SENATE BILL NO. 480 March 24, 1999, Introduced by Senator KOIVISTO and referred to the Committee on Gaming and Casino Oversight. A bill to license and regulate the conducting of video gaming; to license and regulate certain video gaming agents; to impose certain duties and authority upon certain state depart- ments, agencies, and officers; to provide for the distribution of video gaming revenues; and to provide penalties. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1. This act shall be known and may be cited as the 2 "Michigan video gaming act". 3 Sec. 3. As used in this act: 4 (a) "Bureau" means the bureau of state lottery as created by 5 the McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972 PA 239, 6 MCL 432.1 to 432.47. 7 (b) "Commissioner" means the commissioner of state lottery 8 as defined by section 3 of the 02455'99 TLG 2 1 McCauley-Traxler-Law-Bowman-McNeeley lottery act, 1972 PA 239, 2 MCL 432.3. 3 (c) "Distributor" means an individual, partnership, corpora- 4 tion, association, or other legal entity that distributes or 5 sells video gaming machines or associated equipment in this 6 state. 7 (d) "Manufacturer" means an individual, partnership, corpo- 8 ration, association, or other legal entity that assembles or 9 produces video gaming machines or associated equipment for sale 10 or use in this state. 11 (e) "Net machine income" means the amount of money obtained 12 after subtracting credits paid out in cash from the amount of 13 money inserted into a video gaming machine. 14 (f) "Operator" means an individual, partnership, corpora- 15 tion, association, or other legal entity that places video gaming 16 machines or associated equipment in a video gaming establishment 17 for public use in this state. 18 (g) "Video gaming establishment" means a building or site 19 where 1 or more video gaming machines or associated equipment is 20 placed for use in this state and that meets the licensure 21 requirements described in section 7(a). 22 (h) "Video gaming machine" means a computerized video game 23 accessible to the player by means of a video gaming terminal that 24 awards credit which can be used for an extension of play or for a 25 voucher redeemable from the video gaming establishment. 26 Sec. 5. (1) The commissioner shall establish and administer 27 state video gaming at the earliest feasible and practicable 02455'99 3 1 time. Video gaming shall produce the maximum amount of net 2 revenues for the state consonant with the general welfare of the 3 people. 4 (2) Upon establishing video gaming, the commissioner shall 5 provide that a person holding a license to conduct video gaming 6 shall use machines and other necessary related systems and serv- 7 ice from distributors, manufacturers, and operators licensed by 8 the commissioner. 9 Sec. 7. (1) The commissioner shall promulgate rules pursu- 10 ant to the administrative procedures act of 1969, 1969 PA 306, 11 MCL 24.201 to 24.328, to implement this act, which shall include, 12 but not be limited to, all of the following: 13 (a) A system of licensure that includes the licensure of 14 manufacturers, distributors, operators, and video gaming estab- 15 lishments and that prohibits the licensure of an entity in more 16 than 1 capacity except that a video gaming establishment that 17 holds a track license issued under the horse racing law of 1995, 18 1995 PA 279, MCL 431.301 to 431.336, may also be licensed as an 19 operator. The system of licensure shall provide that video 20 gaming shall be conducted only in video gaming establishments. 21 Premises licensed as video gaming establishments shall hold a 22 track license issued under the horse racing law of 1995, 1995 PA 23 279, MCL 431.301 to 431.336, or a license for consumption of 24 alcoholic liquor on the licensed premises issued under the 25 Michigan liquor control code of 1998, 1998 PA 58, MCL 436.1101 to 26 436.2303. 02455'99 4 1 (b) A system of registration for video gaming machines. 2 (c) The establishing of standards of conduct for persons or 3 entities licensed in each capacity. 4 (d) The establishing of prize limits. 5 (e) Limits and standards for the import, export, and trans- 6 portation of video gaming machines in this state. 7 (f) Limits on the number of video gaming machines per video 8 gaming establishment as follows: 9 (i) In a video gaming establishment licensed solely under 10 the Michigan liquor control code of 1998, 1998 PA 58, MCL 11 436.1101 to 436.2303, the number of video gaming machines shall 12 not exceed 5. 13 (ii) In a video gaming establishment that also holds a race 14 meeting license under the horse racing law of 1995, 1995 PA 279, 15 MCL 431.301 to 431.366, the number of video gaming machines shall 16 not exceed 5 per 1,000 patrons who were in attendance on live 17 racing dates in the 1998 calendar year. For the purposes of 18 determining patron attendance, a race meeting licensee may 19 include all of the following in its total: 20 (A) Each patron that attended any race meeting that is con- 21 ducted at the racetrack for which the race meeting licensee has 22 been issued a license. 23 (B) Each patron that attended a race meeting conducted by 24 the race meeting licensee whether or not that race meeting was 25 conducted at a track for which the race meeting licensee has been 26 issued a license. 02455'99 5 1 (2) Within 36 months of the effective date of this act, the 2 commissioner shall review the impact of the limits based on 3 utilization, revenue, and cost efficiency and recommend to the 4 legislature whether those limits should be maintained. 5 Sec. 9. (1) Except as provided in section 7, a person 6 shall not be licensed as a manufacturer, distributor, operator, 7 or video gaming establishment if that person has a direct or 8 indirect interest in any entity that is licensed as a manufactur- 9 er, distributor, operator, or video gaming establishment under 10 this act. 11 (2) As used in this section, "person" means an individual, 12 corporation, association, sole proprietorship, partnership, 13 trust, or other form of business entity. 14 Sec. 11. (1) The amount of net machine income shall be dis- 15 tributed as follows: 16 Year 3 and 17 Year 1 Year 2 each year thereafter 18 Manufacturer Share 0 0 0 19 Distributor Share 0 0 0 20 Operator Share 38.5% 38.0% 37.5% 21 Video Gaming 22 Establishment Share 38.5% 38.0% 37.5% 23 State Share 23.0% 24.0% 25.0% 24 (2) The state share shall be distributed as follows: 25 (a) 20.0% shall be deposited in the state school aid fund 26 established in section 11 of article IX of the state constitution 27 of 1963 and distributed as provided by law. 02455'99 6 1 (b) 5.0% shall be deposited in the Michigan strategic fund 2 created in the Michigan strategic fund act, 1984 PA 270, MCL 3 125.2001 to 125.2093. 4 (c) 5.0% shall be deposited in the Michigan underground 5 storage tank financial assurance fund created in section 21506 of 6 the natural resources and environmental protection act, 1994 PA 7 451, MCL 324.21506. 8 (d) 70.0% shall be deposited in the Michigan transportation 9 fund established in section 10 of 1951 PA 51, MCL 247.660. 10 Sec. 13. The commissioner shall do both of the following: 11 (a) Supervise and administer the operation of video gaming 12 in accordance with this act and the rules. 13 (b) License as agents to conduct video gaming persons whom 14 he or she considers will best serve the public and protect the 15 honesty and integrity of the video gaming industry. 16 Sec. 15. Licensees shall comply with rules promulgated by 17 the commissioner to protect the integrity of the video gaming 18 system. 19 Sec. 17. The commissioner shall license, register, and 20 establish a fee for each video gaming machine manufacturer, dis- 21 tributor, operator, and licensed establishment before any video 22 gaming machine or associated equipment is manufactured, distrib- 23 uted, sold, or placed for public use in this state by that manu- 24 facturer, distributor, operator, or establishment. The annual 25 fee for each license shall not exceed the following: 26 (a) $5,000.00 for a video gaming machine manufacturer. 02455'99 7 1 (b) $5,000.00 for a video gaming machine distributor. 2 (c) $2,500.00 for a video gaming machine operator and $50.00 3 per registered machine. 4 (d) $100.00 for a video gaming establishment. 5 Sec. 19. (1) The commissioner, subject to the applicable 6 laws relating to public contracts, may enter into contracts for 7 the operation of video gaming and into contracts for the promo- 8 tion of video gaming. 9 (2) A contract awarded or entered into by the commissioner 10 shall not be assigned by its holder except by specific approval 11 of the commissioner. 12 (3) Any contract or portion of a contract for video gaming 13 equipment or related services entered into before the effective 14 date of this act by a manufacturer, distributor, operator, or 15 establishment that does not conform with the provisions of this 16 act is void. 17 Sec. 21. (1) A license for a video gaming establishment 18 shall not be issued to any person to engage in business exclu- 19 sively as a video gaming agent. Before issuing a license, the 20 commissioner shall consider the financial responsibility and 21 security of the applicant and his or her business or activity. 22 The commissioner shall review the applicant's license history 23 with the appropriate issuer of the license including an 24 applicant's license for on-premises consumption of alcoholic 25 liquor and may deny a license to a person if the commissioner 26 believes that the applicant will compromise the honesty or 27 integrity of the video gaming industry. 02455'99 8 1 (2) As used in this section, "person" means an individual, 2 association, corporation, club, trust, estate, society, company, 3 joint stock company, receiver, trustee, referee, any other person 4 acting in a fiduciary or representative capacity who is appointed 5 by a court, or any combination of individuals. Person includes 6 any department, commission, agency, or instrumentality of the 7 state, including any county, city, village, or township and any 8 agency or instrumentality thereof. 9 (3) Notwithstanding any other provision of law, a person 10 licensed under this act may act as a video gaming agent. A 11 person lawfully engaged in nongovernmental business on state 12 property may be licensed as a video gaming agent. 13 (4) A license is assignable and transferable but only inso- 14 far as the track license or on-premises consumption license is 15 transferable. 16 (5) A licensed agent or his or her employee may conduct 17 video gaming only on the premises stated in the license of the 18 agent. 19 (6) The commissioner may require a bond from any licensed 20 agent in an amount as provided in the rules. 21 (7) A licensed agent shall display his or her license or a 22 copy of the license conspicuously in accordance with the rules. 23 (8) The commissioner may suspend or revoke the license of 24 any agent who violates this act or a rule promulgated under this 25 act. 26 Sec. 23. A special fund to be known as the "state video 27 gaming fund" is created in the department of treasury. The state 02455'99 9 1 video gaming fund consists of the state's share of net machine 2 income received from video gaming and all other money credited or 3 transferred to the fund from any other fund or sources pursuant 4 to law including interest earnings on common cash attributable to 5 the state video gaming fund. 6 Sec. 25. All fees and revenue collected by the commissioner 7 or bureau under this act shall be paid into the state video 8 gaming fund. All necessary expenses incurred by the bureau in 9 the administration and enforcement of this act and in the initia- 10 tion, implementation, and ongoing operation of charity games 11 shall be financed from the state video gaming fund. The amount 12 of these necessary expenses shall not exceed the amount of reve- 13 nues received from the fees collected under this act. At the end 14 of each fiscal year, all money, including interest, in the state 15 video gaming fund which is attributable to fees collected pursu- 16 ant to this act but which has not been expended pursuant to this 17 section shall be deposited in the Michigan transportation fund 18 created in section 10 of 1951 PA 51, MCL 247.660. 19 Sec. 27. (1) The commissioner may suspend or revoke any 20 license issued under this act if the licensee or any officer, 21 director, agent, member, or employee of the licensee violates 22 this act or a rule promulgated under this act. 23 (2) A proceeding to suspend or revoke a license shall be 24 considered a contested case and shall be governed by the adminis- 25 trative procedures act of 1969, 1969 PA 306, MCL 24.201 to 26 24.328. The commissioner may suspend a license for a period not 02455'99 10 1 to exceed 60 days pending any prosecution, investigation, or 2 public hearing. 3 (3) Upon petition of the commissioner, the circuit court 4 after a hearing may issue subpoenas to compel the attendance of 5 witnesses and the production of documents, papers, books, 6 records, and other evidence before it in any matter over which it 7 has jurisdiction, control, or supervision. If a person subpoe- 8 naed to attend any such proceeding or hearing fails to obey the 9 command of the subpoena without reasonable cause, or if a person 10 in attendance in any such proceeding or hearing refuses, without 11 lawful cause, to be examined or to answer a legal or pertinent 12 question or to exhibit any book, account, record, or other docu- 13 ment when ordered to do so by the court may be punished as con- 14 tempt of the court. 15 Sec. 29. (1) A licensee whose license is revoked in conse- 16 quence of a violation of this act or a rule promulgated under 17 this act is ineligible, for a period of 1 year after the revoca- 18 tion, to apply for a license. 19 (2) If a license is suspended, in addition to other penal- 20 ties which may be imposed, the commissioner may declare the vio- 21 lator ineligible to conduct video gaming under this act for a 22 period not exceeding 1 year. 23 (3) The licensee shall return its license to the commis- 24 sioner on or before the effective date of a suspension or 25 revocation. Whether returned or not, the license shall not be 26 valid beyond the effective date of the suspension or revocation. 02455'99 11 1 Sec. 31. (1) The commissioner shall report immediately to 2 the governor, the state treasurer, and the legislature any 3 matters that require immediate changes in the laws of this state 4 in order to prevent abuses or evasions of this act or rules 5 promulgated under this act or to rectify undesirable conditions 6 in connection with the administration or operation of video 7 gaming. 8 (2) The commissioner shall make a continuous study and 9 investigation of video gaming to do all of the following: 10 (a) Ascertain any defects in this act or in the rules that 11 allow any abuses in the administration and operation of video 12 gaming or any evasion of this act or the rules may arise or be 13 practiced. 14 (b) Formulate recommendations for changes in this act and 15 the rules. 16 (c) Guard against the use of this act and the rules as a 17 cloak for the carrying on of organized crime. 18 (d) Ensure that this act and the rules are in a form and are 19 administered as to serve the true purposes of this act. 20 (3) The commissioner shall make a continuous study and 21 investigation of the operation and the administration of similar 22 laws which may be in effect in other states or countries, any 23 literature on the subject which may be published or available, 24 any federal laws which may affect the operation of video gaming, 25 and the reaction of citizens to existing and potential features 26 of video gaming with a view to recommending or effecting changes 27 that will tend to serve the purposes of this act. 02455'99 12 1 Sec. 33. Any other law providing any penalty or disability 2 for conducting video gaming or any acts done in connection with 3 video gaming shall not apply to video gaming conducted under this 4 act. 5 Sec. 35. A person who willfully violates this act is guilty 6 of a misdemeanor and shall be fined not more than $1,000.00 or 7 imprisoned for not more than 6 months, or both. 8 Sec. 37. This act does not take effect unless all of the 9 following bills of the 90th Legislature are enacted into law: 10 (a) Senate Bill No. 477. 11 12 (b) Senate Bill No. 478. 13 02455'99 Final page. TLG