How Illegal Gambling Can Become Legal By Exploiting State Loopholes

Although sports betting is flourishing across the United States, other forms of gambling are still frowned upon. This is particularly true for online casinos, which are only available legally in a handful of states. Despite this, some forms of illegal gambling have become legal through a variety of loopholes.

Video gaming terminals (VGTs) have a bad reputation for their lack of protections for problem gamblers. While sportsbook users can block themselves from online and retail sportsbooks, VGTs don’t link games to individual identities. They can allow anyone to play for unlimited amounts of time, regardless of their propensities for problem gambling. Public opinion has limited the ability of VGTs’ spread.

However, that hasn’t stopped them from creeping around state law to get in front of players. Sometimes VGTs are targeted by state officials, and other times they’re continually pushed to the backburner. Here are a few states that have gambling that’s legal through different loopholes. Each type of gaming is different, but the legal loopholes they exploit share common threads.

Georgia’s Public Slot Machines

Georgia has some of the strictest gambling restrictions in the country. It doesn’t allow commercial casinos or sports betting. Lottery tickets and charitable gaming are all bettors and gamblers will find in Georgia. However, that hasn’t stopped one type of gaming from infiltrating Georgia.

In 2013, Georgia legalized coin-operated amusement machines (COAMs). They’re slot machines that aren’t allowed to pay cash to winners. Winners can only be paid in credits that can buy:

  • In-store merchandise
  • Fuel
  • Lottery Tickets

That seems like a compromise that pleases anti-gambling folks. However, some business owners don’t care about the prohibition of cash prizes. They get a cut of the machine revenue, and they know more players will come to win cash than gas station merchandise. In one operation, the Georgia Bureau of Investigation found five businesses that were paying cash out on their machines, anyway. The GBI arrested two people on felony commercial gambling charges. But the GBI suspects the problem is more widespread than their sting revealed. It’s an ongoing problem.

Ignoring a state’s gambling laws isn’t a loophole like the other two states. However, it’s a clear abuse of Georgia’s gambling laws. Seedy business owners redeeming credits for cash are running unlicensed gambling operations. They probably aren’t worried about problem gamblers, and all the off-the-books money is money that Georgia can’t tax. It’s a clear no-win situation for Georgia.

Missouri’s No-Chance Slots

Missouri’s no-chance slot machines advertise the legal gray area they operate in. These slot machines are available at convenience stores and include stickers that state their rules. The machines show players their chances of winning before the next turn. However, players can’t skip to the next turn. They have to play that turn first.

That means players at no-chance machines aren’t betting on their current spin. They’re betting on the one after.

The machine stickers claim that they’re not illegal gambling machines because they show players their chances of winning that spin. They also quote Missouri’s gambling law and the loophole they’re exploiting. Missouri didn’t fall for that, and the company behind it–ironically named Integrity Vending LLC–lost in court over these machines.

These machines may disappear from Missouri following Integrity Vending’s court loss. However, it’s an important lesson in VGTs that exploit legal loopholes. First, announcing that your company’s product is a loophole is bad business. Second, some states can come down on loophole companies hard and limit their operations. One Missouri county disapproved of these machines, and they were vindicated in court. Barely legal products can be removed from the marketplace.

Illinois’ Gambling Laws And Chicago’s Sweepstakes Machines

Illinois gambling laws are unique. It allows VGTs, but it also allows local municipalities to disallow them. That means VGTs are legal in Illinois but illegal in Chicago. However, Chicago has sweepstakes machines, instead. These sweepstakes are like VGTs, but critical differences let them get around Chicago’s anti-VGT law:

  • Players don’t pay for their first set of free credits
  • Machines award coupons instead of cash

Sweepstakes machine supporters lean on the free credits and the awarded coupons as reasons they’re not VGTs. However, these are clear obfuscations. The machines allow players to buy more credits after their first round of free credits. Players can also redeem those coupons for cash, making them inconvenient VGTs instead of clear exceptions to Chicago’s VGT ban.

Some lawmakers have tried banning sweepstakes machines but failed. Current Mayor Lori Lightfoot introduced a bill to bring a casino to Chicago. However, the bill doesn’t touch the sweepstakes machine issue. Those machines remain in Chicago despite some opposition from some lawmakers.

How Video Gaming Terminals Infiltrate States They’re Not Supposed To

There are different ways for VGTs to slip into areas where they’re illegal. Some machines are honest lottery machines that locals abuse in their own ways. Others find loopholes and stress how legal they are in their legal gray area. Others still change rewards and payment terms to create enough distance between the legal definition of a VGT and their machines. Each method is a legal trick to expand VGT territory.

Are Sweepstake Machines VGT?

Sweepstake machines stand out among the VGT crowd as uniquely slippery. They’re not illegal. Their business models really are different from traditional VGT machines. Free currency gives players the chance to win without risk.

However, players get better chances to win if they continue buying credits. The machines may as well award cash if the coupons can be redeemed for cash. A paper slip isn’t enough separation to let the sweepstakes machines off the hook that easily. However they circumvent the law, VGTs can give players a video gaming experience that’s similar to video poker or slots.

Do Sweepstakes Machines Protect Gamblers?

The problem isn’t that they offer these services. But it’s dangerous for them to offer them without oversight and player protection. The state government can impose winning percentages over the lifetime of these machines. It’s how it can guarantee fair odds for the machine’s lifetime. Governments can also provide resources for problem gamblers–assuming they protect gamblers rather than send them resources they can use or ignore. And that’s all before considering tax collections.

Players shouldn’t delude themselves into thinking outlawing VGTs eliminates them. They should be on the lookout for machines that make small changes to themselves to avoid being called VGTs. They often act more like cheap knockoffs of VGTs than the real thing. Players should treat these imitators like lesser entertainment products–if they don’t avoid them altogether.

See our guide to Responsible Gaming to learn more about problem gambling and available resources. 

About the Author

Chris Gerlacher

Christopher is a sports betting enthusiast and online gaming expert from Colorado Springs.