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Lawsuit filed over video gaming profit split

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Illinois

* The plaintiffs are represented by Dan Webb and other Winston & Strawn attorneys. Press release…

The State of Illinois is forcing thousands of small businesses across the state to cough up half of their profits to video gaming operatives - a mandated shakedown that violates the constitutional rights of thousands of bar and restaurant owners.

According to a lawsuit filed Tuesday in Cook County Circuit Court, the state’s Video Gaming Act is written in a way that also deprives those locally-owned businesses of millions of dollars in potential revenues, while shorting the state of much-needed revenues, as well. An analysis of revenue figures shows the law costs local businesses as much as $150 million annually – or nearly $25,000 a year for an average bar or restaurant.

Some of those businesses are now suing the Illinois Gaming Board, stating the law “serves no rational purpose” other than to illegally line the pockets of those who own coin-operated video gaming machines
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“I can think of no other industry where, by law, a business is forced to give up 50% of their profits and is strictly prohibited from even trying to negotiate better terms,” said attorney Dan K. Webb, of Winston & Strawn, whose firm filed the complaint. “This law is not only unconstitutional, it provides a gravy train of unearned cash for big gaming businesses that make little investment in Illinois.”

Though video gaming existed illegally in Illinois for years, a law to legalize it was passed in 2009 and took effect in 2012. Its purpose was to help small, locally-owned businesses grow. Since then, nearly 6,000 bars, restaurants and cafes have added to their revenues by installing a few gaming machines in their business. Those machines have led to new job creation, more than $3 billion in net revenues and created nearly $1 billion in state and local tax revenues. Last year alone, those establishments added $277 million to state coffers and $55 million more to local governments.

Once those taxes on the machines are paid, local businesses aren’t allowed to keep whatever is left. Instead, by law, they must give up half of those profits to the companies that delivered the machines – an unfair demand, given that the bars, restaurants and cafes are funding the operations and expenses of the business.

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After significant lobbying by the terminal operators, the state mandated in February that nearly all promotional efforts to attract customers to play the games – and increase revenues – be shouldered by those who own the business, even as they are forced to give away 50% of all of their profits to the terminal operators. As an example, the state agreed to implement new rules this year, saying terminal operators aren’t even allowed to help pay for a bag of peanuts as a free give-away to players.

The Liquor Control Board has the same sort of rules for taverns and it’s goofy. One of the few disagreements I ever had with the late Steve Schnorf was the liquor commission rule that tavern owners couldn’t use coasters supplied by distributors. Schnorf was the commission’s chairman for years. The rule is why coasters mostly disappeared from lots of small bars, only to eventually reappear when the video terminal operators started handing them out to the owners. I hate using napkins as coasters, but here we go again.

* Anyway, my petty little complaint aside, the lawsuit is here. A sampling of what bar and restaurant owners are missing out on is here. We’re talking some serious bucks.

posted by Rich Miller
Tuesday, Apr 4, 17 @ 2:24 pm

Comments

I think this is interesting. Can the municipalities increase their taxes on gaming, or is that currently frozen too?

Comment by He Makes Ryan Look Like a Saint Tuesday, Apr 4, 17 @ 2:37 pm
Bars with coasters treat napkins like they’re hundred dollar bills. Napkins are better, you can use them to throw out your gum, wipe up a spill, write down the crazy bet you made with the random person sitting next to you or to leave a ransom note. Coasters are just coasters.

Comment by The Captain Tuesday, Apr 4, 17 @ 2:43 pm
==I hate using napkins as coasters, but here we go again==

Rich, sprinkle salt on the napkin when the drink is delivered. It keeps the napkin from sticking to the bottom of the glass.

Comment by Lester Holt's Mustache Tuesday, Apr 4, 17 @ 2:47 pm
===Rich, sprinkle salt on the napkin===

I know the trick. But it’s worthless if the glass sweats so much it turns the napkin into mush.

Comment by Rich Miller Tuesday, Apr 4, 17 @ 2:50 pm
Rich, maybe you can lobby for the law to make businesses use any increased profits from changes in the law to be directed towards coasters just a thought …

Comment by Perrid Tuesday, Apr 4, 17 @ 2:56 pm
Actually a 50/50 split with the owner of the games is what most were paying before the law. I was talking with an old guy who had many years of experience in these machines back when the law was passed. He said then that there was not enough money in them anymore to make them worthwhile. He said that with the cut you had to give the state, it just wasnt worth it. Just a side thought for what its worth

Comment by SOIL M Tuesday, Apr 4, 17 @ 3:05 pm
=== it just wasnt worth it===

If Franny’s is making $180,000 a year on ‘em, it’s worth it.

Comment by Rich Miller Tuesday, Apr 4, 17 @ 3:46 pm
The “grey” machines could be leased per year or 50/50 split. You were 1099ed and had to pay the taxes on the income. The state wanted their cut faster and gauranteed so they made them “legal”. Now the owner has to pay for all advertising, give up the square footage, pay the electric, and stop selling tickets/tip boards. (Rich, they can buy coasters. It’s cheaper than the napkins)

Comment by Trolling Troll Tuesday, Apr 4, 17 @ 4:23 pm
The terminal operator and the business owner split 70% of the net terminal income. 25% of net terminal income goes to the state of Illinois 5% goes to the local municipality. The formula used to calculate what the business owner is missing is incorrect. They cannot take it from the entire MTI it would have to come from the terminal operator and as soon as already 70% split. Also, the TO’s supply the vgt’s, the redemption kiosks, the money to stock it, people to fix the machines, etc.

Comment by Iron Lady Tuesday, Apr 4, 17 @ 4:24 pm
While I’m sure this would be a windfall for the Dotty’s, Stella’s, etc. Idon’t believe most small licensed locations could afford the expense of buying and maintaining the machines and keeping enough cash constantly on hand to stock the payout kiosks

Comment by iroquois county dem Tuesday, Apr 4, 17 @ 6:24 pm
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

Comment by Anonymous Tuesday, Apr 4, 17 @ 6:41 pm