Environment and Technology

Cherrymasters' luck might turn next year: Proponents argue that state regulators could electronically monitor slots in taverns around Indiana

May 15, 2006

In past years, legislators have proved unwilling to expand gambling outside Indiana's riverboat casinos.

But Indiana Licensed Beverage Association Executive Director Brad Klopfenstein, who has been leading the push to legalize electronic "cherrymaster" machines, thinks his luck could soon turn.

"The legislators we've talked to, they don't seem to have the steadfast 'no, no, no' attitude they used to have," Klopfenstein said. "We're hoping we'll get a bill filed and it'll get a fair hearing next year."

And new technology the Indiana Gaming Commission is moving toward to monitor the 18,000 electronic poker and slot machines in the state's 10 riverboat casinos could bolster that push.

The technology would use a centralized IT system to make sure the machines are making the proper payouts. That would supplant an existing system under which inspectors take small statistical samples machine by machine during unannounced audits.

The centralized approach is what cherrymaster advocates have in mind to ensure regulation of the estimated 40,000 machines in taverns, truck stops and convenience stores does not become a logistical nightmare.

"What we're proposing is not the status quo, where you have individual games in establishments and you're relying on the operator of the bar to report their sales at the end of the month," Klopfenstein said.

"We're looking at something tied into a centralized system. It would be a lot more like an online lottery terminal than a jukebox."

Cherrymaster advocates hope to entice legislators by playing up the potential windfall to the state from legalizing the machines. Klopfenstein estimates they could provide $300 million in tax revenue annually to state coffers.

The Gaming Commission is asking for ideas for centralized technology in a request for proposals it recently issued seeking a private company to monitor and test the accuracy of casino games.

Since 1996, those duties have been performed by New Jersey-based Gaming Laboratories International through physical inspections machine by machine. Its contract recently lapsed.

Ernest Yelton, executive director of the Indiana Gaming Commission, said the RFP was prepared exclusively for application to the legal electronic gambling machines already on riverboats.

He said the "cherrymaster" issue had no influence on it. Yelton said it's up to legislators to establish gambling law. The Gaming Commission only enforces it.

"We want to make sure we're in a position in Indiana to allow our licensees at least the capability of utilizing this technology," Yelton said.

"I don't think this contract has anything to do with the legalization of cherrymasters. If server-based gaming is perceived as a mechanism where illegal machines could be replaced with machines which could be monitored without a great deal of difficulty, that's something the General Assembly would have to take into account."

But if political winds change, rolling out cherrymaster regulation and oversight across the state could be a simple matter. Klopfenstein said several states-including Louisiana, South Dakota and Montana-already have adopted centralized monitoring systems for games outside of casinos.

And he said changes in the General Assembly's leadership this year could alter the debate. The primary defeat of longtime Senate President Pro Tem Robert Garton, a Republican, and the possibility of a Democratic-controlled House after the fall general election, could give the cherrymaster issue new legs.

"Property tax rates are still going up at a pretty astounding rate. They'll still be looking for some new revenue sources," Klopfenstein said.

"We're pretty much offering up a $300 million solution. It's up to them to decide, all right, instead of raising property taxes on everyone, would it be more palatable to legalize this form of gaming?"

But Indiana Gaming Insight Publisher Ed Feigenbaum said political will could just as easily swing the other way. He noted that Garton's defeat came at the hands of an ideological conservative. Historically, candidates with those political leanings have not been friendly to gambling.

"The chances are a little better. But at the same time, you balance that with what has become a much more ideologically conservative Senate," Feigenbaum said.

"It becomes very difficult to expand gaming in an environment with that many ideological conservatives sitting."
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