The Coin Operated Amusement Machines (COAM) industry has enjoyed significant growth over the past few years in Georgia and other states. But like any successful business model, winning often comes at a cost.
In this case, the industry’s growth — which has led to job creation, economic development in rural areas and millions in education funding in Georgia — seems to be welcoming what industry leaders describe as bad actors.
As a result, Luck Bucks Gaming Group, a top COAM operator in Georgia, is laying out the problems facing the industry in Georgia, and how to fix those problems.
The company claims improper operating models are allowing competitor machine license holders that circumvent existing laws and regulations to offer compensation structures to location owners under the table, according to a memo obtained by Southeast Politics. That, the company argues, is incentivizing owners to enter into new contracts and forcing out existing license holders who are playing by the rules.
Likewise, the company said inconsistent regulation enforcement is enabling bad actors to abuse the system, engage in improper activities and take business away from compliant companies.
Lucky Bucks is also concerned about a lack of transparency resulting from the Georgia Lottery Corporation’s minimal reporting requirements, which it says allows non-compliant license holders to “operate without impunity while the majority of the industry is left in the dark.”
“Other areas of concern include: cash stuffing, whereby an MLH (Machine License Holder) provides cash to a location owner who in turn provides that gas as a prize payout to a player, resulting in inflated revenues; parking, which creates revenue sharing agreements that improve the location value and potential sale price of a contract to another MLH; and replays, which allow locations to provide cash payouts to players by masking them with future player replays,” the memo explains.
Lucky Bucks also has some issue with the use of gift cards for prize payouts, which it argues could reduce revenue intended for education funding and push spending out of state. The Georgia General Assembly is currently considering a bill (HB 353) that would award gift cards to winners that could be redeemed anywhere in the state. Under current law, players can only redeem their winnings on merchandise in the store where the game is located. The company wants such gift cards to be lottery products and to be reloadable.
“Left unchecked, these issues could result in a massive expansion of unregulated gaming in the state,” Lucky Bucks wrote in its memo.
To curb those issues, the company is calling for the elimination of improper operating models; enhanced enforcement; and more transparency.
To eliminate improper operating models, Lucky Bucks suggests “implementing uniform contract structures” and extending the existing “9 month rule,” which requires applicants for a new location license to either not place a new COAM at the location for 9-months or accept an agreement with the preceding location owner, to 36-months.
On enhancing enforcement, Lucky Bucks recommends strengthening the Georgia Lottery Corporation’s ability to police the industry, and increase the severity of penalties to deter bad actors.
The company is also suggesting more stringent reporting requirements and daylight reporting of location owners involved in cash payouts.
Other suggestions include criminal prosecution for cash stuffing; mandatory wait periods and payment disclosures before an owner can re-enter the market after parking violations; and the cancellation of unused or revoked licenses.
Lucky Bucks concluded its memo by noting that the Georgia General Assembly has been “extremely gracious” in hearing the company’s concerns and proposed solutions.
“Our goal is to continue working with them to strengthen enforcement, make regulation fair and consistent, and improve transparency within the COAM industry to benefit players, retail locations, operators and every Georgia resident while generating additional revenue for education for generations to come,” the memo reads.