Slot-distribution rules still unsettled

Marc Levy

Friday, June 17, 2005 | 9:43 a.m.

HARRISBURG, Pa. -- Gambling regulators approved rules for licensing manufacturers of slot machines Thursday but were unable to reach a compromise on how the state should regulate distributors.

Licensing regulations for manufacturers and distributors originally were linked but the seven-member Pennsylvania Gaming Control Board separated them to avoid a public dispute.

The board will start taking license applications from manufacturers by next week, but members postponed a vote on distributor regulations for the second time, largely because of a disagreement over whether to require manufacturers to contract with regional distributors.

Jeffrey W. Coy, a board member and former state lawmaker who has pressed for the regional distributorships, said that approach would mean more opportunities for small businesses and those owned by minorities and women.

Board member Joseph W. Marshall III said he prefers a "free market" approach that would let manufacturers decide how many distributors are necessary, but first he wants to establish what kind of tasks the board will require of distributors.

To ensure that distributors sustain jobs in the supply chain, the board may require them to provide ancillary services such as warehousing and slot machine repair, he said.

The gambling law passed in July requires that all four of the board's legislative appointees, including Coy, and at least one of the three gubernatorial appointees agree on board actions.

The manufacturer licensing requirements spell out the kind of information that must be included in applications as well as various legal standards that applicants must meet.

A pending Supreme Court challenge to Pennsylvania's 11-month-old slot machine gambling law has slowed the board's progress, and Coy said it also has reduced pressure to quickly settle the question of distributorship licensing.

IGT Corp., the world's largest slot-machine manufacturer, submitted comments to the board last month criticizing the proposed regional distributor requirement as a business and regulatory nightmare.

The gambling law, which legalized 61,000 slot machines at 14 racetracks, resorts and other venues, requires that manufacturers contract with a distributor with offices in Pennsylvania.

Although Pennsylvania has businesses that distribute things like video games and coin-operated machines, the law essentially created a new class of business because no one in the state currently distributes slot machines.

Louisiana is the only state that currently has such a requirement, which was championed in Pennsylvania by Democrats but criticized by some Republicans as a way for politically connected operatives to make money off the gambling industry.

Thus far, two politically connected Democrats, including one who is an IGT lobbyist and raises campaign funds, have expressed interest in a distributor's license. Several out-of-state firms have expressed interest as well.