Thursday, September 10, 2009

The Trib calls for a repeal of video gambling

In an editorial They are not the only ones to point out the regulatory challenges on this thing.

One of their concerns, and a legitimate one, is the regulatory framework is going to be too complex for the gaming board to deal with. Between all of the different types of licenses, background checks, etc. this is going to be very complex to administer.

The answer is not getting rid of video poker, but simplification...

I think you could 'simplify' video poker in Illinois significantly, in a way which could improve the state's revenue stream from the machines as well as give more money to local governments (which I think would improve local participation).

First: video poker is made part of the state lottery system.

Secondly: The machines are owned and operated by the state.

The lottery would own (or lease) and operate the machines. You could likely find two suppliers who could provide the machines to the state at a fixed cost per machine. So instead of a 50/50 split on the net after taxes between the machine owner and the venue you could give venue 60% of the revenue and give more back to the state in terms of revenue that could then be used not only for capital but other stuff.

If a venue got $1,000 in revenue from the machines. Now under the law $300 goes in taxes and the venue gets $350 and the machine owner gets $350.

Now if you take the machine owner out all sorts of other options pop up.
Lets say the venue gets 40 of the revenue $400 (so they are up $50), the State gets $400 (up over $100) and the local government entity gets $150 (also up significantly) and the last $50 goes to the lottery as admin overhead (or go $25 to the lottery and $25 to the general school fund)

So the state does better, the local government does better and the venue does better. The only loser in this is the machine owner.

Some other advantages.

The state would manage odds on the machines, so you wouldn't have venues fighting with each other over who has the loosest machines.

The vendor who operates/provides the machines would have no incentive to cheat because the base contract would be so big that any funny business would not be worth the risk.

more on this to come...

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