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Fair game

There’s big money to be made in electronic gaming machines, and the ILBA is betting state legislators will see the benefits of expanding Indiana’s gambling laws

By Michael Summers

michael_summers@fortwaynereader.com

Fort Wayne Reader

2005-12-12

For years, Cherry Masters and other electronic gaming devices in Indiana bars and clubs existed in a weird legal netherworld.

For the record, these machines are illegal in unlicensed establishments. Indiana currently permits licensed pari-mutuel wagering on horse races; bingo; charity game nights and raffles by "licensed qualified organizations"; and licensed riverboat gambling in authorized counties. And, of course, there’s the state lottery. But any other kind of gambling is considered a Class B misdemeanor. Specifically, Indiana law defines illegal gambling as the “knowing or intentional risking (of) money or other property for gain, contingent in whole or in part upon lot, chance, or the operation of a gambling device.”

In short, if it’s a game of chance where you’re risking money or property in an unlicensed establishment, it’s illegal gambling.

Yet the Cherry Masters were virtually everywhere, and so prevalent that in many communities they were viewed as totally acceptable. The attitude recalls John Travolta’s character in Pulp Fiction describing marijuana laws in the Netherlands: “It’s legal, but it ain’t 100% legal.” Change “legal” to “illegal” in that sentence and you’ve got the picture. Or maybe it’s more accurate to say that they’re illegal, just not illegal enough for anyone to do anything about them. To make things a little hazier, there were even two prominent court cases in Delaware county during the mid-80s where juries ruled that Cherry Masters could be considered games of skill, not chance, therefore they were permissible in establishments not licensed for gambling.

Yes, the idea of a Cherry Masters as a game of skill sounds like a joke, and apparently, the state excise police thought it was pretty funny, too. Early in 2005, they executed a series of raids on bars, taverns, VFW halls, and other unlicensed establishments in Allen County that had Cherry Masters and other electronic gaming machines.

Why, after years of benign neglect and a laissez-faire attitude towards electronic gaming devices in places not licensed for gambling was state excise choosing now as the time to enforce the law?

“That’s the $64,000 question,” says Loren Fifer, the regional vice president of the Indiana Licensed Beverage Association (ILBA) and owner of two Peanuts establishments in Fort Wayne. Fifer says he put the “why now?” question to Dave Heath, the Chairman of Indiana’s Alcohol & Tobacco Commission. “His reply was ‘because they’re illegal.’”

Fifer and the Indiana Licensed Beverage Association are spearheading a campaign which they hope will settle the Cherry Masters issue once and for all, urging state legislators to take some action on the video gambling machines during the short session this winter. The ILBA would like to see them legalized and regulated, and believes it has a great incentive for the state of Indiana to do it soon — according to a 2003 study by the public policy firm William-Lynn-James, Indiana is missing out on a substantial amount of potential tax revenue. The study cites a minimum of $144 million annually, with as much as $400 million possible. It certainly wouldn’t fix Indiana’s budget deficit, but it would help.

Fifer outlines the ILBA’s position. “We would like to see them (electronic gambling machines) taxed at a reasonable rate,” Fifer explains. “We would like to see them controlled, only put in licensed areas that can sell liquor; control the number of machines, control the payout, let the state collect the tax.”

“Here we are, an independent, small business saying to the government ‘tax me! Control me!’ and they don’t know how to deal with that,” he says.

It’s not only the state of Indiana that could benefit. “Raid” is a dramatic word that conjures images of a prohibition-era G-man in an overcoat and fedora taking an axe to poker tables, roulette wheels, and illegal barrels of gin. In the case of the crackdown on Cherry Masters and other electronic gambling machines, the state excise simply took the motherboards out of the offending machines or let the owners do it themselves. In some cases, establishments were hit with a fine — $500 for a first-time fine, $1000 the second time.

But even though tables weren’t wrecked, glasses broken, and bars hacked to pieces, the raids left another kind of devastation in their wake, this one financial. Many VFWs and smaller bars, the “mom-and-pop” operations, are in big trouble. They depend on income from these machines to cover a lot of expenses — worker’s benefits, advertising, charitable donations, sponsorships, entertainment… “Those machines gave you money for advertising, which increases sales. Those machines gave you money to give to charitable organizations — scholarships, little league teams… The service clubs and the bars are major contributors to those organizations,” says Loren Fifer. “That money came from the Cherry Masters.”

Pulver’s Pub, a “neighborhood” bar tucked away in the Marketplace of Canterbury, is a perfect example of the kind of small establishment that seems especially vulnerable. Owner Lana Pulver says the revenue from the three Cherry Masters she had in the bar wasn’t huge, but made that extra bit of difference. “The games helped me pay for musicians on Tuesday night, and karaoke on Thursday and Saturday nights,” she says. “Now, I’m probably going to have to cut back on entertainment. It’s going to be hard without that kind of help.”

Pulver also says that, like many bar owners in town, she’s seen a fall-off in customers. In her case, it’s a small fall-off, but still substantial: a handful of people came in specifically to play the Cherry Masters, and while there, they bought drinks and food. They don’t come in anymore. Fifer himself says he’s down about 20%, and he counts himself as one of the lucky ones.

Part of what has the ILBA incensed is that taking the motherboards from Cherry Masters in bars and VFW establishments has hardly stamped out electronic video gambling in Allen County. “That kind of stuff is all over town,” Fifer says. “Go talk to representatives and tell them this is happening, and they don’t believe you. You’ve gotta take them out by the hand and say ‘look, it’s there!’ Now, you tell me, where is the control over a minor playing a Cherry Master in a restroom at a gas station? Or a Laundromat? Or a cigarette store?”

State Representative Ben GiaQuinta (D) is one of several legislators who has been pushing for some kind of action on electronic gambling machines. When state excise police began cracking down on local bars with gambling machines in Allen County earlier this year, GiaQuinta asked to see a list of people whose complaints had allegedly prompted the raids. “They gave me complaints of people who called, but… The list was not a genuine list,” he says. “It didn’t amount to anything and it really didn’t answer my question. It really put them on the defensive. I just wanted to know who was complaining and why they were complaining, and they couldn’t provide that.”

GiaQuinta’s take on the “why now” question is that the state felt that unlicensed Cherry Masters were taking business away from the riverboat casinos. “This is a way to shut them down and act like you were doing a good thing,” he says. “Yet the state has something like nine riverboats, and they’re all loaded with Cherry Masters.”

“My thrust is: the state allows bingo, we allow the lottery, we have riverboats out there where people can come and go and gamble all they want,” GiaQuinta adds. “What’s the big deal here? Either make them legal for everybody, or make them all illegal and throw them all out.”

Making them all illegal seems unlikely — according to the 2003 study cited above, Indiana has over 16,000 legal electronic gaming devices in operation. In 2001, these generated a gross revenue of $22 billion, and accounted for 78% of total gaming tax revenues. That’s a lot of money, and proponents of expanding legalized gambling say that’s just the tip of the iceberg. But perhaps one of the reasons legislators have been reluctant to address the problem of illegal electronic gaming devices is that the issue doesn’t seem to have a lot of resonance with voters.

“If you talk to legislative officials who have actually done any real polling on the issue, you’ll find that expansion of gambling is a break-even proposition at best in terms of popularity,” says Andy Downs of the Mike Downs Center for Indiana Politics at IPFW. “Ask people, ‘are you in favor of the expansion of gambling?’ 49% or 51% are going to say ‘yes’. It’s one of those issues legislators don’t want to touch.”

Another reason is that to many voters and legislators, gambling is seen as a moral issue. Fifer and other supporters acknowledge this, but point out that they’re asking for these machines to be regulated and taxed, like cigarettes and alcohol. “If you go to people who view it as a moral issue, and say ‘should we increase your taxes, or should we tax the sinners on their sin?’ They’re going to say, ‘go tax the sinner’,” Fifer says. “That’s what representatives ought to be thinking about.”

Whether anything substantial on the electronic video gambling issue will happen in this winter’s legislative session is uncertain. Public statements by House Speaker Brian Bosma (R-Indianapolis) and Governor Mitch Daniels have not necessarily ruled it out, but neither seems particularly eager to tackle the issue. Fifer says he would accept a two-year moratorium of electronic gambling machines, a sort of truce that legislators could use to appoint a committee, study the problem, and figure out what needs to be done. Whether that happens in time to save some of the smaller establishments and VFW organizations that have been hit particularly hard by the crack-down is another question, but Fifer is certain that Indiana will see the benefits of expanding legalized gambling.

“It’s the only real hope for this next session,” he says. “They’re broke. They can’t tax the people anymore. The money is here waiting for them. Let’s do it and do it right. It’s hard for the public to understand what the money to be made from this could do as far as property taxes, school taxes. We’re not trying to tell the state where to spend the money. We assume they know where they need it best. God knows, there are a thousand good ways to spend the money in Indiana.”