Step By Step: Florida’s Path to More (or Less) Gaming

Moving government to act, for any purpose, is a difficult and time-consuming process. Anyone who has spent any amount of time in government relations work knows that changing the status quo in government is done by inches, not feet, and definitely not miles. It is a step-by-step process. This maxim is being tested once again, this time in Florida. Florida, a state with a hodgepodge of gambling and gaming laws, and no dedicated gaming commission, is in the thralls of multiple debates regarding destination casino resorts, the legality of Internet cafés, and the impact of gaming decisions on both the budget and the compact with the Seminoles.

Watching the ongoing gambling debate in Florida is a lot like watching a rerun of a bad sitcom. Alabama just recently went through an almost 8-year battle over gambling. The battle included the rise and fall of Internet sweepstakes operations and electronic bingo. The Alabama Supreme Court struck down Internet sweepstakes operations in 2006 and dealt a deadly blow to electronic bingo operations in 2009. In 2008, legislative attempts were made to clarify electronic bingo, regulate it, and tax it. The efforts culminated in 2010 with legislation that would have allowed the people of Alabama to vote to approve electronic bingo facilities, requiring each facility to provide a specific minimum investment, the creation of a gambling commission and earmarks on the taxes—sound familiar? The fight dominated state government for three legislative sessions. In the end, the state senate passed electronic bingo legislation, only for it to die in the House of Representatives without a vote. Because the legislature failed to act either for or against electronic bingo, the courts have been left to deal with all the issues regarding electronic bingo.

The Florida version of the gaming debate, however, brings more to the table than the Alabama prequel. First, Florida already allows a wide variety of gaming. It specifically allows pari-mutuel wagering at horse and dog tracks, conducts a state lottery, has poker rooms, allows slot machines in specific locations, allows Class II and Class III tribal gaming, and tolerates Internet sweepstakes operations (at least for now). Second, Florida has a larger, more diverse and more progressive population than Alabama, allowing an opportunity for conversations on gaming to be more than a religious debate.

Like Alabama, however, Florida is trying to deal with a growing gambling appetite, both from a revenue standpoint and a player standpoint. Currently, the gaming industry is outpacing the governmental regulation and oversight needed for the industry. As a result, Florida has seen an explosion of “Internet cafés,” state and local governments at odds over legal questions regarding slot machines, and a tied-up legislature that is forced to deal with “should we” or “should we not” questions regarding gambling.

Some of the gaming-related legislation that has been proposed this year includes:

1. SB710 / HB487 – Destination Resorts: This legislation establishes a state department on gaming, creates a state gaming commission, establishes licensing procedures and regulations for destination resorts, allows slot machines and provides taxes. The legislation appears dead for the 2012 session, but expect it to come back next year with bigger and better compromises.

2. SB428 / HB3 – Simulated Gambling Prohibition and Community Protection Act: This legislation is directed toward Internet cafés. It defines simulated gambling devices and prohibits their use in connection with a sweepstakes or other promotion. There is, however, a carve-out for corporations that are registered under the federal Securities and Exchange Act of 1943 and have total assets of not less than $25 million. These corporations are allowed to conduct game promotions on an “electronic communication device, including, but not limited to, a computer or a cellular telephone.” The Senate version of this bill appears to be stalled, but HB3 is still making its way through the process.

3. SB380 / HB467 – Regulation of Internet Cafés: This legislation seeks to regulate electronic devices used for sweepstakes promotions and to create requirements for electronic game promotions. The legislation comes with the added bonus of potentially breaching the Seminole compact and costing the state $223 million per year. The House version has stalled, but SB380 is working its way through the Senate.

4. SB902 / HB843 – Electronic Lottery Vending Machines: This legislation gets close to allowing VLTs (video lottery terminals) but stops just short—remember, small steps. This could be the biggest opportunity for incremental change to Florida’s gaming laws this session. The legislation will allow individuals to access lottery vending machines. Currently, access to such electronic devices is limited to retailers. HB843 has passed the House and has been sent to the Senate.

As the legislative session winds down, expect to see more litigation over issues left on the table by the legislature. This should include Internet cafés and slot machines at the tracks. One case to watch is Florida Gaming Center Inc. v. Florida Department of Business and Professional Regulation. This case deals with the legislature’s power to allow slot machines without a constitutional amendment. In 2009, the legislature amended Florida Statute §125.011, redefining “eligible facility” to allow slot machines at certain pari-mutuel facilities. The First District Court of Appeals held that the legislature had the power to make the amendment. The case has been appealed to the Florida Supreme Court. The real fight over this issue concerns the interpretation of §125.011. The question to be answered is whether the amended language allows a county with an eligible facility to hold a referendum for slot machines without any additional legislation from the state. The Florida Attorney General recently issued Advisory Legal Opinion – AGO 2012-01 stating that before a county can hold a referendum based on §125.011, there must be state legislation. This will end up in the courts.

The gaming debate in Florida is far from over. Change is coming to Florida, but how much and when remain to be seen. The changes, when they do come, will most likely be one small step at a time.

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