Fort Worth asks Texas Supreme Court to declare eight-liner machines illegal lotteries
The city of Fort Worth argued Tuesday before the Texas Supreme Court that the popular slot machines known as eight-liners should be deemed illegal lotteries.
The case stems from ordinances the Fort Worth City Council passed in 2014 in an attempt to regulate game rooms, which many residents believe attract crime. The city’s regulations were quickly hit with lawsuits from gaming machine companies. Portions of the ordinance related to restricting game rooms to certain areas were struck down, and the extent of the city’s oversight has been debated in the courts ever since.
Eight-liner operators suing the city claim state law pre-empts the local regulations, and argued that Chapter 2153 of Texas Occupations Code already provides “comprehensive and uniform statewide regulation” of the machines.
Provisions of state law allow local municipalities to impose restrictions, such as banning the machines from being within 300 feet of a church, school or hospital. The city’s 2014 ordinances went further than that, restricting them to industrial-zoned areas and banning them from within 1,000 feet of schools, churches, hospitals or residential areas.
Marcy Hogan Greer, an Austin attorney who represented the eight-liner operators, stressed that the Legislature made it clear “with no unmistakable clarity” its intent for “uniform and statewide” regulation, rather than a patchwork of local regulations.
While gambling that results in cash payouts is illegal in Texas, state law exempts machines used solely for entertainment purposes that dole out small, non-cash prizes. Because of this, game room owners are legally allowed to operate eight-liners, as long as prizes are cashless and aren’t worth more than $5 or 10 times the cost to play the game.
But the city of Fort Worth argued that the eight-liner machines constitute illegal “lotteries” — which the Texas Constitution forbids. And therefore, section 47.01(4)(B) of the Texas Penal Code is unconstitutional, because in the city’s view it circumvents the Constitution’s ban on lotteries by allowing the eight-liner machines to operate.
“The Legislature cannot authorize what the Constitution prohibits,” said David Keltner, an attorney with the Kelly, Hart & Hallman law firm who argued on behalf of the city of Fort Worth.
The loophole is often referred to as the “fuzzy animal” exception because of its intention to allow lottery-like games that award kids nominal prizes, like at Chuck E. Cheese locations.
Keltner argued that the eight-liner machines, which users can play to win tickets that they can then redeem for prizes, do not fall within the scope of the “fuzzy animal” exception because of some prizes’ value.
“The prizes aren’t fuzzy animals. They’re Xboxes. They’re flat screen TVs,” Keltner said.
The slot machines meet the definition of a “lottery,” Keltner argued, because they give players who pay an opportunity to win a prize by chance rather than skill.
But justices questioned whether that means amusement games within Chuck E. Cheese locations would also be banned. Keltner said that many of the games “have some degree of skill, even for a child.”
Greer argued that eight-liner machines aren’t traditional lotteries, and do require skill rather than complete chance. Greer noted that the machines can require players to press a button at the right time to stop the spinning symbols — a point that Justice Jane Bland met with skepticism.
“I think it’s important that the Legislature define lottery,” Greer said.
While the 2nd Court of Appeals affirmed a lower court’s ruling that sections of Texas law preempt the city’s ordinances — it did not side with the operators’ claim that Chapter 2153 of the Texas Occupations Code completely pre-empts local regulation.
“The city would like for the court to determine that the machines are unconstitutional and therefore not pre-empted by the occupations code. That is really our position,” Chris Mosley, a senior assistant attorney for Fort Worth, said after Tuesday’s arguments. “Our second best would be for the court to send it back to the Fort Worth Court of Appeals to determine constitutionality.”
The outcome could have implications that would affect eight-liner machines and their regulation across the state. If eight-liner slot machines are found to be illegal gambling devices, Texas cities would have grounds to regulate or ban the machines.
“It would be easier, because they would just be eliminated,” Mosley said, stressing that the city is already allowed to crack down on illegal gambling.
However, if the machines are deemed constitutional and the court finds that state law does pre-empt the city’s ordinances, then Texas cities may have to go to the Legislature to be extended the authority to impose stricter regulations than what state law allows.
Under state law, select counties were first granted the authority to regulate game rooms in 2013 — a point Keltner argued as proof that the “comprehensive and uniform statewide regulation” was no longer.
It’s an authority that was extended to Tarrant County in 2017, and subsequently all of Texas’ 254 counties under a state law that went into effect September 2019.
In November, Tarrant County Commissioners unanimously adopted a long list of requirements for game room owners, that go in effect April 1, requiring permits, limiting hours of operation and more. State law also only defines a “game room” as a for-profit business that contains six or more machines, meaning that the county can’t regulate businesses with less than six machines.
“We, the industry, helped pass that legislation because we think that that’s the way to regulate in light of what the city did in deciding that a game room means a convenience store with one eight-liner. It’s silly,” said Stephen Fenoglio, an Austin attorney who previously represented the game machine distributors.
As the city awaits the court’s ruling that could put an end to its years-long legal battle, it will move forward with the county’s game room regulations, Mosley said.
This story was originally published January 28, 2020 at 1:25 PM.
