ASSEMBLY, No. 1671
STATE OF NEW JERSEY
INTRODUCED MARCH 4, 1996
By Assemblymen ROMA and KELLY
An Act providing for the operation of video lottery machines as part of the State Lottery, supplementing P.L.1970, c.13 (C.5:9-1 et seq.) and repealing P.L.1983, c.80.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Business entity" means any sole proprietorship, partnership, corporation or other organization, association or business.
"Commission" means the State Lottery Commission established pursuant to P.L.1970, c.13 (C.5:9-1 et seq.).
"Director" means the Director of the Division of the State Lottery.
"Holding a substantial interest in" means:
with respect to a proprietorship, when an individual or the individual's spouse owns, operates, manages or conducts, directly or indirectly, the proprietorship, or any part thereof;
with respect to a partnership, when an individual or the individual's spouse shares in any of the profits or potential profits of the partnership activities;
with respect to a corporation, when an individual or the individual's spouse is an officer or director of the corporation or the individual or the individual's marital community is a holder, directly or beneficially, of five percent or more of any class of stock of the corporation;
with respect to an organization, association or business not covered by the foregoing, when an individual or the individual's marital community is the owner of or otherwise controls 10 percent or more of the assets of the organization, or when an individual or the individual's spouse furnishes five percent or more of the capital, whether in cash, goods or services, for the operation of a business, association or organization during any calendar year.
"Licensed premises" means an establishment operated by the holder of a plenary retail consumption license or a seasonal retail consumption license as defined in R.S.33:1-12 which is also licensed pursuant to this act to have video lottery games placed on its premises.
"Net machine income" means the amount of money placed by players into a video lottery machine less amounts paid out to winning players.
"Service employee" means an employee of a video lottery machine operator who is certified by the commission to service, maintain and repair video lottery machines.
"Video display" means the visual presentation of a video lottery game shown on the screen of a video lottery machine.
"Video lottery game" means electronically simulated games of chance displayed and played on a video lottery machine.
"Video lottery machine" or "machine" means an electronic video game machine which, upon the insertion of coins or cash, is available to play or simulate the play of a video game, including but not limited to video poker or blackjack, but not including keno, as authorized by the commission, using a video display and microprocessors and in which the player may receive, by chance, free games or tickets that can be redeemed for cash, but does not mean a machine which directly dispenses coins, cash or tokens.
"Video lottery machine associated equipment" means any proprietary device, machine or part used in the manufacture or maintenance of a video lottery machine, including but not limited to integrated circuit chips, printed wire assemblies, printed wire boards, printing mechanisms, video display monitors and metering devices.
"Video lottery machine distributor" means any individual or business entity which distributes or sells video lottery machines or video lottery machine associated equipment in this State.
"Video lottery machine manufacturer" means any individual or business entity which assembles or produces video lottery machines or video lottery machine associated equipment for sale or use in this State.
"Video lottery machine operator" means: a. any individual, partnership, corporation or association which owns video lottery machines or video lottery machine associated equipment and physically places machines at licensed premises located anywhere in this State for use by members of the public or b. the holder of a premises license who is authorized pursuant to this act to operate a total of not more than six video lottery machines owned by the licensee at each of not more than two licensed premises operated by the licensee.
2. In addition to the powers and duties of the State Lottery Commission set forth in section 7 of P.L.1970, c.13 (C.5:9-7), the commission shall have the power and it shall be its duty to provide for the establishment of a Statewide network of video lottery machines in the manner provided by this act.
3. The commission shall provide for the licensing of manufacturers, distributors and operators of video lottery machines and for the licensing of machines and the premises on which machines are placed for use by members of the public. The commission shall issue five separate types of licenses:
video lottery machine distributor's license;
video lottery machine manufacturer's license;
video lottery machine operator's license;
machine license; and premises license.
No individual or business entity shall be eligible to hold more than one type of license. However, the holder of a premises license may also hold an operator's license but shall only operate a total of not more than six machines at each of not more than two licensed premises operated by the licensee. The holder of a video lottery machine operator's license shall also be required to obtain a separate machine license for each individual machine placed in operation.
4. A premises license shall only be issued for a premises which is operated by the holder of a plenary retail consumption license or a seasonal retail consumption license as defined in R.S.33:1-12.
5. a. The commission shall contract with the holders of video lottery machine operators' licenses to operate video lottery machines at licensed premises. The holder of an operator's license shall enter into an agreement with the holder of a premises license to place a machine or machines owned or leased by the operator at the licensed premises for use by members of the public in a form approved by the commission. The agreement shall conform with the provisions of this act and shall be of a duration which is consistent and concurrent with the operator's contract with the commission. If the holder of an operator's license also holds a premises license, the licensee may operate not more than six machines owned by the licensee only at each of not more than two licensed premises operated by the licensee. Any machine covered by this act shall be exempt from all present vending contracts.
b. No inducements of any kind, or of whatever nature whatsoever, shall be offered or given by a video lottery machine operator, or asked for by the holder of a premises license in order to induce either the operator or the holder of the premises license to enter into a contract concerning the placement of video lottery machines at a licensed premises during the course of an initial contract or any renewal thereof. A licensee who violates the provisions of this subsection shall have the licensee's license suspended for a period of time to be determined by the commission.
6. An individual or business entity seeking to obtain a license pursuant to this act shall apply to the director on such forms as the director shall provide. The application shall include the applicant's consent to credit checks and criminal record searches along with such waivers and releases as the commission may deem necessary to ensure a full and complete review of the application.
7. a. No license shall be issued to any applicant who has knowingly made a false statement of material fact to the commission or who is found by the commission to lack the necessary financial stability or responsibility for licensure or when licensure would adversely affect the public health, safely or welfare or endanger the security or welfare of the State Lottery.
b. No license shall be issued to any individual or to any business entity if the individual applicant or any individual having a substantial interest in the business entity applicant has been convicted within 10 years prior to the date of application under the laws of this State of a crime of the fourth degree or above or under the laws of another state or of the United States with a crime which, if committed in this State, would be such a crime unless the convicted person has affirmatively demonstrated to the commission clear and convincing evidence of rehabilitation. In determining whether an individual has affirmatively demonstrated rehabilitation, the following factors shall be considered:
(1) the nature and responsibility of the position which the convicted individual would hold;
(2) the nature and seriousness of the offense;
(3) the circumstances under which the offense occurred;
(4) the date of the offense;
(5) the age of the individual when the offense was committed;
(6) whether the offense was an isolated or repeated incident;
(7) any social conditions which may have contributed to the offense; and
(8) any evidence of rehabilitation, including good conduct in prison or in the community, counseling or psychiatric treatment received, acquisition of additional academic or vocational schooling, successful participation in correctional work-release programs, or the recommendation of persons who have had the individual under their supervision.
c. An individual applicant for licensure or, where the applicant is a business entity, any individual having a substantial interest in the business entity shall submit to the director the individual's name, address and fingerprints taken on standard fingerprint cards by a State or municipal law enforcement agency. The Attorney General, at the request of the director, shall conduct an investigation of any applicant for licensure under the provisions of this act. The director is hereby authorized to exchange fingerprint data with and receive criminal history record information from the Federal Bureau of Investigation, the Attorney General and the Division of the State Police for use in making the determinations required by this act. The applicant shall bear the cost of the criminal history record check.
d. The director may issue a temporary license, which shall be valid for not more than 90 days, pending completion of the investigation and determination of qualifications.
e. The commission shall notify an applicant who is found, for any reason, not to be qualified for licensure of the reason therefor and of the specific convictions which constitute the basis for the finding. The applicant shall have 30 days from the date of the written notice to request a hearing on the accuracy of and the basis for the denial of the license. Criminal history record information shall be maintained on file by the director for not longer than 10 years.
8. The commission shall, by regulation, establish fees for licenses issued pursuant to this act, other than a premises license. The fee established for a manufacturer's license or a distributor's license shall not exceed $25,000 for the first year of licensure and $12,500 for each year thereafter. The fee for an operator's license shall be $10,000 for the first year of licensure and $5,000 for each year thereafter. However, when the holder of an operator's license also holds a premises license, the fee for the operator's license shall be $1,000 for the first year of licensure and $500 per year for each year thereafter. The fee for a machine license shall be $200 annually per machine.
The holder of a premises license shall pay the fee provided for in section 10 of this act to the municipality in which the licensed premises is located.
9. Prior to being issued a license, each video lottery machine operator shall make arrangements in a form agreeable to the commission to contribute ½ of 1% of the amount remaining, subsequent to the State receiving its share from each machine, to the New Jersey Council on Compulsive Gambling. Amounts due the council shall be paid in equal shares by operators and the holders of premises licenses. It shall be the responsibility of each operator to ensure that these amounts are transmitted to the council in the manner provided by the commission.
10. In order to compensate municipal governments for administrative expenses associated with the operation of video lottery machines within their jurisdiction, the governing body of a municipality in which a licensed premises is located may impose a fee of up to $100 on the holder of a premises license which shall be payable upon the issuance of the license and upon each renewal of the license.
11. An applicant for licensure pursuant to this act shall furnish all information requested by the commission, including but not limited to financial data and documents, certifications, consents, waivers, individual history, stockholder forms and other materials requested by the commission. No license shall be issued to any applicant who fails to provide all material requested by the commission. Each applicant shall provide the commission with such written consents as the commission may require to obtain access to any relevant information.
12. An applicant shall bear the risk of any adverse consequences of the commission's investigation of the applicant's qualifications for licensure, including but not limited to the disclosure of any information by the commission or a third party. An applicant for licensure shall expressly waive any claim against the commission and its employees and agents arising as a result of the commission's investigation.
13. The commission may require that any application or other document submitted to it by an applicant for licensure or a licensee shall be sworn to or affirmed before a notary public. Any document submitted by an attorney on behalf of an applicant shall be signed by the attorney. The attorney's signature shall constitute certification that he has read the forms or documents and that, to the best of his knowledge, information and belief, their contents are true.
14. a. No person shall distribute for operation a video lottery machine unless it has been approved by the commission.
b. No person shall place in operation a video lottery machine unless it has been approved by the commission.
15. A manufacturer of video lottery machines seeking a license to allow the use of its machines in this State shall submit to the commissioner two copies of machine illustrations, schematics, block diagrams, circuit analysis, technical and operation manuals, program source codes and hexadecimal dumps, with the compiled computer program presented in such manner as the commission shall require and any other information requested by the commission.
16. The commission may require that an applicant for or holder of a manufacturer's license submit at least two working models of a video lottery machine for which it is seeking approval to the commission for examination, testing and analysis. The manufacturer shall pay any costs associated with the commission's testing of the machine. The commission is authorized to completely disassemble machines submitted to it. The applicant shall waive any claim against the commission for damage to or destruction of a machine. The commission may require an applicant to provide specialized equipment and the services of an independent technical expert to assist it in testing a machine.
Upon completion of testing the commission shall provide the applicant with a complete report of its test results and shall approve or disapprove the machine for distribution and use in this State. If a machine is disapproved, the commission shall inform the applicant of modifications which should be made in order for the machine to be approved.
17. Each video lottery machine placed in operation shall at all times be in compliance with this act and the regulations of the commission. The director shall cause any machine which is not in compliance to be taken off the system and out of play. Any machine which has been modified or the design of which has been modified without the approval of the commission may be confiscated by the director.
18. Every manufacturer of video lottery machines shall, pursuant to a training program approved by the commission, provide training in the service and maintenance of its machines. No video lottery machine shall be placed into operation until the manufacturer provides the training required by this section. Each manufacturer shall submit to the commission an outline of its training curriculum, a list of the instructors and their qualifications, a copy of the instructional materials and the time, dates and location of training classes. Service employees shall, upon the completion of an approved training program, be certified by the commission to service and repair video lottery machines and video lottery machine associated equipment. A service employee shall not be employed by more than one video lottery machine operator at any one time.
19. Video lottery machines and video lottery machine associated equipment shall be maintained and serviced in the manner and condition required by the commission.
20. The holder of a video lottery machine operator's license shall be responsible for keeping a written service log in each of its machines. The log shall be located in the main cabinet access area of the machine. Every person, including employees of the commission, who gains entry into any internal space of a video lottery machine shall sign the log and indicate the time, date and purpose of entry, the electronic and mechanical meter readings and the parts of the machine inspected or repaired. Service log forms shall be obtained from the commission and shall be retained by an operator for at least three years after a machine is removed from service. Service logs shall be available for inspection by employees of the commission upon request.
21. The commission shall inspect each individual machine before it is placed in operation to ensure that the machine complies with the provisions of this act and the regulations of the commission. The commission shall seal the software eproms on the logic board on each machine at the time of inspection. An operator shall inform the commission in writing of any breaks or tears in the seal noticed during servicing which were not the result of a repair.
22. The holder of a video lottery machine operator's license shall obtain a machine license for each machine it places into operation and shall pay the fee for machine licenses established pursuant to section 8 of this act. The machine shall prominently display the machine license on each machine. A machine which does not display a machine license is contraband and subject to confiscation by any law enforcement officer.
23. The readings on the electronic meters shall be capable of being printed on the machine's printing mechanism.
Each machine shall be equipped with a non-removable plate on which is inscribed the manufacturer's name, the machine model, the date of manufacture and a serial number which is unique to that particular machine.
Each machine shall prominently display a table listing the available prizes and the odds of winning. Each machine shall prominently display a telephone number which may be called to report malfunctions or complaints.
24. The commission shall require that all machines placed in operation be linked to a central computer system operated by the commission which shall monitor and control use of the machines as required by the commission and provide auditing program information as required and approved by the commission. The system approved by the commission shall not limit participation to only one manufacturer of video lottery machines. The system shall incorporate electronic fund transfer procedures to facilitate the collection of revenue. Nothing contained in this section shall be construed as requiring the exclusive use of video lottery machines which are constantly linked to a central computer system through open telephone lines.
25. The commission shall immediately disconnect from the system and remove from use any machine which does not comply with the provisions of this act or regulations of the commission until the machine is brought into compliance.
26. No video lottery machine shall accept more than two dollars to be played on any one game. The value of free games or prizes which may be awarded per game shall not exceed $500. A machine shall dispense to each winning player a ticket indicating the amount won and containing information on how to redeem the ticket for cash. A minimum of 85%, but not more than 92%, of the amount bet by the players of video lottery machines shall be allocated annually for the payment of prizes.
27. The holder of a premises license shall immediately pay a winning player an amount won on a machine upon presentation by the player of a winning ticket at the premises where the ticket was obtained. Prior to payment, each winning ticket shall be validated by the commission's central computer system.
28. Pursuant to section 2 of an Act of Congress of the United State entitled "An act to prohibit transportation of gambling devices in interstate and foreign commerce," approved January 2, 1951, being chapter 1194, 64 Stat. 1134, and also designated at 15 U.S.C. (1171-1177), the State of New Jersey, acting by and through the duly elected and qualified members of its Legislature, does hereby, in accordance with and in compliance with the provisions of section 2 of that Act of Congress, declare and proclaim that section 2 of that Act of Congress shall not apply to any gambling device in this State where the transportation of such device is specifically authorized by and done in compliance with the provisions of this act, any other applicable statute of this State, and any regulations promulgated pursuant thereto, and that any such gambling device transported in compliance with State law and regulations shall be exempt from the provisions of that Act of Congress.
29. The holder of a video lottery machine operator's license shall maintain records of the operation of each of its machines placed into use which shall be made available to the commission upon request and shall be sufficient to ensure that the machine has been operated in compliance with the provisions of this act and the regulations of the commission. The records maintained pursuant to this section shall include, but not be limited to, the accounting ticket required by this act and corresponding licensee records containing the performance synopsis of each machine as well as an exact copy of the printed ticket voucher.
The records required to be maintained pursuant to this section shall be held by the licensee for a minimum of three years.
30. No more than six machines shall be placed at any one licensed premises except that a racetrack which is under the jurisdiction of the New Jersey Racing Commission may have up to six machines placed at each fixed location at which licensed beverages are served at the racetrack.
31. The commission shall provide applicants for and the holders of a video lottery machine manufacturer's licenses with the protocol documentation necessary to enable the manufacturer's machine to communicate with the commission's computer and provide the audit information and controls required by the commission.
32. The commission shall enter into contracts of three years duration with the holders of video lottery machine operators' licenses. The holder of an operator's license shall agree in its contract with the commission to pay to the commission 25% of the net machine income during the first three-year contract, 27 1/2% of net machine income during a second three-year contract and 30% of net machine income during any subsequent contract.
The holder of a video lottery machine operator's license shall remit the commission's percentage of net income to the commission through an electronic transfer of funds on the fifteenth day of each month and on the last day of each month for the period of time prior thereto prescribed by the commission. If the date on which payment is due falls on a day on which banking business is not transacted, payment shall be due on the next business day.
The holder of a video lottery machine operator's license shall provide the commission with all information and bank authorizations necessary to ensure the timely payment of monies due the commission. Operators shall provide the commission with 30 days notice of proposed account changes to ensure the uninterrupted transfer of funds.
An operator licensee shall maintain a balance in the licensee's account which is sufficient to cover the amount due the commission on each payment date. Failure to maintain a sufficient balance in the account shall result in the assessment of an interest penalty equal to 12% of the amount due. Failure to make payment on any amounts past due plus interest on or before the next payment date shall be grounds for suspension or revocation of the operator's license and removal of the licensee's machines from play. The holder of a video lottery machine operator's license who does not also hold a premises license and who has placed a machine in any licensed premises shall agree that the commission shall ensure that the contract between the operator and the premises licensee specifies that the funds remaining in the machine after all payments required by this act are made shall be divided evenly between the operator and the premises licensee. Funds shall be divided at least weekly and a copy of the distribution statement shall be given to all parties.
33. The holder of a video lottery machine operator's license shall retain an audit tape that records for each machine an exact duplicate of all tickets printed and transactions recorded. The operator licensee shall retain an audit tape for at least three years and shall store it in a secure place.
34. The holder of a video lottery machine operator's license shall keep accurate records of net machine income for each machine. Prior to the payment date, the commission shall prepare and mail to the operator licensee a statement of the net machine income for each machine and the amount due the commission. An operator shall report to the commission in writing any discrepancy between the amounts on the commission's statement and amounts shown on each machine's mechanical and electronic meters. The commission shall not be responsible for resolving discrepancies between the two sets of figures.
Whenever a discrepancy is reported by an operator pursuant to this section, the commission shall make no credit adjustments until the discrepancy is resolved. The operator shall submit to the commission the maintenance log that includes current mechanical meter readings and the audit tape that contains electronic meter readings generated by the machine's software for each machine that reflects a discrepancy. If the meter readings and the commission's records cannot be reconciled, the commission shall make an appropriate disposition of the matter in view of all of the facts and circumstances. Any accounting discrepancies that cannot be resolved by reason of a violation of this section shall be resolved in favor of the State. No electronic accounting meters may be cleared without a commission employee present.
35. No video lottery machine shall be played except during the hours that the licensed premises at which it is located may lawfully serve alcoholic beverages.
36. No person under the age of 21 years shall operate a video lottery machine.
37. All payments made by a video lottery machine operator to the holder of a premises license pursuant to an agreement as provided by section 5 of this act shall be by check or draft.
38. No licensee shall use the word casino in any sign or advertisement in connection with a video lottery machine.
39. Any person who tampers with a video lottery machine with intent to interfere with the proper operation of the machine is guilty of a disorderly persons offense.
40. Any person who, with intent to manipulate the outcome, payoff or operations of a video lottery machine, manipulates the outcome, payoff or operation of a video lottery machine by physical tampering or other means is guilty of a crime of the fourth degree.
41. Information and records of the commission are confidential, except for official purposes, and may not be disclosed except in accordance with a judicial order or as otherwise provided by law. Information and records considered confidential include:
applications, credit and security checks of lottery retailers, licensees and persons seeking or doing business with the lottery; and,
marketing, financial or sales data, the disclosure of which may be harmful to the competitive position of the New Jersey lottery, its retailers, licensees or persons seeking or doing business with the lottery.
42. All monies received by the commission pursuant to this act including license fees shall be deposited in the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58) and shall be appropriated for charity care at disproportionate share hospitals, as those terms are defined in section 2 of P.L.1992, c.160 (C.26:2H-18.52).
43. a. As used in this section, "gray area device" means any video machine which upon the insertion of coins or cash is available to play or simulate the play of video poker, keno, blackjack or any other game authorized by the commission for play on a video lottery machine but which is not part of the State lottery network established pursuant to this act.
b. After the effective date of this act, no person shall place a gray area machine for the use by members of the public at any licensed premises or at any other place.
c. A person who violates the provisions of this section is guilty of a crime of the fourth degree and shall be subject to a maximum eighteen months imprisonment or a fine not to exceed $5,000 per machine, or both.
d. Nothing contained in this section shall be construed as affecting any game or device which is authorized pursuant to the Casino Control Act, P.L.1977, c.110 (C.5:12-1 et seq.).
44. Pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) the State Lottery Commission, within 120 days of the effective date of this act, shall promulgate rules and regulations to effectuate the purpose of this act, except that, notwithstanding any other law to the contrary, no rule or regulations establishing a video lottery game shall be considered an "administrative rule" or "rule" pursuant to that act.
45. The commission shall expedite the implementation of this act and shall ensure, to the extent reasonably possible, that at least one video lottery machine is placed into operation within 60 days of the effective date of this act at each location for which a premises license has been issued during that period. During the first 60 days after the effective date of this act the commission shall consider applications for premises licenses in a manner which will ensure that licenses are issued in direct proportion to the population and potential number of licensed premises in each county so as to provide the public with fair and equitable access to machines.
Notwithstanding any provision of this act to the contrary, no licensed premises shall be permitted to place into operation more than one machine until all holders of premises licenses who applied for licensure during the first 60 days after the effective date of this act have had the opportunity to place one machine into operation.
46. P.L.1983, c.80 (C.5:9-7.1) is repealed.
47. This act shall take effect upon the date that an amendment becomes a part of the New Jersey Constitution which authorizes the Legislature to establish a video lottery with the net proceeds thereof used to reimburse hospitals for the cost of providing eligible charity care.
STATEMENT
This bill directs the State Lottery Commission to establish a Statewide network of video lottery machines. Players would be able to play simulated video poker, blackjack and other games (other than keno) approved by the commission. Prizes would be awarded in the form of free games and cash. All machines would be privately owned but linked to the commission's computer system which would monitor and control the machine's use.
Video lottery machines could only be located at certain establishments licensed to sell alcoholic beverages, which have obtained premises licenses from the commission. The bill also requires that manufacturers, distributors and operators of video lottery machines be licensed by the commission. No individual or business entity would be allowed to hold more than one type of license, except that the holder of a premises license may also hold an operator's license but is restricted to operating a total of not more than six machines at not more than each of two of its own premises.
The bill provides for the comprehensive regulation of licensees, machines and related equipment and establishes State and municipal license fees. It imposes stringent record keeping requirements on the operators of video lottery machines. Operators would be required to electronically transfer the State's share of net machine income to the commission on a bimonthly basis. No more than six machines could be located at any licensed premises, except that racetracks would be permitted to have up to six machines placed at each fixed location at which licensed beverages are served at the racetrack. Persons under the age of 21 would be prohibited from playing video lottery machines.
The bill also prohibits the placement of so-called gray area machines at a licensed premises. A gray area machine is defined in the bill as a machine which is similar to a video lottery machine and offers similar games but which is not part of the State network. Thus, the bill seeks to eliminate this form of illegal gambling activity and to channel money previously bet on illegal games into the State lottery.
The bill's provisions are modeled on a similar program in South Dakota.
The bill provides that it will take effect upon the date that an amendment becomes a part of the New Jersey Constitution which authorizes the Legislature to establish a video lottery with the net proceeds used to reimburse hospitals for the cost of providing eligible charity care. All monies received by the Lottery Commission as a result of the video lottery including licensing fees would be deposited in the Health Care Subsidy Fund and appropriated for charity care at disproportionate share hospitals.
The bill repeals P.L.1983, c.80 (C.5:9-7.1) which currently prohibits the use of video machines as part of the State lottery.
Provides that the State Lottery Commission will establish a Statewide network of video lottery machines.