During the 1990s, South Carolina became the land of gambling loopholes. During the 1970s and 1980s video game machines began to appear in many South Carolina locations. Cash prizes were given to players who accumulated points representing winning scores at the games. No cash was dispensed by the machines; instead, the owners of establishments with the machines paid the players. Although the arrangements seemed on the surface to violate antigambling laws, they survived legal challenges. In 1991 the state supreme court bought into a loophole that the operators offered in their defense. The operators argued that the machines were not gambling machines as long as the prizes were not given out by the machines directly. The court agreed, and so naturally a gaming machine industry began to blossom throughout the state (Thompson 1999).
Operators “seen their opportunity”, as the famous turn-of-the-last-century political philosopher George Washington Plunkitt of Tammany Hall would say, “and they took ’em”. As the gaming revenues flowed in, the operators formed a very strong political lobby to defend their status quo. The legislature addressed the issue of machine gaming, but it could only offer a set of weak rules that have not been rigorously enforced. Legislation provided that gaming payouts for machine wins were supposed to be capped at $125 a day for each player. Advertising was prohibited. There could be no machines where alcoholic beverages were sold, operators could not offer any incentives to get persons to play the machines, and there could be only five machines per establishment. Machines were also licensed and taxed by the state at a rate of $2,000 per year. (Of the tax, $200 is now given to an out-of-state firm to install a linked information system).
The rules have not been followed in their totality. Establishments have linked several rooms, each having five machines. As many as 100 machines have appeared under a single roof. Progressive machines offer prizes into the thousands of dollars. Operators claim they pay each player only $125 of the prize each day. In some cases, they award the full amount of the prize and have the player sign a “legal” statement affirming that the player will not spend more than $125 of the prize in a single day. Advertisements of machine gaming appear on large signs by many establishments. Bars and taverns have machines.
There have been thousands of citations against establishments, and fines have been levied. In 1997 and 1998, there were $429,000 in fines in a nine-month period. The practices did not end, however.
Several interests in the state did not care for gambling. They persuaded the legislature to authorize a statewide vote on banning the machines. According to the legislation authorizing the elections, votes were to be counted by counties. If a majority of the voters in a county said they did not want the machines, the machines would be removed from that county. In 1996, twelve of forty-six counties said they did not want the machines. Before they could be removed, however, the operators won a ruling from the state supreme court saying that the vote was unconstitutional. The court reasoned that South Carolina criminal law (banning the machines) could not be enforced unequally across the state. Equal protection of the law ruled supreme in the Palmetto State.
Over the last years of the 1990s, the legislature and state regulators continued to wrestle with issues surrounding machine gaming. One effort to have all the machines declared lotteries and banned in accordance with a state constitutional prohibition on lotteries failed, as the supreme court held by a single-vote majority that the gaming on the machines did not constitute lottery gaming. The 1998 gubernatorial election seemed to turn on gambling issues, as supporters of machine gaming and lotteries gave large donations to the winning candidate. The new governor has sought to win wide support by initiating new “more effective” regulations, but these have not yet won consensus support in the legislature. One new proposed regulation would allow machines to have individual prizes of up to $500 that could be won on a single play. Another proposal would set up a new state regulatory mechanism for machine gaming.
In the meantime, machine gaming flourishes. At the beginning of 1999 there were over 31,000 machines in operation. They attracted over $2.1 billion in wagers, and operators paid out prizes of $1.5 billion. Machine owners and operators realized gross gaming profits of $610 million – approximately $20,000 per machine per year. Almost all of the machines were made outside of the state. Over half were Pot o’ Gold machines made in Norcross, Georgia. These cost $7,500 each. Most of the operators share revenues with owners of slot machine routes. There has been no mandatory auditing of machine performance, although the state authorized the installation of a slot information system.
In 1999 the voters were authorized by the legislature to decide if the machines should stay or be removed. If the voters did not determine the machines could stay, they had to be taken out. But in a surprise decision, the state supreme court ruled the referendum vote unconstitutional and ordered that the machines be removed by 30 June 2000. In November 2000, the voters removed a constitutional ban on lotteries. A lottery will begin in 2001.
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