Fort Worth’s legal battle over eight-liners continues after Texas Supreme Court opinion
A yearslong legal battle between the city of Fort Worth and operators of eight-liner gambling machines continues after the Texas Supreme Court sent the case back to a lower court Friday.
Before weighing in on the extent to which Fort Worth can regulate the popular slot machines, more commonly known as eight-liners, the Texas Supreme Court ordered the Second Court of Appeals in Fort Worth to first determine the legality and constitutionality of the machines.
In January, the city argued before the Texas Supreme Court that the gambling machines are illegal lotteries. But the amusement redemption machine operators suing the city argued that provisions of state law supersede the city’s ability to regulate them.
“We cannot reach that issue today, however, because the answer depends initially on whether the eight-liners at issue are constitutional and legal,” Justice Jeff Boyd wrote in the court’s opinion.
And because the court of appeals had not addressed that question, the Texas Supreme Court reversed the lower court’s judgment and sent the case back for it to consider.
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 amusement redemption machine operators. 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.
Provisions of Chapter 2153 of the Texas Occupations Code 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.
Eight-liner operators suing the city claim that Chapter 2153 of the Texas Occupations Code completely pre-empts the local regulations.
However, the city of Fort Worth argued that the eight-liner machines constitute illegal “lotteries” — which the Texas Constitution forbids. And therefore, as unconstitutional gambling devices, the section of the Texas Occupations Code does not apply to those machines, meaning that the city would not be pre-empted by state law.
In Friday’s opinion, the Texas Supreme Court sided with the city’s interpretation, and concluded that more broadly, Chapter 2153 of the Texas Occupations Code does not apply to unconstitutional or illegal machines, because “it would necessarily give legal authority to them and allow them to legally operate, in violation of the constitution.”
“We’re just gratified that the court accepted our interpretation of the occupations code and rejected the operators’ interpretation,” said Chris Mosley, a senior assistant attorney for Fort Worth.
Are eight-liners’ purpose for gambling or entertainment?
The next question to address is whether the eight-liner machines that belong to the operators suing the city are unconstitutional or illegal.
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.
The loophole is often referred to as the “fuzzy animal” exception because of its intention to allow lottery-like games that award nominal prizes, like at Chuck E. Cheese locations.
In the city’s view, if the machines are illegal lotteries, then section 47.01(4)(B) of the Texas Penal Code is unconstitutional, because it circumvents the Constitution’s ban on lotteries by allowing the eight-liner machines to operate.
While the Texas Supreme Court declined to weigh in on the machines’ legality or constitutionality like the city had hoped, Mosley said he was looking forward to going back to the Second Court of Appeals, “because I just don’t think that there is any room for doubt that these machines are unconstitutional.”
Stephen Fenoglio, an attorney who represents the amusement redemption machine operators, said that due to reduced dockets brought on by the novel coronavirus outbreak, the case likely won’t be heard until closer to the end of the year.
“My guess is that it’ll go back to the Texas Supreme Court on both issues: constitutionality and preemption,” Fenoglio said. “And the Supreme Court made it clear they’re not going to address the preemption until the issue of constitutionality is addressed.”
The case’s outcome could affect how Texas cities are able to regulate the machines across the state. If the machines are deemed constitutional and the court finds that state law does preempt 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. Tarrant County was extended that authority in 2017, and it was later granted to all of Texas’ 254 counties under a state law that went into effect in September 2019.
In November, Tarrant County Commissioners unanimously adopted a long list of requirements for game room owners that went into effect April 1. The regulations require permits, limit hours of operation and more.
State law 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. However, the county can crack down on illegal gambling.
