Bars can add up to five slot machines each

The Illinois Supreme Court, in a unanimous vote of the seven-member panel, upheld the constitutionality of the state’s Video Gaming Act.

The decision overturns an appellate court decision that struck down the law on the basis that passage of the substantive bill and an appropriations bill as one measure violated the state constitution’s single-subject rule for laws, and clears the way for bars, restaurants and other licensed liquor establishments to operate up to five gaming machines each.

Illinois Governor Pat Quinn created the controversial legislation as the Capital Projects Act, a measure to raise an estimated $31 billion for road projects and other capital improvements. The idea was to transform the quasi-legal, so-called “grey-area” machines that had been operating in bars for decades into legal, licensed and taxable revenue-generators for the state. It included an opt-out provision for local jurisdictions across the state, which scores of municipalities took advantage of.

Chicago Blackhawks owner Rocky Wirtz filed the original lawsuit against the law, alleging that the bundling of provisions in the package constituted “logrolling” in violation of the state constitution. Wirtz’s opposition to the law centered on its inclusion of a liquor tax, in addition to new taxes on candy, grooming products, soft drinks and vehicle registration, to help pay for the highway program. Wirtz made his fortune in a family liquor distributing business.

A district court upheld the state law, but it was overturned on appeal.

Quinn hailed the court decision last week, and pledged to go “full-speed ahead” with his highway construction plan, borrowing money against future slot revenues to keep construction projects going.

The Illinois high court decision, though, is also a victory for slot manufacturers, which have been eyeing the potential of a maximum 75,000 new units, according to initial estimates by state officials. Most private-sector estimates have put the actual potential size of the new market, absent the jurisdictions that have opted out, closer to 30,000 games.

Longtime Class II manufacturer American Gaming Systems, which named former Bally chief Bob Miodunski as interim CEO, has a complete line of Class III games ready for the new bar market—games that are designed specifically to be similar to the games with which thousands of Illinois bar patrons are already familiar.

Other Las Vegas-based slot makers stand to benefit from the decision as well. “Today’s decision by the Illinois Supreme Court is a very positive catalyst for the gaming equipment suppliers,” said Roth Capital Markets gaming analyst Todd Eilers in an interview with the Las Vegas Review-Journal. “This decision also gives us greater confidence in our fiscal year 2012 estimates for the group.”

Games in the new Illinois market will all be linked to a central computer system. The state initially awarded the contract for the system to lottery titan Scientific Games, but withdrew the award last September of technical reasons. Now that the law has been upheld, the state is expected to accept new bids for the central system.

The games will be distributed by route operators, which will share the revenue with the individual bar owners.

The expansion is separate from the proposed bill that would add five casinos, expand existing casinos and allow racetracks to offer slot machines that the legislature has approved. Quinn is considering whether to sign the bill (see a complete report in the USA Gaming section of this week’s GGB News).

By Staff