopoly right to exclusive operation of its games.

In addition to Altman’s bill, the department is asking legislators to clarify the whether they are authorized to approve slot machines in counties outside of Miami Dade and Broward, said department spokeswoman Sandi Poreda, because “there is a concern about potential effects on the compact if left unclarified.”

A legal opinion by lawyers working for the Seminole Tribe, written at the request of several legislators, indicated that the tribe believes that the machines used to operate the Internet Cafes operate like slot machines and are in violation of the compact. The House and Senate remain at odds over whether to ban or regulate so-called Internet Cafes.

“The Tribe is not considering withholding payments,’’ said Barry Richard, one of the lawyers who authoried the opinion released on Thursday. But, he added, the Tribe believes “these are slot machines. They are proliferating at a rapid rate. They are competing with the Tribe and they are illegal.”

If the state legalizes them and imposes regulations, he said, “then the Tribe will have to address the extent to which it is having an impact on their operation.”

If the Tribe stops payment, it also loses it monopoly right to exclusive operation of its games.
The Senate, however, is relying on a competing opinion by the Carlton Fields law firm that says regulating Internet Cafes will not violate the compact.

The bottom line: sweepstakes law on which the Internet Cafes operate has been in existence since 1971 and the video lottery terminals used by the Internet Cafes have been operating since 2006.

“How is regulating an existing legal activity an expansion?’’ asked Sen. Miguel Diaz de la Portilla, Senate sponsor of the bill to regulate the machines. “In fact, it’s a contraction because by the very nature of additional regulations, hurdles and expenditures to comply with the law you are going to have fewer Internet Cafes.”

He believes that the suggestion that the rulings by state regulators and the move to regulate Internet Cafes are mere scare tactics by the Tribe.

“If the tribe really believes what they purport to believe in that letter, then why aren’t they withholding payment,’’ Diaz de la Portilla said. “What they say and what they do are two separate things and that indicates that it’s nothing more than a smokescreen, a game, a scare tactic.’’

Meanwhile, with the House and Senate at odds over how to handle the Internet Cafes, and the Tribe choosing not to challenge the existing law, few expect much to change this session.

“The train has left the station when it comes to casinos,’’ said Sen. Maria Sachs, who voted against giving the department more regulatory control. “It’s going to happen and, you can see, little by little there is a gradual step towards more and more gaming."