Video gambling parlors sue Illinois over profit-sharing

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Illinois Café & Services Company LLC, which runs the Dotty's Café chain, filed a complaint April 4 in Cook County Circuit Court along with co-plaintiff, Laredo Hospitality Ventures LLC, which operates the Stella's and Shelby's branded establishments.

"Video gaming has been a success in IL".

Law360, Springfield (April 6, 2017, 12:07 AM EDT) - A trio of IL restaurant chains sued the state's Gaming Board on Tuesday over a state law mandating that bars and restaurants share half of their profits made from gambling at video terminals with third-party operators.

The Video Gaming Act was passed in IL in 2009 but came into force several years later, in 2012.

Unlike establishment owners and gaming licensees, terminal operators, the complaint states, don't have a role in monitoring or ensuring the integrity of video gaming. Thanks to the most recent changes in the state's legislation, businesses in IL are now permitted to operate no more than five video gaming terminals, allowing customers to place real-money bets on blackjack, slots, and video poker, among other casino games. They allege violations of the due-process and equal-protection clauses of the IL and U.S. Constitutions. In other words, a video gaming parlour is practically prohibited from owning the gaming terminals, located on its own premises. Further, the state law "imposes no special or heightened licensing review on them" and the operators aren't authorized to do fix work or maintenance on a terminal's interior components without a Gaming Board representative present.

Thus, gaming parlours are required to outsource their terminals with licensed and regulated video gambling terminal operators. The state law determines which party pays for what and which one is to collect a given percentage of the terminals' profits.

A mandatory 50 percent of after-tax profits from each machine goes to the terminal operator, and a board policy also controls the amount of marketing and advertising costs operators have to pitch in, according to the lawsuit.

The complaint says the state law forces establishments that want to offer video gaming to contract with "terminal operators" - companies that install the actual game machines - and mandates "they split the profits of video gaming without taking into account their relative investments, expenses and efforts; and then forbids them from freely negotiating the terms of their legislatively imposed joint venture". They believe the two work together to unfairly restrict their "freedom of contract".

"The profit diversion provision, dual licensing prohibition and advertising and promotions policy are unconstitutional on their face and unfair to the business owners and entrepreneurs that own and operate establishments across the state", the complaint states. According to the three video cafés, this is a violation of both the IL and US Constitutions. "Its success and popularity hide a lost opportunity, however, because the Video Gaming Act places a disincentive on local establishments to improve their consumers' video gaming experience", argued the gambling establishments, which are represented by Dan K. Webb of Winston & Strawn LLP in Chicago, said. The plaintiffs insist on amending the Video Gaming Act so that it allows all participants in the video gambling industry in the state to negotiate the terms of their own contracts. After working there for a couple of years and writing on various topics, he found his interest for the gambling industry.

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