VIDEO LOTTERY ENTERTAINMENT. (NEW)

View NCGA Bill Details2021
House Bill 954 (Public) Filed Tuesday, May 11, 2021
AN ACT TO AUTHORIZE THE REGULATION OF VIDEO LOTTERY ENTERTAINMENT.
Intro. by Warren, Moffitt, Hunter, Wray.

Status: Serial Referral To Rules, Calendar, and Operations of the House Added (House action) (Sep 1 2021)

SOG comments (1):

Long title change

House committee substitute to the 1st edition changed the long title. Original long title was AN ACT TO AUTHORIZE THE REGULATION OF VIDEO LOTTERY TERMINALS.

H 954

Bill Summaries:

  • Summary date: Aug 31 2021 - View Summary

    House committee substitute amends the 1st edition as follows.

    Makes the following changes to proposed Article 9, Video Lottery Entertainment, of GS Chapter 18C.

    Adds associated equipment and net machine revenue to the Article's defined terms. Now defines manufacturer to mean a person who is licensed by the NC State Lottery Commission (Commission) who manufactures, assembles, services, or produces video lottery terminals or associated equipment in the state (was, an individual, partnership, corporation, trust, association, joint venture, limited liability company, or other business entity that conducts the described activities). Now defines operator to mean a person licensed by the Commission who owns, leases, or otherwise controls a video lottery terminal for which a video lottery terminal permit has been issued by the Commission and places those video lottery terminals or associated equipment for public use in the state (was, an individual, partnership, corporation, trust, association, joint venture, limited liability company, or other business entity that conducts the described activities). Replaces the term video lottery retailer with the term video lottery merchant, defined as a person licensed by the Commission and with whom an operator has contracted to allow placement of video lottery terminals for public play and redemption of shares of video lottery games in accordance with the Article. Now includes electronic computerized video game machines that accept cash as an alternative to lottery shares within the meaning of video lottery terminal, as previously defined. Makes changes throughout the Article to conform to changes to the Article's defined terms and their definitions as amended.

    Directs the Commission to determine that video lottery games (was, terminals) are a type of lottery game in the state, with play of video lottery games (was, terminals) deemed a share for purposes of GS Chapter 18C. Makes such play exempt from GS 18C-131(c) and explicitly limits play to video lottery terminals with valid video lottery terminal permits. Makes the Chapter applicable to conduct of video lottery games (was, terminals). Requires the Commission to adopt rules to determine the play of video lottery games (was, terminals). Now directs that the rules address the procedures for monitoring, collection, and remittance of net machine revenue from the video lottery games within 10 specified parameters (previously, directed that the Commission's rules include the allocation of net income from video lottery terminals and the procedures for the monitoring, collection, and distribution of income from the terminals within eight specified parameters). Revises the parameters set forth for the Commission's rules, now providing the following. Requires at least 32% of the total net machine revenues from video lottery games to be transferred to the NC Video Lottery Fund (previously, required at least 35% of the total annual revenues to be transferred to the State), with the Commission required to adopt rules to establish a schedule of remittance, calculation of net machine revenue, and calculation of net revenue per operator, and authorizes the adoption of rules to set a minimum percentage of annual revenue, per machine or per operator, to be returned to the public in the form of prizes. More specifically caps the total annual net machine revenues from video lottery games allocated for administrative expenses of the Commission at 8%, adding that any monies unused by the Commission must be transferred to the NC Video Lottery Fund. Now requires 35% of the net machine revenues to be allocated to operators and 25% of the net machine revenues to be allocated to video lottery merchants. Requires associated equipment, in addition to video lottery terminals, to be connected to a central monitoring system at all times during play and as determined by the Commission. Requires all video lottery terminals to be placed with a video lottery merchant who holds an active off-site ABC permit or an active on-site ABC permit. Bars video lottery merchants from engaging solely in the business of placing video lottery terminals for play by the public. Requires the Commission to allow each video lottery merchant to operate up to six video lottery terminals per location, with the Commission authorized to allow up to four additional terminals per location (previously, allowed the Commission to place up to seven video lottery terminals with a lottery game retailer who holds an off-site ABC permit, and up to five video lottery terminals with a lottery game retailer who holds an on-site ABC permit). Now prohibits placement of video lottery terminals within 500 feet (was, 1,000 feet) of a church, public school, or any nonpublic school. Requires prizes for play of video lottery terminals to be issued by a share that is redeemable pursuant to specified state law or may be inserted into terminals for redemption or to generate credits for the play of video lottery games (previously, required shared for play of terminals to be a credit ticket voucher redeemable for cash or that can be inserted for redemption or to generate credits for the play of games). Maintains the restriction requiring the Commission to contract with licensed manufacturers and operators only. Adds new restrictions for operators placing video lottery terminals for play in the state, providing that the operators can only (1) purchase, lease, or otherwise obtain video lottery terminals and associated equipment from licensed manufacturers and (2) contract with licensed terminals for play by the public. 

    Creates the NC Video Lottery Fund (Fund) as an enterprise fund within the State treasury consisting of the transfer of net machine revenues and any monies remaining from the Commission's administrative expenses, and any earned interest on those funds. Directs the legislative appropriation of the monies in the Fund annually in the Current Operations Appropriations Act, based on estimates of the net machine revenue from video lottery games to the Fund. Requires appropriating $2 million each fiscal year to each of five named universities for the improvement of graduation rates and student success or sustainability of the named institutions, as well as an amount to the State Education Assistance authority for each fiscal year sufficient to fund scholarship forgivable loans for eligible students under the Community College Scholarship Loan Program, appropriated to the Community College Scholarship Loan Trust Fund. 

    Regarding video lottery permitting, refers to video lottery terminal permits (was, video lottery permits) throughout. Adds a new provision requiring the Commission to adopt rules establishing the schedule for issuance and affixation of video lottery terminal permits, including an option for a licensed operator or licensed video lottery merchant to request to add video lottery terminals into play by the public during the license year. Makes conforming changes to reflect the requirement for associated equipment to be compatible with the Commission's central monitoring system.

    Explicitly prohibits engaging in the manufacture, operation or service, or placement for play by the public of any video lottery terminal without a license issued by the Commission. Changes the disqualifications for licensees. Previously, barred licensing an applicant who has been convicted of a felony or any gambling offense in any state or federal court within 10 years of issuance of the license or who employs officers and directors who have been convicted of a felony or any gambling offense in any state or federal court within 10 years of issuance of the license. Now bars licensing an applicant who (1) has been convicted of a felony in any state or federal court within 10 years of issuance of the license, (2) employs officers or directors who have been convicted of a felony in any state or federal court within 10 years of issuance of the license, (3) has completed a sentence for a felony in any state or federal court within 10 years of issuance of the license, or (4) employs officers or directors who have completed a sentence for a felony in any state or federal court within 10 years of issuance of the license. Now bars licensing an applicant who resides in the same household as a member or employee of the Commission, or who is an employee, director, officer, partner, or proprietor of a manufacturer, operator, or video lottery merchant. In addition to barring licensure if the applicant has not been a resident for at least three years immediately preceding the application, also bars licensing an applicant who has not maintained a physical office location in the same jurisdiction for at least three years immediately preceding the application related to the lawful video lottery terminal industry, or the applicant has not conducted business in the state in the amusement game industry for at least three years immediately preceding the application and has not been incorporated, formed, or otherwise qualified to do business in the state (evidenced by specified State or federal filings). Eliminates the provision that barred any entity acting as a supplier for the Commission in building, operating, maintaining, or contracting to build, operate, or maintain a central monitoring system from eligibility as a licensed manufacturer or operator, or from contracting as a video lottery retailer. Now bars licensed operators from giving anything of value to any video lottery merchant as an incentive or inducement to locate video lottery terminals in a specific location. Directs the Commission to adopt additional rules governing the exchange of gifts, loans, and other financing agreements, gratuities, special discounts, favors, hospitality, or service between licensees. Now authorizes the Commission to revoke any license for cause (was, at any time). 

    Eliminates the provision which deemed licenses nontransferable. Instead, allows for licenses to be transferred or assigned so long as the new license holder submits an application and associated fee and is approved by the Commission. Previously, barred holding multiple types of licenses. Now allows a manufacturer to be licensed as an operator, and an operator to be licensed as a manufacturer. Bars a manufacturer or an operator from being licensed as a video lottery merchant. Authorizes the Commission to contract with a manufacturer for the central monitoring system if the Commission is satisfied that the manufacturer will not use any knowledge or control of the system to advantage the manufacturer, an associated operator, or a video lottery merchant with whom the manufacturer's terminals are placed. Directs the Commission to strive to have at least five licensed manufacturers and 12 licensed operators at all times.

    Makes the general duties set forth for video lottery license holders applicable no longer applicable to video lottery retailers.

    Specifically requires operators to file with the Commission the name and address (was, name only) of the video lottery merchant where each permitted video lottery terminal for public play is located. Requires the independent testing of gaming software for video lottery terminals to include testing for compatibility with the central monitoring system. Prohibits the Commission from limiting licensure or connection to the central monitoring system to one type of video lottery terminal, one manufacturer, or one operation (previously, prohibited video lottery terminals approved by the Commission from limiting participation to only one manufacturer or one type of video lottery terminal). Makes organizational changes to enact the provisions related to the central monitoring system in a statute separate from the possession and permitting provisions. No longer directs the Commission to use commercially reasonable efforts to adopt and implement the central monitoring system. Makes conforming changes to eliminate the restriction placed upon the Commission to contract for the system with unlicensed manufacturers, operators, or retailers only. No longer prohibits the system from using a slot machine interface board for the purpose of accounting and reporting to the State. 

    Additionally makes it unlawful for a person under 21 to play a video lottery terminal (previously, only made it unlawful to purchase a share for play of a terminal). 

    Authorizes the Commission and the Alcohol Law Enforcement Division (ALE) to inspect an establishment of a licensed video lottery merchant (was, a video lottery retailer, with no specification as to licensure) during normal business hours, in addition to the previous grant of authority to inspect licensed operators and licensed manufacturers. Adds a new requirement for ALE to report to the Commission the results of any inspection and potential violations noted during an inspection. 

    Makes further technical changes throughout the Article.

    Amends GS 18C-122 to authorize the Commission to hear any report of information regarding any security vulnerabilities of the Commission and the Education Lottery, or that could be used to provide an unfair advantage to a player or jeopardize the integrity of any lottery game, with such reports exempt from public records laws. 

    Amends new GS 105-102.7, making clarifying changes that the privilege taxes established apply to licensed manufacturers, licensed operators, and licensed video lottery merchants. Makes conforming changes to refer to "video lottery merchants" rather than "retailers." 

    Amends GS 105-259 to allow disclosure of tax information in order to provide the Commission the information required for licensure under new Article 9, GS Chapter 18C (specifically, GS 18C-214).

    Enacts new Part 5 to Article 23, GS Chapter 115C, establishing the Community College Scholarship Loan Program (Program). Charges the State Education Assistance Authority (Authority) with the Program's administration, with the purpose of providing scholarship forgivable loans to residents to attend community colleges in pursuit of an associate degree, diploma, certificate, and for those students to be eligible for forgiveness of the scholarship forgivable loans upon award of the degree, diploma, or certificate within six years. Allows for awards to eligible students for up to six years for tuition and fees associated with attendance. Details eligibility requirements, including residency requirements. Allows the Authority to use up to 5% of annual appropriations for Program administration, as well as funds received as loan repayment for recovery of funds advanced under the Program. Establishes the Community College Scholarship Loan Trust Fund (Trust Fund), administered by the Authority, consisting of net revenues transferred from the NC Video Lottery Fund, funds received as repayment of loans, and monies earned on interest thereof. Restricts use of funds in the Trust Fund to the award of scholarship forgivable loans under the Program and administrative costs of the Program. Lists required terms of all scholarship forgivable loans, including capping the interest rate at 10%, providing for forgiveness of the loan upon award of a degree, diploma, or certificate at an NC community college within six years (with certain extensions permitted, and forgiveness also provided due to death or permanent disability), and repayment requirements. Directs the Authority to annually report to the specified NCGA committee on the Program's implementation, beginning November 1, 2023. Details required content of the annual reports. Effective January 1, 2022, and applies beginning with the scholarship forgivable loans awarded for the 2023-24 academic year. 

    Directs the Commission to use sufficient funds from the NC State Lottery Fund to cover initial operating expenses of the Commission to implement new Article 9, GS Chapter 18C, up to $10 million. Requires the borrowed funds to be available for expenditure without further legislative action beyond the act. Requires the Commission to repay any borrowed funds within 24 months after the effective date of the act.

    Changes the effective date of the act, unless otherwise provided, to January 1, 2022 (was, October 1, 2021). Authorizes the Commission to begin rulemaking to implement new Article 9, GS Chapter 18C, prior to January 1, 2022. Bars temporary or permanent rules from becoming effective prior to January 1, 2022. Authorizes the Commission to initiate requests for proposals for the central monitoring system prior to January 1, 2022, but bars awarding any contract prior to that date. Authorizes the Commission to accept and issue applications for licensure under new Article 9, GS Chapter 18C, but bars issued licenses from becoming effective prior to the later of January 1, 2022, or the date the Commission deems the central monitoring system active. 

    Makes conforming changes to the act's titles. 


  • Summary date: May 13 2021 - View Summary

    Enacts Article 9, Video Lottery Entertainment, to GS Chapter 18C, organized into four Parts as follows.

    Part 1 sets forth 10 defined terms. Directs the NC State Lottery Commission (Commission) to determine that video lottery terminals are a type of lottery game in the state, with play of video lottery terminals deemed a share for purposes of the Chapter. Defines video lottery terminals as a device operated under the authority of the Commission that shall be exempt under GS 14-306.1A and is any electronic computerized video game machine that, upon the insertion of a lottery share, is available to play a video lottery game authorized by the Commission, and which uses a video display and microprocessors in which, by chance, the player may receive free games or credits that can be redeemed for cash; excludes a machine that directly dispenses coins, cash, or tokens. Directs the Commission to adopt rules to determine play of video lottery terminals and the allocation of their net income, and procedures for monitoring, collection, and distribution of income from the video lottery terminals. Sets eight parameters for such rules, including requiring at least 35% of the total annual revenues to be transferred to the State, capping net revenue allocations to the Commission for administration at 8%, requiring video lottery terminal placement with a lottery game retailer who holds an active off-site or on-site ABC permit, connecting all video lottery terminals to a central monitoring system, and requiring shares for play to be a credit ticket voucher. Charges the Alcohol Law Enforcement Division (ALE) of the Department of Public Safety with enforcement authority under the Article.

    Part 2 requires all video lottery terminals to have a video lottery permit affixed to it prior to play, with permits issued annually by the Commission based on the number of approved video lottery terminals registered with the Commissioner per licensed operator. Restricts placement or removal of permits to the Commissioner only. Prohibits transporting a terminal out of state without removing the permit. Requires manufacturers, licensed operators, and video terminal retailers to make video lottery terminals and associated equipment available for inspection by the Commission. Restricts permitting to terminals with software and hardware compatible with the Commission's central monitoring system and the Commission's approval of all installed games. Subjects terminals without a permit displayed to confiscation by any law enforcement officer.

    Establishes minimum qualifications for licensed operators, which can be an individual, group of individuals, corporation, partnership, or association. Qualifications include state residency for three years preceding the application and that the applicant is not disqualified based on specified characteristics or conduct of the applicant. Disqualifications include age and character requirements, criminal history restrictions, and tax delinquency. Specifies required materials for application, and required background investigations. Places the burden of proving qualification upon the applicant. Authorizes the Commission to revoke an application at any time for cause. Provides ethics standards of licensees and applicants in relation to the Director of the Commission. Bars from eligibility as a licensee or contracted video lottery retailer any entity that acts as a supplier for the Commission regarding its central monitoring system. Caps the application fee at $250 plus the cost of the criminal and financial record check. Deems licenses not transferable or assignable. Prohibits holding more than one of the following licenses: a video lottery terminal manufacturer, a video lottery terminal operator, or a video lottery terminal retailer. 

    Establishes five general duties of video lottery license holders and retailers, including (1) promptly reporting violations related to video lottery games; (2) holding the Commission and the State harmless and defending all claims against a license holder, the State, or the Commission and its employees regarding the licensee's participation in or operation of video lottery games; and (3) maintaining all required records.

    Part 3 requires all video lottery terminals, properly permitted, to be placed with a video lottery retailer for play. Requires operators to file with the Commission the location of each permitted video lottery terminal and the name of the retailer where the terminals are located. Requires the Commission to contract for a central monitoring system from  suppliers of such systems who are not licensed manufacturers or operators, or retailers in the state. Details requirements of the central monitoring system, including requiring the system to be linked by a communications network through which all video lottery terminals connect to a single point of commerce. Prohibits issuing a permit until the game software of the video lottery terminal is certified by an independent testing lab; charges licensed manufacturers with submitting all video lottery terminals for independent testing for compliance with Commission rules and regulations. 

    Makes it a Class 1 misdemeanor to purchase or sell a share for play of video lottery terminals by or to persons under 21. Restricts maximum wager amounts to amounts established by the Commission. Requires the Commission to establish the manner in which the odds are calculated and how the odds are posted. Requires written notification to the Commission prior to transporting a video lottery terminal from one retailer to another, or for servicing. 

    Part 4 places sole administrative enforcement authority of the Article with the Commission. Permits the Commission or ALE to inspect an establishment at any time during normal business hours. 

    Establishes the following criminal offenses. Makes it a Class 1 misdemeanor to tamper with a video lottery terminal with the intent to interfere with its proper operation, with increased punishment to a Class H felony for a second offense, and a Class G felony for a third or subsequent offense. Makes it a Class G felony to manipulate the outcome, payoff, or operation of a video lottery terminal, with intent to do the same, with increased punishment to a Class F felony for subsequent offenses. Makes it a Class G felony for a video lottery retailer or operator to falsely report or fail to report the amount due required by the Commission, and subjects the retailer or operator to termination by the Commission. Makes it a Class G felony for any video lottery terminal retailer or operator to pay a prize to any person in the amount less than the specified prize won, and subjects the retailer or operator to termination by the Commission. 

    Makes conforming changes to GS 18C-304 (defining game or lottery game) and GS 18C-120 (providing for the Director of the Commission's duties regarding operation and administration of the Chapter).

    Further amends GS 18C-120, adding to the Director's powers the power to engage an independent firm experienced in security procedures to conduct a comprehensive study and evaluation of all aspects of security in operation of video lottery terminals. Specifies required components of the study.

    Enacts GS 105-102.7, establishing an annual privilege tax as follows: $50,000 for licensed video lottery terminal manufacturers; $25,000 plus $150 per video lottery terminal licensed to the operator for licensed video lottery terminal operators; and $1,000 per retail location plus $150 per video lottery terminal in each retail location for licensed video lottery terminal retailers. 

    Makes conforming clarifications to GS 14-306.1A (Types of machines and devices prohibited by law; penalties), and GS 14-306.4 (Electronic machines and devices for sweepstakes prohibited) to specify that neither statute makes any activity conducted pursuant to new Article 9 of GS Chapter 18C illegal. 

    Effective October 1, 2021. 


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