July 5, 2018
To: Establishment Owners, Managers and Employees who Operate Gaming Machines
From: Terry Nichols
Chief of Police
Brownwood Police Department
Vance Hill
Brown County Sheriff
Shane Britton
Brown County Attorney
Subject: Gambling Penal Code 547
Establishment Owners, Managers and Employees:
It has come to our attention that you are possibly operating an illegal gambling establishment. The purpose of this letter is to inform you that the Brownwood Police Department and the Brown County Sheriffs Office will be investigating your business, and other like yours, in the very near future. Unfortunately, you will not know about the investigation until it is concluded because it will be conducted covertly.
If we determine that your business is being operated illegally, we will collectively take all legally available action against your business, including the arrest and prosecution of operators and employees, the seizure of all illegally obtained proceeds and the seizure of all equipment involved in the operation of your business.
There is a common misconception that if the Texas State Comptroller placed a tax stamp on these devices they are legal. This is only partially true. The Texas State Comptroller stamp is confirmation that the device is legally registered with the state. Being registered, however, does not address the legalities of how the machine is being operated.
Under current law, if the eight liner is used only for bona fide amusement purposes, awards the player with non-cash merchandise or vouchers redeemable for novelty items, and the value of the prize or certificate is not more than 10 times the cost of a single play or five dollars (whichever is less), the machine is legal. On the other hand, if the machine pays out in cash or exceeds the statutory minimum prize amount, it is illegal.
However, it’s not quite that simple. Eight liner operators use various tactics to “skirt” the law. For example, two consolidated Texas Supreme Court cases from 2003 held that gift certificates redeemable at retail stores are the equivalent of cash and eight liners that dispense the certificates are illegal gambling devices. In addition, if an eight liner rewards a player with cash, even if that cash is only used to play another machine, the eight liner is an illegal gambling device. See Hardy v. State, 102 S.W. 3d 123 (Tex. 2003); State v. One Super Cherry Master Video 8-Liner Machine, 102 S.W.3d 132 (Tex. 2003); see also Tex. Att’y Gen. Op. No. GA-0913 (2012) (concluding eight liner machines in a bingo hall that issue tickets redeemable for daubers, bingo play cards, and items from a bingo hall concession stand are illegal gambling devices).
The Texas Supreme Court extended the logic of Hardy in a 2013 case, State v. $1, 760. OO in U.S. Currency, 406 S.W.3d 177 (Tex. 2013). Here, the eight liners accepted cash, which the machine converted into points that were used for play. When a player redeemed points from an eight liner upon completion of play, the eight-liner dispensed a ticket for every five hundred points won. Players could use the tickets to either (l) redeem store merchandise that did not exceed a wholesale value of $5, or (2) receive credits to replay another machine, which were implemented electronically by an attendant without having to convert the tickets back into cash. Players could return at a later date to redeem the tickets for replays on the eight liners. The tickets had no cash value and were never exchanged for cash for replay. Nevertheless, the court held that an electronic, nonimmediate right of replay does not fall into the Section 47.01(4)(B) exception because the distributed tickets were not redeemable exclusively for noncash merchandise prizes, toys, or novelties. State v. $1, 760.00 in U.s Currency, 406 S.W.3d 177, 178 (Tex. 2013).
We strongly recommend that you seek legal advice from someone qualified to advise you on the current operation of your business to ensure that you. are in compliance with the law. Additionally, you may want to review Chapter 47 of the Texas Penal Code, as well as read the above-referenced cases in their entirety. If you would like a copy of these cases, they are available at the County Attorney’s office.
Terry Nichols – Brownwood Chief of Police
Vance Hill – Brown County Sheriff
Shane Britton – Brown County Attorney
