Update of the Legislators' Guide To Video Lottery Terminal Gambling

Chapter 1. – Overview of Gambling Activities in Maryland 2
permitted to operate no more than five machines, and 50 percent of the proceeds must go to
charity. Machines are licensed by the local sheriff’s office, and annual reports outlining the
disposition of the proceeds are required to be provided to the Comptroller. The Comptroller’s
Office, however, has no authority to audit these reports.
Over time it became clear that unauthorized slot machines were starting to proliferate in
the State in the form of electronic bingo machines. Reports surfaced of thousands of machines in
several counties located in commercial businesses such as bars, liquor stores, and bingo parlors,
many resulting from a Maryland Court of Appeals decision in 2001.
The Court of Appeals case of Chesapeake Amusements, Inc. v. Riddle held that a ticket
dispensing machine with a video screen that displays the contents of the dispensed tickets and
emits a musical tone that signals a winning ticket was not a slot machine under Maryland law.
The key factor in this decision was that the tickets were dispensed from a pre-printed roll of
tickets that was inserted into the machines by the manufacturer. Thus, the element of chance was
in the tickets and not in the machine. Over time, the design of machines changed rapidly as new
technology was developed and the legality of each version of a machine was called into question.
As a result, there was much confusion among State and local officials, owners, and distributors
of machines as to whether certain machines were legal.
In 2008, legislation was enacted to alter the State’s current prohibition on slot machines
to clarify which machines are legal and which are illegal. Under that legislation, illegal
machines are ones that read a game of chance and deliver a game of chance. The legislation
specified certain exceptions that included, among others, machines that are arcade-type games,
paper pull-tab machines that only deliver a ticket that must be opened manually by the player,
and State Lottery games. One of the exceptions, of course, includes the authorization of VLTs at
specified locations.
State Lottery
The State Lottery was established in 1972 through legislative action and a constitutional
amendment approved by voters. Revenues generated from the Lottery are deposited in the
general fund, as they have been since the Lottery’s inception. Revenues for the general fund
were $497 million for fiscal 2008 and estimated at $456 million for fiscal 2009.
Special lottery games are held for the benefit of the Maryland Stadium Authority – the
revenues generated are used for the authority’s operating expenses and to finance the authority’s
capital program.