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Md. lottery continues to grapple with amusement games

Visitors to Ocean City can still return from their vacations this summer stuffed with too much junk food and weighed down with too many prizes and tchotchkes won on the Boardwalk even as other amusement operators around the state live with an air of uncertainty.

Game distributors and operators in other areas of the state continue their anxious watch of a Maryland Lottery and Gaming Control Agency panel tasked with drafting regulations that will govern the machines that dispense prizes other than free plays. The delay, which stretches back to 2012, has some worried about the fate of the machines even as a new law governing the devices was signed into law last week by Gov. Larry Hogan. It is set to take effect on June 1.

“This is the 49th month we’ve been dealing with this,” said Kevin O’Keefe, a lobbyist who represents the industry.

O’Keefe and others will gather Wednesday to review the latest set of proposed rules meant to regulate the games.

These games include skee ball and the ubiquitous claw machines that dispense stuffed animals and other items of a trivial nature. But they also include so-called merchandise dispensers, machines that award more expensive prizes including phones and tablet computers. The games pop up in laundromats and bowling alleys and in chain restaurants, such as Dave & Busters, that cater to customers who play the games for fun.

One looming concern with the new regulations is the potential for new fees. Previous proposed regulations called for licenses of up to $200 annually for each game with the money going to cover the cost of testing to ensure skills-based games were just that.

The version under discussion Wednesday still calls for testing but so far is silent on fees.

“This is already a heavily taxed industry,” O’Keefe said, noting that operators pay sales tax on both the machine and merchandise as well as amusement taxes in the local jurisdictions in which they are located. “Hopefully there won’t be any more fees in there.”

Meanwhile, the games in Ocean City will be treated differently.

The machines came under more scrutiny in 2012 with the expansion of gaming and the desire to protect companies making hundreds of millions of dollars of investment in the state’s evolving casino industry.

“With that being done, there were some very onerous regulations proposed that would affect the businesses on the iconic boardwalk in Ocean City,” said Sen. James N. Mathias Jr, D-Eastern Shore. He said the 2012 law was needed because “there can be an evolution of these coin-operated equipment that can intrude into the gambling world.”

The continued hand-wringing over potential amusement game regulations was one of the issues legislative sources said delayed the confirmation of Gordon Medenica, the state lottery and gaming director.

Medenica was not available for comment on this story, according to an agency spokeswoman.

This is just the latest attempt to regulate the industry since a 2012 law was passed that made amusement games subject to oversight by the gaming agency. One attempt in 2014 angered distributors and arcade owners because it also would have required the licensing and taxing of electronic arcade games such as Pac-Man.

A legislative committee delayed approval of proposed regulations that were submitted last year. Those proposals would require registration and testing procedures for all skills-based amusement games. A person who operates games that award a non-cash prize valued at more than $30 and is a redemption merchandiser or other skills-based amusement device would also have to register.

Gov. Larry Hogan opposed the rules, saying they would have an adverse effect on businesses, and he vowed to work with the industry on a compromise.

The Senate bill passed earlier this year allows games at the four major family arcades on the boardwalk in Ocean City to offer more expensive prizes by establishing family entertainment centers. Mathias, a second-generation owner of an arcade business and the former mayor of Ocean City, sponsored the bill. He said it was necessary to save the atmosphere that helps draw people to the seaside town.

“There was a lot of anxiety and worry for (arcade owners)” Mathias said. “It took the last three years to figure it out and create the family entertainment center (license).”

While merchandiser machines in other parts of the state would be limited to prizes valued at under $30, similar games on the Ocean City boardwalk could offer prizes up to $599 in up to 10 machines. Other machines could offer prizes of minimal value similar to machines in other areas of the state.

But O’Keefe said other businesses would like the same ability. Mathias said his effort was focused on one thing — protecting Ocean City.

“For me, that’s an argument (for other operators) to make,” Mathias said. “My concern was my constituents and how adversely this was affecting the boardwalk. The rest of the story is yet to be written and it will be written by these regulations.”

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