Rudi Keller
| Missouri Independent
A lawyer for a company hoping to break into Missouri’s gambling market told a state Senate panel Wednesday, April 1 that unregulated slot machines are siphoning millions from schools and that lawmakers should respond by legalizing video lottery games.
Matt Hortenstine, chief counsel for Illinois-based J&J Ventures, called enforcement efforts a “whack-a-mole” game unless retailers have a ready replacement for the machines currently proliferating in convenience stores, bars and fraternal halls around the state. If a particular form of unregulated game is found to be illegal under Missouri gambling laws, he said, developers will change the games and the process will start all over again.
Local law enforcement doesn’t have the resources to match the game vendors, he said.
“The court can only address what comes before the court, that singular machine that is the subject matter of that criminal enforcement, and industry will adapt to it,” Hortenstine said.
Hortenstine was testifying April 1 during a hearing of the Select Committee on Gaming in support of a House-passed bill that would give the Missouri Lottery Commission the authority to license video games for installation in retail locations across the state.
During the hearing, the five-member committee heard conflicting arguments.
Promoters said video lottery would produce badly needed revenue for education and help retailers sustain their businesses. Opponents said lawmakers should let law enforcement push the unregulated games out of the state and that the bill violates constitutional restrictions on gambling and the way tax money from gambling is used.
The bill has been one of the most heavily lobbied of the session. J&J employs 23 lobbyists, including 15 hired since the start of 2025. Torch Electronics of Wildwood, one of the biggest purveyors of the unregulated slot machines, employs 13 lobbyists.
And all the players in the gambling industry have been heavy political contributors, giving $3.3 million to campaigns since the start of 2025. Casinos oppose the bill because they operate the only legal slot machines in the state. And Torch, which in past years opposed the legislation, is neutral this year because the bill does not bar the company from becoming licensed to provide video lottery terminals.
The bill narrowly passed the House and it faces an uncertain future.
Senate President Pro Tem Cindy O’Laughlin, a Shelbina Republican who chairs the committee, told reporters after the hearing that her resistance to expanding gambling has not changed.
“My position is that it is detrimental to family security,” O’Laughlin said.
O’Laughlin said she will meet individually with the committee’s other four members before setting a date for a vote on the bill.
“If it were up to me, I would have had them all removed by now,” O’Laughlin said of the slot machines.
Under the bill, the Missouri Lottery Commission would be given power to license retailers to offer up to eight video lottery terminals at a single location. The games would have to be in a designated area of the establishment, not visible from the entrance.
It would be illegal for anyone under 21 to play and each game would have to pay out at least 80% of the money wagered. The profits would be split three ways, with the lottery taking 31% and retailers splitting the rest with game vendors.
City and county governments would have 120 days after the bill takes effect to decide if they want to opt out of having video lottery games in their community.
Other provisions would impose a $250 per machine fee to pay for services for people with developmental disabilities and increase the $2 boarding fee paid by casinos by adjusting it for inflation since 1993, when it was imposed.
If the law was in effect now, the fee would increase to $4.56 on July 1. The fee pays for the operations of the Missouri Gaming Commission, which regulates casinos, and any money left over is used to fund veterans nursing homes. Under the bill, 50 cents of the fee would be dedicated to building a museum to house artifacts from the Arabia Steamboat Museum in Kansas City, which is closing in November.
The bill is estimated to generate about $300 million in new revenue for education and $56 million for veterans services.
With thousands of unregulated machines in operation around the state, the state is losing that revenue, said state Rep. Bill Hardwick, a Republican from Dixon and sponsor of the bill. He told the committee that ambiguities in state law make enforcement difficult.
The bill will force retailers to remove unregulated slot machines within a year, he said.
“The problem will never be resolved unless the legislature changes the law,” Hardwick said.
Enforcement efforts
Since about 2019, Missouri has seen a proliferation of unregulated games. Owners contend they are legal under Missouri law because they have a “pre-reveal” feature that allows players to see if the next result is a winner before placing a bet.
Torch calls them “No Chance Gaming,” contending the pre-reveal feature removes the element of chance. Games based on chance, like a slot machine, are illegal under the Missouri Constitution outside of casinos or the lottery while games that have an element of skill are not.
That legal uncertainty has also given the machines the name “gray market games.”
The Missouri State Highway Patrol filed about 200 cases with county prosecutors in 2019 and 2020, alleging the machines violate state law. But few actual charges were filed in court and most targeted convenience store owners for misdemeanor violations.
Torch Electronics, the biggest player in the market, along with Warrenton Oil Co., one of its biggest clients, has pushed back aggressively both in courts and in the legislature. The companies unsuccessfully sought a ruling that its games were legal, and protected from enforcement, and is pursuing an appeal of a ruling that its games violate a city ordinance passed in Springfield.
Enforcement efforts have ramped up again since a federal judge ruled in February that Torch’s machines “meet the statutory definition of ‘gambling device’ and are therefore illegal under Missouri law when played outside a licensed casino.”
Just before the decision, Attorney General Catherine Hanaway announced she was cooperating with federal investigators looking at the games and has since filed lawsuits and felony criminal charges against convenience store owners in Greene and Dunklin counties.
Lawmakers should let those cases play out, said Marc Ellinger, general counsel for the Missouri Gaming Association, the lobbying organization for casinos.
More than a century ago, Ellinger said, the courts ruled that games with pre-reveal features are illegal.
In 1913, in a case out of Moberly, a restaurant owner who had a gum dispenser that also paid out tokens worth 5 cents each was found to be operating an illegal game even though customers knew if the next play would provide a win or just gum.
The elements that made the gum dispensers illegal are the same elements present in the unregulated games, he said.
“They are not gray market machines,” Ellinger said. “They are not no chance machines. They are illegal slot machines.”
More: Greene County convenience store owner charged for gaming machines
The bill is unconstitutional, Ellinger said, because it authorizes games of chance and because it diverts money from education programs. Only a statewide vote on a constitutional amendment would make them legal, he said.
Scott Pool, an attorney for J&J, said the bill is constitutional. The revenue that would go to veterans and other programs are fees on the retailers and vendors, not money from players, he said.
“The funding provisions are absolutely constitutional,” he said.
Revenue needs
The money generated by unregulated machines has become a major source of support for convenience store owners, said Lynn Wallis, owner of a company that operates 50 convenience stores.
When the machines were being introduced, she said, some retailers took them and others did not. The ones that did are enjoying larger profits, she said.
Her company has 18 stores where the games are installed, she said, and took in more than $1.5 million in 2025.
She estimated there are 30,000 to 40,000 unregulated machines across Missouri. There are approximately 13,000 slot machines at the state’s regulated casinos.
“With all the machines that are generating this revenue, the state should be taking some advantage of that,” Wallis said.
Angie Schulte, lobbyist for Casey’s General Stores, said the company studied what it would make if it put the games in their stores. Of the company’s 400 stores in Missouri, 148 are large enough to house the games.
With four to five games per store, she said, the company estimated it could increase profits by $63,000 in each location.
There is no accounting of the amounts being wagered in the unregulated games. Based on Schulte’s estimate of revenue and the low end of Wallis’s estimate on the numbers, profits could be approaching $2 billion annually.The state’s revenue from gambling totaled about $700 million in the most recent fiscal year.
At the 13 casinos, $18.2 billion was wagered and the state received $363 million from the 21% tax on the money from lost wagers.
So far, tax revenue from casinos is up about 7.5% this fiscal year, meaning the amounts being lost are going up.
Since Dec. 1, everyone over 21 with a smart phone can make bets on sporting events. In the first three months, $1.2 billion was wagered.
The lottery sold $1.6 billion in tickets in the fiscal year that ended June 30 and provided $337 million for education programs. The lottery’s net revenue is up about 4% so far in the current fiscal year.
Missouri will need revenue if it wants to eliminate the income tax, Hortenstine said. Video lottery will keep its promise, unlike sports wagering, he said.
During the campaign in 2024, promoters of sports wagering aired commercials that portrayed it as a boon to education funding.
But that constitutional amendment included provisions allowing sports bookmakers to deduct all of their promotional costs from their net revenue. Betting began Dec. 1 and in the first two months, the dominant players in the market, FanDuel and DraftKings, paid no taxes and carried over paper losses into February. The total tax revenue was $659,196 from all sports books.
Both companies reported net earnings in February and the total taxes from sports wagering for the month was $1.2 million.
The results from sports betting should be a spur to act on the video lottery bill, Hortenstine said. Lawmakers were lobbied heavily to legalize sports betting before the initiative and lawmakers probably would have more strict limits on deductions for promotional costs.
“Let’s finish the work and address this properly through the legislative process that you can control,” Hortenstine said, “and make the best possible solution to this problem.”
This story was first published at missouriindependent.com.
