Call it whatever you want; limited stakes gaming, slot machine route operations, convenience gaming, or distributed gaming.
It’s all big business.
In 2018, six states with locations that have a limited number of slot machines grew revenues 7.5 percent to $4.04 billion, according to a report by St. Louis-based accounting firm RubinBrown.
Those figures don’t include Nevada, which doesn’t publicly report revenues from its 19,000 limited stakes slot machines. More on that later.
The giant in the small stakes gambling market is Illinois. The Land of Lincoln is the Land of Video Gaming Terminals.
By the end last year, Illinois’ 6,560 locations – bars, restaurants, liquor stores, fraternal lodges, and other establishments with a liquor license – produced just under $1.5 billion in gaming revenue, an increase of 15 percent. Each location was allowed up to five video slot machines per license.
As a comparison, Illinois’ 10 commercial casinos produced $1.37 billion in gaming revenue in 2018, a decline of 2.5 percent. No wonder Boyd Gaming Corp., which operates the Par-A-Dice Hotel Casino in East Peoria, Illinois, and the Blue Chip Casino in neighboring Indiana, spent $100 million to buy an Illinois slot machine route operation with 1,000 games in more than 200 locations across the state.
Penn National Gaming, which has three casinos in Illinois and an Indiana casino near Chicago, acquired route operator Prairie State Gaming in 2015. The operation has 1,700 slot machines in more than 380 bar and retail Illinois retail locations.
Illinois is the prime example where video lottery gaming is slicing into commercial gaming business, according to RubinBrown’s Daniel Holmes, who, along with Brandon Loeschner oversee the firm’s gaming practice. The larger concern is the potential loss of casino jobs.
Illinois continues to grow. At the end of March, the state’s 6,920 locations had 31,481 games. However, some areas of the state are trying to slow the hyper-growth. Bloomington, for example, imposed a one-year moratorium on new machines. At the same time, there is a push in the Legislature to allow locations to have up to 10 machines.
“The city’s ban … was implemented to provide the city council time to evaluate the impact the gaming machines are having on the community and if there is a need for new locally imposed gaming regulations,” according to the report.
Oregon was No. 2 in limited stakes gaming, producing almost $934 million in gaming revenue – an increase of 2.2 percent – in 3,923 locations. The gaming sector in Louisiana, Montana, South Dakota and West Virginia saw revenue growth span between less than 1 percent to 8.1 percent.
“It was an impressive year for the overall industry as revenues increased for every state jurisdiction offering limited stakes wagering,” Loeschner and Holmes wrote.
RubinBrown also pointed out that combining limited stakes gaming results with commercial casino numbers in shared states – South Dakota, Illinois, Louisiana and West Virginia – all 26 states would have shown marked increases in 2018.
But what about Nevada?
Unlike other limited stakes gaming states – which tax all gaming revenue produced from a low of 0.3 percent in South Dakota to a high of 1.9 percent in Illinois – Nevada doesn’t tax the revenue produced at games managed by a slot route operator.
In fact, money the state collects from the games isn’t even a tax. It’s a fee.
Restricted gaming establishments – bars, taverns, convenience stores, grocery stores and other businesses – are allowed up to 15 slot machines.
Under Nevada gaming regulations, the locations pay an annual fee of $250 per machine. There is also a quarterly fee per machine; $81 each for the first five games and $141 each for the next 10. That adds up to an annual tax of $11,010 for a location with 15 slot machines.
According the Nevada Gaming Control Board’s quarterly statistics report, 1,982 statewide locations in 2018 paid total fees of $8.45 million on 18,961 games.
Beyond Nevada, limited stakes gaming continues to grow.
Pennsylvania is expected to roll out video gaming at truck stops statewide this year, each which can offer a maximum of five games. As of January, just 60 locations have filed applications. The move is part of an overall expansion that includes mini-casinos and Internet gaming.
“The Pennsylvania limited stakes market will not be as pervasive as the Illinois industry,” according to RubinBrown. “The law restricts the industry to truck stops and certain geographic areas.”
Missouri lawmakers are also discussing legislation to allow slot machine gaming outside its casinos.
(Disclosure: Howard Stutz oversaw corporate communications for slot route operator Golden Entertainment from July 2016 to May 2018. He has no financial interest in the company.)
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
