Gambling in American History

The notion of using a machine for gambling bounced around in many inventors’ heads during the last decade of the nineteenth century. It was the era of inventions, after all. Gambling contraptions of one sort or another proliferated around San Francisco. There, in 1893, Gustav Frederick Wilhelm Schultze registered a patent for a wheel machine. This gave the inspiration for Charles August Fey to make a machine with spinning reels. Three years later he put together his final version of a machine that bears a resemblance to today’s machine. Fey called his machine the Liberty Bell. It had three reels with bells, hearts, diamonds, spades, and horseshoes. Three bells paid off ten-for-one in drinks. Schultze challenged Fey’s and others’ rights to make machines, but he was unsuccessful in having his patent stand up in court, as the validity of gambling machines was questionable.
Fey did not seek to win a patent for his machine. Instead, he sought to guard it by maintaining ownership over each unit he produced. He arranged to place the machines in establishments around San Francisco and other nearby areas with an arrangement that he would take 50% of the revenues from the machine and let the owner of the premises have 50%. The process was effective for several years, but according to Fey’s grandson, Marshall Fey, in 1905 someone from the Mill’s Novelty Company of Chicago secured a machine through unauthorized means and used it as a model for their own machine (Fey 1983). Soon the Mill’s company was making a wide line of machines. In 1906 it developed the first machine that stood upright on its own and did not have to be placed on a stand. This machine, “the Kalamazoo”, and all others came under the scrutiny of legal enforcement against gambling.
Back in San Francisco, the police chief arrested several premise owners. One was fined but appealed. He won the appeal in the Superior Court, which ruled that the machine games were not lotteries. Police actions were also frustrated by defense allegations that enforcement was hypocritical in that California permitted poker card clubs. Nonetheless, the machine makers were wary of legal crackdowns, and they made several adjustments to try to defend their products. Some adjustments and subterfuges used by the manufacturers over the early days of machines included the following (many of these ruses are still attempted in various places):
Machines indicated that prizes were paid off as cigars or drinks or other merchandise rather than cash.
Signs on machines indicated that the machines were not gambling machines.
The machines played music as the coins entered them, and they had signs saying.
Buttons were placed on the machines, and reels could be stopped from spinning when the buttons were pushed. In this way a skillful player could always win, hence the element of chance was removed and the machines were not gambling machines.
The machines portrayed game symbols from games that were legal. For instance, they used poker hands in California.
One of most ingenuous attempts at seeking to avoid the tag of being a “gambling” machine came early, as machines were developed that would tell the player exactly what they would win when they put the next coin in. There was no chance. Of course, what the player was seeking was a chance to play in order to find out what would come after that. Courts wrestled with definitions of gambling on these kinds of machines for many decades.
Machines also were configured so that a player would actually get a piece of gum or some other novelty prize with each play, under the ruse that they were buying merchandise from the machine.
Through the twentieth century, cat-and-mouse games were played among machine owners, operators, police, and the courts. But these games were often quite secondary to the fact that machines were illegal and yet were operating. Public acceptance along with patterns of public bribery and lax law enforcement allowed the machines to proliferate in most locales of the United States. During the years of national prohibition of alcoholic beverages, mobsters gained control over the placement of many machines, and accordingly, the machines became associated with organized crime in the minds of many law enforcement people.  As gambling became legalized in many forms, such an association caused policymakers to leave machines out of the mix of legalized gambling products. Even down to the current day, the biggest battles over the scope of Native American gambling permitted under the Indian Gaming Regulatory Act of 1988 has focused upon whether a state has to allow a tribe to have slot machines (or other gambling machines).
Over the years since Fey’s first Liberty Bell, down to the 1980s, the machines did not change much in basic appearance. Although their facades contained many variations, they all had the spinning reels. Growth in the numbers of machines was constant into mid-century. In 1931, a new company in Chicago developed the Ballyhoo pin ball machine. Bally’s placed over 50,000 of such “skill” machines in bars and restaurants during their first year of operation. The machines allowed players to win more games but not money. In fact, winners could be paid for the number of games they won. Bally’s concentrated on these “novelty” machines as its corporate strength grew.
In 1951 the federal government passed the Johnson Act in an attempt to stop illegal gambling machines. The law exempted machines from prosecution if they were in legal jurisdictions, and as a result, many operators moved their businesses to Nevada. The law also caused Bally’s to lobby Illinois for permission to make machines. In 1963 Illinois repealed the state prohibition on manufacturing machines. At this time the Mill’s company and two others (including Jennings, a spin-off from Mill’s), dominated the gambling machine business. This was soon to change, as Bally’s entered the field with a new knowledge base about recreational machines and their players. Within twenty years Bally’s took over three-quarters of the machine business in the United States.