Bill Summary for H 954 (2021-2022)

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Summary date: 

May 13 2021

Bill Information:

View NCGA Bill Details2021
House Bill 954 (Public) Filed Tuesday, May 11, 2021
Intro. by Warren, Moffitt, Hunter, Wray.

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Bill 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.