BILL REQ. #:  H-2240.3 

Read first time 04/01/11.   Referred to Committee on State Government & Tribal Affairs.

     AN ACT Relating to equity and fairness through the creation and regulation of electronic scratch ticket machines for nontribal gambling establishments; amending RCW 67.70.040, 67.70.330, and 9.46.291; adding a new chapter to Title 67 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   This act may be known and cited as the gaming equity and fairness act of 2011.

NEW SECTION.  Sec. 2   (1) The purpose of this act is to extend electronic scratch ticket games, which are currently allowed only to tribal entities, to house-banked card room licensees in the same form and manner that is allowed under the Indian gaming regulatory act. The legislature declares that house-banked card rooms operating at least five card games may use the types of electronic scratch ticket games, devices, and player terminals authorized under this chapter.
     (2) The legislature further declares that electronic scratch tickets are a legal form of gambling in the state of Washington. This chapter is intended to grant specific authority to the commission to regulate electronic scratch ticket gambling by house-banked card rooms.
     (3) The legislature finds this chapter will assist in job creation and retention. The legislature further finds that this chapter is necessary for the immediate preservation of public health and safety and the support of state government and its existing public institutions as it is intended to generate revenue appropriated in the 2011-2013 biennium. Programs dependent upon the additional revenue forecasted under this chapter provide for the health, education, and welfare of the citizens of the state of Washington.

NEW SECTION.  Sec. 3   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Central accounting and auditing computer system" means a computer system owned and operated by the commission that provides a secure means to monitor, receive, store, and access data, and record critical functions and activities of the player terminals.
     (2) "Central computer" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.
     (3) "Commission" means the Washington state lottery commission.
     (4) "Electronic scratch ticket" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.
     (5) "Electronic scratch ticket game" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.
     (6) "Electronic scratch ticket game set" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.
     (7) "Electronic scratch ticket game subset" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.
     (8) "House-banked card room" means the holder of a house-banked card room license from the gambling commission.
     (9) "Manufacturing computer" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact as it exists on the effective date of this section or as hereinafter amended.
     (10) "Net win" means gross wagers received from gambling activities minus the:
     (a) Amount paid to players for winning wagers; and
     (b) Accrual of prizes for progressive jackpot contests; and
     (c) Repayment of amounts used to seed guaranteed progressive jackpot prizes.
     (11) "Player terminals" has the same meaning as provided in Appendix X2 to the state-tribal gaming compact, as it exists on the effective date of this section or as hereinafter amended.

NEW SECTION.  Sec. 4   (1)(a) All electronic scratch ticket systems, games, and player terminals approved for operation by the gambling commission as a tribal lottery system under tribal-state class III gaming compacts in the state pursuant to RCW 9.46.360 may be put into use under this chapter to the same extent and in the same manner as electronic scratch tickets are regulated under the tribal-state gaming compact by house-banked card rooms operating at least five card games. All computers and player terminals and the combination and components thereof in each system must conform to this chapter and the rules adopted under this chapter.
     (b) Electronic scratch ticket systems, games, and player terminals not approved for operation by the gambling commission under the tribal-state class III gaming compact in the state may be put to use after approval is obtained from the commission under the requirements of this chapter and rules adopted under this chapter.
     (2) The electronic scratch ticket game consists of a finite number of electronic scratch tickets, a certain number of which, if drawn, entitle a player to prize awards at various levels. The scratch tickets are designed from a template in conformity with this chapter and are created in game sets on a manufacturing computer from which scratch tickets are randomly selected and placed into scratch ticket subsets. Each game set has a predetermined number of winners and values and is designed so as to assure players of an at least seventy-five percent payback of the amounts paid in the aggregate for all tickets in the set. As a game set's tickets are placed into subsets, the pool of tickets available from that game set for placement into subsets diminishes, until each ticket in the game set has been placed into a subset.
     (3)(a) Electronic scratch ticket game subsets are transmitted to the central computer, where they are stored until dispensed electronically on demand to player terminals. Scratch tickets are electronically dispensed from the central computer in the order within each subset in which the tickets were received. Players compete against each other to draw winning tickets. As subsets are used, they are replaced by additional subsets that have been created and delivered to the central computer in the same manner, until the game set has been depleted, ending that particular game. Different games based on different game sets may be offered simultaneously through the central computer.
     (b) Each game set must be consistent with the provisions of Appendix X2 as adopted under the most current tribal-state class III gaming compact in Washington state or as hereafter amended and meet the following minimum requirements:
     (i) Each game set must be made up of a finite number, that cannot be limited by rule, of electronic scratch tickets;
     (ii) All scratch tickets in a particular game set must be of the same purchase price, not to exceed five dollars, but a single ticket may offer more than one opportunity to win a prize on the same wager;
     (iii) The payout percentage for the entire game set must be no less than seventy-five percent of the total purchase price of all tickets in the set combined;
     (iv) Each game set must be assigned a unique serial number; and
     (v) Each ticket must have a specific outcome and prize level associated with it.
     (4) A central accounting and auditing computer system must monitor the electronic scratch ticket games and their related systems. This central accounting and auditing computer system must be:
     (a) Controlled, owned, and operated by the commission;
     (b) Connected to electronic scratch ticket systems operated by licensees to communicate a licensee's electronic scratch ticket game system information; and
     (c) For the purpose of assuring the integrity, security, honesty, and fairness in the operation and administration of electronic scratch ticket games.
     (5) The maximum number of electronic scratch ticket game player terminals is limited to two hundred per licensed location with a maximum number of terminals for all licensed locations limited to seven thousand eight hundred seventy-five.
     (6) Video and/or electronic surveillance is required by electronic scratch ticket game licensees.
     (7) The commission must adopt rules defining the remaining electronic scratch ticket system operating requirements including rules regarding internal controls, software auditing, player terminals, the standards for random number generators, accounting, security, reporting, storage requirements, testing, and auditing of system operations that must be consistent with the provisions of Appendix X2 as adopted under the most current tribal-state class III gaming compact in Washington state or as hereafter amended.

NEW SECTION.  Sec. 5   (1) Play of all electronic scratch ticket games is restricted to players who are twenty-one years of age or older.
     (2) Placement of player terminals for electronic scratch ticket games are allowed only:
     (a) On premises and in areas of premises meeting the liquor control board's requirements for barrier and signage as contained in WAC 314-02-025(3) as it exists on the effective date of this section; and
     (b)(i) Where the entire facility is not restricted to persons of age twenty-one;
     (ii) In areas of the premises designated as off-limits and restricted to persons under the age of twenty-one; or
     (iii) In premises designated as off-limits to persons under the age of twenty-one in their entirety.
     (3) Duties of employees who are eighteen, nineteen, and twenty must comply with the provisions of chapter 66.44 RCW and the rules adopted by the liquor control board under that chapter.

NEW SECTION.  Sec. 6   (1) In order to be eligible for an electronic scratch ticket license, the commission must, at a minimum, require the applicant to demonstrate that the applicant is:
     (a) A holder of a house-banked card room license from the gambling commission operating at least five card games on the effective date of this section; or
     (b) A holder of a house-banked card room license who obtains the license after the effective date of this section and who has operated at least five card games for at least five years.
     (2) Electronic scratch ticket licensees may lease and/or revenue-share with persons or entities, including route operators, distributors, and manufacturers licensed by the commission to engage in such activity for the purposes of obtaining and operating scratch ticket devices. Contracts between a route operator and a licensee must be in writing, signed by the parties, and submitted to the commission before the installation of player terminals.
     (3)(a) Except as provided in (b) of this subsection, nothing in this section prohibits the sale of a house-banked social card game business operating electronic scratch ticket games, sale of nongambling assets of a house-banked social card game business, or change of location of a house-banked social card game business.
     (b) If a house-banked social card game business ceases to operate, the following are prohibited:
     (i) Sale of the business, other than a sale in connection with a change of location outside the jurisdiction; and
     (ii) A change of location of the business within the jurisdiction.
     (c) For the purposes of this subsection "ceases to operate" means a business does not owe any taxes imposed under RCW 9.46.110 for twelve consecutive months.

NEW SECTION.  Sec. 7   Individual licensees may electronically interconnect the player terminals on separate licensed locations. However, capacity for remote access or control of any player terminal from a remote device without written commission approval is not allowed. All communications to and from the player terminals that constitute a wide area network system must be encrypted for security purposes and coverage and must comply with the encryption scheme of the electronic accounting system.

Sec. 8   RCW 67.70.040 and 2006 c 290 s 3 are each amended to read as follows:
     The commission ((shall have)) has the power((, and it shall be its)) and duty:
     (1) To adopt rules governing the establishment and operation of a state lottery as it deems necessary and desirable in order that such a lottery be initiated at the earliest feasible and practicable time, and in order that such lottery produce the maximum amount of net revenues for the state consonant with the dignity of the state and the general welfare of the people. Such rules ((shall)) include, but ((shall)) are not ((be)) limited to, the following:
     (a) The type of lottery to be conducted which may include electronic scratch tickets as defined in section 2 of this act, and the selling of tickets or shares, but such tickets or shares may not be sold over the internet. The use of electronic or mechanical devices or video terminals which allow for individual play against such devices or terminals shall be prohibited. An affirmative vote of sixty percent of both houses of the legislature is required before offering any game allowing or requiring a player to become eligible for a prize or to otherwise play any portion of the game by interacting with any device or terminal involving digital, video, or other electronic representations of any game of chance, including scratch tickets, pull-tabs, bingo, poker or other cards, dice, roulette, keno, or slot machines. Approval of the legislature ((shall be)) is required before entering any agreement with other state lotteries to conduct shared games;
     (b) The price, or prices, of tickets or shares in the lottery;
     (c) The numbers and sizes of the prizes on the winning tickets or shares;
     (d) The manner of selecting the winning tickets or shares, except as limited by (a) of this subsection;
     (e) The manner and time of payment of prizes to the holder of winning tickets or shares which, at the director's option, may be paid in lump sum amounts or installments over a period of years;
     (f) The frequency of the drawings or selections of winning tickets or shares. Approval of the legislature is required before conducting any online game in which the drawing or selection of winning tickets occurs more frequently than once every twenty-four hours;
     (g) Without limit as to number, the type or types of locations at which tickets or shares may be sold;
     (h) The method to be used in selling tickets or shares, except as limited by (a) of this subsection;
     (i) The licensing of agents to sell or distribute tickets or shares, except that a person under the age of eighteen ((shall)) may not be licensed as an agent;
     (j) The manner and amount of compensation, if any, to be paid licensed sales agents necessary to provide for the adequate availability of tickets or shares to prospective buyers and for the convenience of the public;
     (k) The apportionment of the total revenues accruing from the sale of lottery tickets or shares and from all other sources among: (i) The payment of prizes to the holders of winning tickets or shares, which ((shall)) may not be less than forty-five percent of the gross annual revenue from such lottery, (ii) transfers to the lottery administrative account created by RCW 67.70.260, and (iii) transfer to the state's general fund. Transfers to the state general fund ((shall)) must be made in compliance with RCW 43.01.050;
     (l) Such other matters necessary or desirable for the efficient and economical operation and administration of the lottery and for the convenience of the purchasers of tickets or shares and the holders of winning tickets or shares.
     (2) To ensure that in each place authorized to sell lottery tickets or shares, on the back of the ticket or share, and in any advertising or promotion there ((shall)) must be conspicuously displayed an estimate of the probability of purchasing a winning ticket.
     (3) To amend, repeal, or supplement any such rules from time to time as it deems necessary or desirable.
     (4) To advise and make recommendations to the director for the operation and administration of the lottery.

Sec. 9   RCW 67.70.330 and 1987 c 511 s 15 are each amended to read as follows:
     (1) The director ((shall have)) has the power to enforce this chapter and the penal laws of this state relating to the conduct of or participation in lottery activities and the manufacturing, importation, transportation, distribution, possession, and sale of equipment or paraphernalia used or for use in connection therewith. The director, the deputy director, assistant directors, and each of the director's investigators, enforcement officers, and inspectors ((shall)) have the power to enforce this chapter and the penal laws of this state relating to the conduct of or participation in lottery activities and the manufacturing, importation, transportation, distribution, possession, and sale of equipment or paraphernalia used or for use in connection therewith. They shall have the power and authority to apply for and execute all warrants and serve process of law issued by the courts in enforcing the penal provisions of this chapter and the penal laws of this state relating to the conduct of or participation in lottery activities and the manufacturing, importation, transportation, distribution, possession, and sale of equipment or paraphernalia used or for use in connection therewith. They ((shall)) have the power to arrest without a warrant, any person or persons found in the act of violating any of the penal provisions of this chapter and the penal laws of this state relating to the conduct of or participation in lottery activities and the manufacturing, importation, transportation, distribution, possession, and sale of equipment or paraphernalia used or for use in connection therewith. To the extent set forth in this section, the office of the director ((shall be)) is a law enforcement agency of this state with the power to investigate for violations of and to enforce the provisions of this chapter and to obtain information from and provide information to all other law enforcement agencies.
     (2)(a) The gambling commission has primary responsibility with regard to enforcement of chapter 67.--- RCW (the new chapter created in section 12 of this act), relating to the conduct of and participation in electronic scratch ticket games.
     (b) The director has sole responsibility with regard to licensing and rule making under chapter 67.--- RCW (the new chapter created in section 12 of this act).

Sec. 10   RCW 9.46.291 and 1982 2nd ex.s. c 7 s 39 are each amended to read as follows:
     (1) Except as specified by subsection (2) of this section, the provisions of this chapter ((shall)) do not apply to the conducting, operating, participating, or selling or purchasing of tickets or shares in the "lottery" or "state lottery" as defined in RCW 67.70.010 when such conducting, operating, participating, or selling or purchasing is in conformity to the provisions of chapter 67.70 RCW and to the rules adopted thereunder.
     (2) The commission must enforce compliance with state law with regard to the conduct of and participation in electronic scratch ticket games as defined by chapter 67.--- RCW (the new chapter created in section 12 of this act) by house-banked card rooms.

NEW SECTION.  Sec. 11   (1) The commission must develop a compensation system for house-banked card rooms from the net win of electronic scratch ticket games. The remaining net win not retained by the commission under subsection (2) of this section must be returned to the house-banked card room as agent compensation.
     (2) The commission must retain thirty-five percent of the net win from electronic scratch ticket games and deposit the proceeds in the gaming equity and fairness account hereby created in the custody of the state treasurer. Expenditures from the account must be used as specified in this section. The legislature may not appropriate funds from the account inconsistent with this section unless approved by an affirmative vote of at least sixty percent of the members of each house of the legislature.
     (3) The money in the gaming equity and fairness account must be expended as follows:
     (a) Up to two percent of the proceeds may be used to reimburse the state gambling commission and the state lottery commission for their reasonable expenses for administration and enforcement of chapter 67.--- RCW (the new chapter created in section 12 of this act);
     (b) One-half of one percent of the proceeds must be used only for problem gaming prevention, youth education, public awareness, training, help-line services, and treatment;
     (c) Five percent of the proceeds must be distributed proportionally to local governments in which a house-banked card room is located, based on the total net win attributable to any card room within such local government's boundaries; and
     (d) The remaining proceeds must be spent as follows:
     (i) Fifty percent for K-12 education;
     (ii) Thirty percent for health and human service programs; and
     (iii) Twenty percent for public safety programs.

NEW SECTION.  Sec. 12   Sections 1 through 7 and 11 of this act constitute a new chapter in Title 67 RCW.

NEW SECTION.  Sec. 13   This act takes effect August 1, 2011.