Missouri state officials, in collaboration with federal agencies, are looking into allegations regarding illegal slot-like machines and the movement of billions of dollars from players to their operators, according to the state’s attorney general, as lawmakers discuss the potential legalization and taxation of these devices.
Missouri Attorney General Catherine Hanaway informed a legislative committee that the inquiry, initiated at the behest of federal authorities, is scrutinizing the finances of operators, the locations of the machines, and their ownership structures to consider possible legal action.
“We are assessing the operations of these games, tracking their financial flow, determining their locations and the number of machines, enabling us to take appropriate enforcement measures,” Hanaway stated to the Missouri Independent.
This investigation follows a federal civil court decision declaring devices produced by Torch Electronics as illegal gambling equipment. Torch Electronics promotes its machines as games of skill that do not operate solely on chance, evading gambling regulations that apply to luck-based gaming.
Hanaway mentioned that the FBI, the Internal Revenue Service, and other federal agencies are involved due to concerns over potential money laundering and banking activities.
Concurrently, the Missouri House is debating legislation that would empower the Missouri Lottery to license and tax machines similar to video lottery terminals (VLTs). Proponents argue that regulation could replace an unregulated sector with licensed machines and yield substantial new revenue, while opponents raise concerns about social implications and question the timing amid ongoing inquiries.
“Whatever regulatory measures you enact as a legislature, we will enforce those laws,” Hanaway assured lawmakers. “However, at present, these operations are illegal, and we will pursue them accordingly.”
The extent of machine operations across the state remains ambiguous. Although there is no official count, lawmakers estimate that up to 25,000 devices might be in operation. Unlike Missouri’s 13 licensed casinos, which are required to report monthly betting totals for taxation, the machines under investigation function without state oversight or public transparency regarding consumer expenditures.
In contrast, Missouri casinos have recorded approximately $17 billion in slot machine bets over the past three fiscal years. Casino profits are taxed at a rate of 21%, contributing $364 million for public education in the most recent fiscal year, as per state data.
Federal court records revealed that Torch machines generated $32 million in revenue from 2017 to 2023 across 20 locations with approximately 100 machines. Of this total, $11 million was shared with retailers, with about 65% returned to players in winnings.
Hanaway expressed concerns regarding the unregulated nature of these machines, emphasizing their potential to attract organized crime. “I am apprehensive about the significant revenue being generated without regulation within our state,” she stated.
A representative from Torch, Gregg Keller, stated that the company has not been approached by investigative authorities but is willing to cooperate if contacted. “Our posture remains the same: we will fully collaborate with law enforcement and legislators to establish and enforce equitable regulations for the entire industry,” he affirmed.
Law enforcement has faced challenges; local prosecutors have frequently opted against pursuing charges, citing the formidable resources and legal expertise of machine operators, Hanaway noted. So far, only a single felony charge has resulted in a conviction, while other cases remain unresolved or pending.
The proposed VLT legislation, which barely passed through a House committee, could allow for licensed machines with mandatory payout standards and potentially generate roughly $350 million in revenue within two years, according to official estimates. Advocates suggest that this revenue could aid efforts to eliminate the state income tax.
Opposition to the bill spans party lines. State Representative Don Mayhew has expressed outright disapproval of the legislation, while Senate President Pro Tem Cindy O’Laughlin has cautioned her colleagues against focusing solely on potential tax revenues.
The future of the VLT legislation remains uncertain within the legislature, with Senate leaders indicating resistance even if the House pushes the bill forward, putting Missouri in a complex position between increased enforcement and efforts to regulate these machines.