Originally created 12/15/03

Gaming machine owners finding some victories in court



COLUMBIA, S.C. -- An increase in gaming machine seizures have some worried the outlawed video gambling industry might be trying to make a comeback in South Carolina.

Those in the industry say they are simply trying to make money with legal machines that reward skill instead of luck and let players win merchandise or free games.

Regulators say illegal cash payouts are not back in a big way, but police have increased seizures of machines in recent months.

Some of those machines are getting declared legal - at least temporarily - as machine owners armed with experts and lawyers overwhelm local police and prosecutors.

"They're waiting for us to turn our backs," anti-gambling lawyer Richard Gergel said of the renewed push by the industry. "The gambling industry is like a collection of cockroaches after an atom bomb. They're always back trying to get into business."

An analysis of court cases and interviews by The State newspaper showed machine owners are making some headway in creating some legal machines, especially one Goose Creek company which has introduced what it says is a tamper-resistant computer chip for its latest $3,500 machine.

Castle King argues the chip helps make all of its Chess Challenge II machines identical and allows a judge to declare all of them legal at once. South Carolina law requires each machine be considered separately.

In a series of raids this fall, State Law Enforcement Division agents found more than 400 machines agents say are illegal.

"Everybody's trying to find the machine, a legal game," said Stacy Drakeford, SLED's chief gaming enforcer. "We've been fighting it for three years."

The distinction is whether a game's outcome depends on a player's skill or on chance. Skill games are OK, chance games are illegal. All cash payouts are illegal, although players can win merchandise or free plays.

These lesser cousins do not offer card games or other traditional gambling-style games, but they are appearing in many of the same places video gambling was popular - convenience stores, bars and private and public clubs.

While the law banning video gambling payouts also made the games of chance illegal in 2000, more than 14,000 licenses have been issued for amusement games. That's down from the heyday of video gambling when more than 37,000 machines brought in $3 billion a year.

SLED records show undercover agents have made 107 cases charging illegal payouts since video poker was outlawed, Drakeford said. Yet SLED has gotten 824 gambling complaints it could not prove, Drakeford said.

Gambling critics believe that wherever there is a machine, there is gambling.

"The only thing different is the icons change," Drakeford said. "It's still the same thing."

But those machines that have a judge's stamp of approval are left alone. Many "are dressed up as games of skill, but really they are games of chance," said Robert Cook, an assistant South Carolina attorney general. "They are controlled largely by computer software."

Find the right machine that can be declared legal costs a lot of money.

The machine with the most success in court is Chess Challenge, which Castle King spent $2 million developing, said Steve Schmutz, one of Castle King's lawyers.

The first version sold by the hundreds and prompted a 14-month legal battle that went to the state Supreme Court. Castle King ultimately pulled the machine from the market Sept. 15 in a settlement with regulators, but the machine was never declared illegal.

Now Castle King is back with Chess Challenge II, which has been declared legal by a state judge in Allendale County.

Another Castle King lawyer, Jonathan Altman, said the company is not trying to break the law. "It doesn't do Castle King any good to spend time, effort and money to develop a game that doesn't meet the legal standard," he said.

To combat the new machine, SLED Chief Robert Stewart made the extraordinary move of hiring a private attorney and asked the Supreme Court to reverse the Allendale decision. Stewart also wants the high court to bar local judges from issuing rulings that affect a whole line of machines.