South Carolina's Supreme Court ruled Thursday that video poker is legal, shifting the state's focus to how the controversial and growing $2.3 billion industry will be regulated.
Video poker operators rejoiced, declaring victory after having invested millions in the decade-long legal fight and contributing to Republican Gov. David Beasley's recent election defeat. ``I find it highly satisfying,'' said industry lawyer Dwight Drake.
Gov.-elect Jim Hodges reiterated his campaign pledges for freezes on the number of machines, heavy taxes and regulation, and a statewide vote on whether to keep the games.
``We must have one final, binding statewide referendum on video poker,'' said Hodges, whose campaign was backed by the video poker industry. ``If people vote to ban the industry, it will be removed from the state. If the voters choose to keep it, I promise that South Carolina will have the toughest gaming regulations in America.''
Video gambling has remained largely unregulated in South Carolina because for the last decade the law has been in dispute. The number of machines has doubled since 1991, from about 15,000 to about 30,000. In the past year alone, gamblers' spending on the games increased by $550 million, to $2.3 billion.
Meanwhile, other forms of gambling have spread across the state. A year ago the Catawba Indian Nation opened a high-stakes bingo parlor in York County, and a week ago an offshore casino boat began cruises near Myrtle Beach. And Hodges won the governor's seat earlier this month after promising to improve schools with a lottery.
``It's pretty clear to me that video poker rules,'' said Tom Grey, director of the National Coalition Against Gambling Expansion. ``The image of that state is now one that is dominated by video poker.''
When the legislature reconvenes in January, Hodges says he intends to push for taxes on the industry that could raise as much as $250 million. Other states with video gambling place a special tax on revenue, ranging from 15 percent in Montana to 59 percent in Oregon. South Carolina has no such tax, though operators do pay the state $2,000 per machine as an annual license fee, netting the state roughly $60 million.
Hodges also has called for criminal background checks on video poker operators and a statewide referendum in November 2000.
The case before the Supreme Court was filed by a group of habitual gamblers who argued that video gambling is a lottery, and thus is prohibited by the state constitution. The case was filed in federal court, but in February Judge Joseph Anderson asked the S.C. court to decide whether video gambling violates the state constitution.
Video poker operators and opponents have eagerly awaited the state court's decision since it heard arguments in April.
``Video gaming devices do not come within the plain and ordinary meaning of `lottery' because they do not involve a drawing and `tickets,' '' Chief Justice Ernest Finney wrote for the majority in the 3-2 decision.
Justices E.C. Burnett and Jean Toal disagreed, saying the machines have the same properties as lotteries, which are defined in the state constitution as games of chance where players pay and can win a prize.
In her dissent, Toal wrote that U.S. District Judge Joseph Anderson could still decide on his own that the machines are unconstitutional. ``This determination ultimately is in the hands of the federal district court,'' she wrote.
The gamblers who brought the case said they intend to continue pursuing it, but Drake said he may ask the court to dismiss it because of Thursday's ruling.
The Supreme Court first ruled on video poker in 1991 in a Lancaster County case, when it declared video gambling payouts were legal. The General Assembly responded by calling for a county-by-county referendum in 1994, and 12 of the 46 counties -- including York, Lancaster and Chester -- voted to ban the games. But the state Supreme Court overturned the results, saying criminal laws must be applied statewide.
Beasley tried unsuccessfully to get the General Assembly to ban video poker this year, and the industry turned on him, throwing more than a million dollars behind Hodges. Beasley said Thursday he was disappointed by the court's ruling. ``I believe the court should have and could have ruled video poker to be unconstitutional,'' he said.
New battlefield
Thursday's decision means the video gambling battle now shifts from the courts to the legislature. And rather than debating whether the industry will survive, now the focus likely will be how much to tax and regulate it.
``I don't think the opposition is going to disappear into the night,'' said video gambling attorney Ken Allen. ``We won a battle in an ongoing war. But the war isn't over. The next big arena is going to be the legislature.''
Legislators who oppose video poker acknowledge they probably won't have enough votes to ban the games.
The video poker industry supports a referendum because it believes it would win. About 60 percent of voters statewide favored video poker in the 1994 referendum.
And while exit polls during this month's election showed 58 percent of voters opposed to video gambling, that gives some opponents little comfort. If a referendum were held, video poker operators would likely spend millions of dollars to persuade voters to favor poker.
``There's no way to beat them in a statewide election,'' said Sen. Wes Hayes, R-York, one of the state's leading video poker opponents. ``They know they could buy the election.''
Senate Majority Leader John Land, D-Clarendon, the leader of the pro-video poker forces in the Senate, said he plans to move next session for a referendum in November 2000, and to tax video poker profits in the interim. Land said he wants the tax to bring in at least $200 million a year, about 30 percent of the $667 million in profits that video gambling operators reported between July 1997 and June 1998. Four states -- Oregon, Rhode Island, South Dakota and West Virginia -- tax video poker profits at higher rates, ranging from 33 percent to 59 percent.
Land rejected the idea of such high tax rates. ``You don't want to use the tax to put them out of business,'' he said.
He said the Supreme Court ruling means that the debate over video poker is effectively over. ``We have a crowd in the Senate who will still try their very best to outlaw it,'' he said. ``But I really think the state has turned a corner. We've got a new governor who says let's vote on it, and in the meantime get some money out of it, and we've got a Supreme Court that says there's nothing unconstitutional about it.''
Poker operators predicted the court's ruling would legitimize their industry after years of fighting for survival. ``It will change the public's view of us, that we're not criminals, that we're not doing anything shady,'' said video gambling operator Henry Ingram, who was convicted in 1984 of conspiring to bribe a sheriff.
In Rock Hill, Leroy Neely was finishing a game of video poker at the Saluda Discount Food Store when he learned of the decision. The 40-year-old mechanic plays three or four times a day and said a state ban on the machines would step on his rights to choose to play.
``I just really like to win money,'' Neely said. ``I want more money, more money, more money.''
