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HF 19

as introduced - 87th Legislature, 2011 1st Special Session (2011 - 2012) Posted on 07/19/2011 05:48pm

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 07/19/2011

Current Version - as introduced

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A bill for an act
relating to gambling; authorizing the director of the State Lottery to establish
gaming machines; imposing a fee on gaming machine revenue; providing powers
and duties to the director; amending Minnesota Statutes 2010, sections 240.13,
by adding a subdivision; 299L.07, subdivisions 2, 2a; 340A.410, subdivision
5; 349A.01, subdivision 10, by adding subdivisions; 349A.10, subdivision
3; 349A.13; 541.20; 541.21; 609.75, subdivision 3; 609.761, subdivision 2;
proposing coding for new law in Minnesota Statutes, chapters 297A; 349A;
repealing Minnesota Statutes 2010, section 240.30, subdivision 8.

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

ARTICLE 1

RACINO

Section 1.

new text begin [297A.651] LOTTERY GAMING MACHINES; FEE.
new text end

new text begin (a) Adjusted gross revenue from the operation of gaming machines authorized under
chapter 349A is exempt from the taxes imposed under section 297A.62, chapter 297E,
or any other tax, permit, or assessment for conducting a gambling activity that is not
imposed herein. The State Lottery must, on or before the 20th day of each month, transmit
to the commissioner an amount equal to the adjusted gross revenue from the operation
of gaming machines, as defined in section 349A.01, for the previous month multiplied
by: (1) 25 percent of annual adjusted gross revenue generated by the licensee up to
$125,000,000; (2) 30 percent of annual adjusted gross revenue generated by the licensee
between $125,000,000 and $200,000,000; and (3) 40 percent of annual adjusted gross
revenue generated by the licensee in excess of $200,000,000. The commissioner shall
deposit the money transmitted under this section in the state treasury. From the amounts
transmitted by the commissioner, $1,000,000 is annually appropriated to the commissioner
of human services for the compulsive gambling treatment program established in section
245.98; provided, however, that this appropriation supplement and not replace existing
funding for the program. The remainder of money transmitted under this section shall be
deposited in the state treasury and allocated as provided in paragraph (b).
new text end

new text begin (b) Money deposited in the state treasury under paragraph (a) must be allocated by
the commissioner to the following funds and purposes in priority order:
new text end

new text begin (1) to the general fund, the amount necessary to increase the aid payment schedule
for school district aids and credits payments in section 127A.45, to not more than 90
percent rounded to the nearest tenth of a percent without exceeding the amount available
and with any remaining funds deposited in the budget reserve;
new text end

new text begin (2) to the general fund, the amount necessary to restore all or a portion of the net
aid reduction under section 127A.441, and to reduce the property tax revenue recognition
shift under section 123B.75, subdivision 5, paragraph (a), and Laws 2003, First Special
Session chapter 9, article 5, section 34, as amended by Laws 2003, First Special Session
chapter 23, section 20, by the same amount; and
new text end

new text begin (3) to the bond proceeds fund, to pay, redeem, or defease bonds of the state sold and
issued pursuant to sections 16A.631 to 16A.675, and the Minnesota Constitution, article
XI, sections 4 to 7.
new text end

Sec. 2.

Minnesota Statutes 2010, section 299L.07, subdivision 2, is amended to read:


Subd. 2.

Exclusions.

Notwithstanding subdivision 1, a gambling device:

(1) may be sold by a person who is not licensed under this section, if the person (i) is
not engaged in the trade or business of selling gambling devices, and (ii) does not sell
more than one gambling device in any calendar year;

(2) may be sold by the governing body of a federally recognized Indian tribe
described in subdivision 2a, paragraph (b), clause (1), which is not licensed under this
section, if (i) the gambling device was operated by the Indian tribe, (ii) the sale is to
a distributor licensed under this section, and (iii) the licensed distributor notifies the
commissioner of the purchase, in the same manner as is required when the licensed
distributor ships a gambling device into Minnesota;

(3) may be possessed by a person not licensed under this section if the person holds
a permit issued under section 299L.08; deleted text beginanddeleted text end

(4) may be possessed by a state agency, with the written authorization of the director,
for display or evaluation purposes only and not for the conduct of gamblingdeleted text begin.deleted text endnew text begin; and
new text end

new text begin (5) may be possessed by the State Lottery as authorized under chapter 349A.
new text end

Sec. 3.

Minnesota Statutes 2010, section 299L.07, subdivision 2a, is amended to read:


Subd. 2a.

Restrictions.

(a) A manufacturer licensed under this section may sell,
offer to sell, lease, or rent, in whole or in part, a gambling device only to a distributor
licensed under this sectionnew text begin or to the State Lottery as authorized under chapter 349Anew text end.

(b) A distributor licensed under this section may sell, offer to sell, market, rent,
lease, or otherwise provide, in whole or in part, a gambling device only to:

(1) the governing body of a federally recognized Indian tribe that is authorized
to operate the gambling device under a tribal state compact under the Indian Gaming
Regulatory Act, Public Law 100-497, and future amendments to it;

(2) a person for use in the person's dwelling for display or amusement purposes in a
manner that does not afford players an opportunity to obtain anything of value;

(3) another distributor licensed under this section; deleted text beginor
deleted text end

(4) a person in another state who is authorized under the laws of that state to possess
the gambling devicedeleted text begin.deleted text endnew text begin; or
new text end

new text begin (5) the State Lottery as authorized under chapter 349A.
new text end

Sec. 4.

Minnesota Statutes 2010, section 340A.410, subdivision 5, is amended to read:


Subd. 5.

Gambling prohibited.

(a) Except as otherwise provided in this
subdivision, no retail establishment licensed to sell alcoholic beverages may keep, possess,
or operate, or permit the keeping, possession, or operation on the licensed premises of dice
or any gambling device as defined in section 349.30, or permit gambling therein.

(b) Gambling equipment may be kept or operated and raffles conducted on licensed
premises and adjoining rooms when the use of the gambling equipment is authorized by
(1) chapter 349, (2) a tribal ordinance in conformity with the Indian Gaming Regulatory
Act, Public Law 100-497, or (3) a tribal-state compact authorized under section 3.9221.

(c) Lottery tickets may be purchased and sold within the licensed premises as
authorized by the director of the lottery under chapter 349A.

(d) Dice may be kept and used on licensed premises and adjoining rooms as
authorized by section 609.761, subdivision 4.

new text begin (e) Gambling devices may be operated on the premises of a licensed racetrack
as authorized by chapter 349A.
new text end

Sec. 5.

Minnesota Statutes 2010, section 349A.01, is amended by adding a subdivision
to read:


new text begin Subd. 1a. new text end

new text begin Adjusted gross gaming machine revenue. new text end

new text begin "Adjusted gross gaming
machine revenue" means the sum of all money received by the lottery for gaming machine
plays, less the amount paid out in prizes for gaming machine games.
new text end

Sec. 6.

Minnesota Statutes 2010, section 349A.01, is amended by adding a subdivision
to read:


new text begin Subd. 6a. new text end

new text begin Gaming machine. new text end

new text begin "Gaming machine" means any machine in which a
coin token or other currency is deposited to play a game that uses a video display and
microprocessors.
new text end

Sec. 7.

Minnesota Statutes 2010, section 349A.01, is amended by adding a subdivision
to read:


new text begin Subd. 6b. new text end

new text begin Gaming machine game. new text end

new text begin "Gaming machine game" means a game
operated by a gaming machine as authorized by the director.
new text end

Sec. 8.

Minnesota Statutes 2010, section 349A.01, is amended by adding a subdivision
to read:


new text begin Subd. 6c. new text end

new text begin Gaming machine play. new text end

new text begin "Gaming machine play" means an electronic
record that proves participation in a gaming machine game.
new text end

Sec. 9.

Minnesota Statutes 2010, section 349A.01, subdivision 10, is amended to read:


Subd. 10.

Lottery procurement contract.

"Lottery procurement contract" means a
contract to provide lottery products, new text begingaming machines, maintenance of gaming machines,
new text endcomputer hardware and software used to monitor sales of lottery ticketsnew text begin and gaming
machine plays
new text end, and lottery tickets. "Lottery procurement contract" does not include
a contract to provide an annuity or prize payment agreement or materials, supplies,
equipment, or services common to the ordinary operation of a state agency.

Sec. 10.

Minnesota Statutes 2010, section 349A.10, subdivision 3, is amended to read:


Subd. 3.

Lottery operations.

(a) The director shall establish a lottery operations
account in the lottery fund. The director shall pay all costs of operating the lottery,
including payroll costs or amounts transferred to the state treasury for payroll costs, but
not including lottery prizes, from the lottery operating account. The director shall credit to
the lottery operations account amounts sufficient to pay the operating costs of the lottery.

(b) Except as provided in paragraph (e), the director may not credit in any fiscal
year thereafter amounts to the lottery operations account which when totaled exceed
nine percent of gross revenue to the lottery fund in that fiscal year. In computing total
amounts credited to the lottery operations account under this paragraph the director shall
disregard amounts transferred to or retained by lottery retailers as sales commissions or
other compensationnew text begin and amounts transferred or retained by a racetrack under a location
contract under section 349A.17
new text end.

(c) The director of the lottery may not expend after July 1, 1991, more than 2-3/4
percent of gross revenues in a fiscal year for contracts for the preparation, publication, and
placement of advertising.

(d) Except as the director determines, the lottery is not subject to chapter 16A
relating to budgeting, payroll, and the purchase of goods and services.

(e) In addition to the amounts credited to the lottery operations account under
paragraph (b), the director is authorized, if necessary, to meet the current obligations of
the lottery and to credit up to 25 percent of an amount equal to the average annual amount
which was authorized to be credited to the lottery operations account for the previous three
fiscal years but was not needed to meet the obligations of the lottery.

Sec. 11.

Minnesota Statutes 2010, section 349A.13, is amended to read:


349A.13 RESTRICTIONS.

Nothing in this chapter:

(1) authorizes the director to conduct a lottery game or contest the winner or winners
of which are determined by the result of a sporting event other than a horse race conducted
under chapter 240;

(2) authorizes the director to install or operate a lottery device operated by coin or
currency which when operated determines the winner of a gamenew text begin, except as authorized
under section 349A.17
new text end; and

(3) authorizes the director to sell pull-tabs as defined under section 349.12,
subdivision 32
.

Sec. 12.

new text begin [349A.17] GAMING MACHINES.
new text end

new text begin Subdivision 1. new text end

new text begin Location contract. new text end

new text begin (a) The director may enter into a contract with
a person to provide locations for gaming machines. Contracts entered into under this
section are not subject to chapter 16C. The director may only enter a contract under this
subdivision with a person who holds a class A license under chapter 240. The gaming
machines may only be placed at the racetrack for which the class A license under chapter
240 was issued. Contracts entered into under this section are void if the racetrack: (1)
has not hosted at least 75 days of live racing, authorized by the Minnesota Racing
Commission, during the previous year, or (2) has not been approved, unless approval is
pending, for at least 75 days of live racing during the present year.
new text end

new text begin (b) Contracts entered into must provide for compensation to the racetrack in an
amount equal to at least the following percentages of adjusted gross gaming machine
revenue generated at the track: (1) 60 percent of the first $125,000,000 of annual revenue;
(2) 55 percent of annual revenue between $125,000,000 and $200,000,000; and (3) 45
percent of annual revenue in excess of $200,000,000.
new text end

new text begin (c) From the compensation received by the racetrack under this section, the racetrack
shall annually remit an amount equal to one percent of the adjusted gross gaming machine
revenue to both the city and the county where the racetrack is located.
new text end

new text begin Subd. 2. new text end

new text begin Initial fee. new text end

new text begin For each location at which gaming machines are provided, the
location contract holder, as a condition of the contract, must agree to pay an initial fee in
the amount of $25,000,000. This fee shall be paid once for each location. For contracts
entered into prior to July 1, 2013, the fee must be paid prior to July 1, 2013. For each
location the initial location contract shall be for a period consisting of the biennium in
which the initial fee is paid plus the succeeding five fiscal years. As part of the location
contract the state shall agree to repay to the location contract holder, $5,000,000, plus
an amount equal to any state authorized fees, taxes, or other charges upon the location
contract holder, related to providing locations for gaming machines, not in existence
when the location contract was executed, in each of the five fiscal years succeeding the
biennium in which the initial fee was paid.
new text end

new text begin Subd. 3. new text end

new text begin Operation. new text end

new text begin (a) All gaming machines that are placed at a racetrack under
subdivision 1 must be operated and controlled by the director.
new text end

new text begin (b) Gaming machines must be owned or leased by the director, however, the financial
responsibility for all other activities related to the gaming facility including, but not
limited to, advertising, marketing, facility expenses, staffing, security, and surveillance,
shall be borne by the holder of the location contract.
new text end

new text begin (c) Gaming machines must be maintained by the lottery, or by a vendor that is under
the control and direction of the director.
new text end

new text begin (d) The director must have a central communications system that monitors activities
on each gaming machine. The central communications system must be located at a
lottery office.
new text end

new text begin (e) The director must supervise the general security arrangements associated
with and relating to the operation of the gaming machines and implement procedures
as deemed appropriate.
new text end

new text begin (f) Advertising and promotional material produced by the racetrack relating to
gaming machines located at the facility must be approved by the director.
new text end

new text begin (g) The director may implement such other controls as are deemed necessary for the
operation of gaming machines under this section.
new text end

new text begin Subd. 4. new text end

new text begin Specifications. new text end

new text begin Gaming machines must:
new text end

new text begin (1) maintain on nonresettable meters a permanent record, capable of being printed
out, of all transactions by the machine and all entries into the machine; and
new text end

new text begin (2) be capable of being linked electronically to a central communications system to
provide auditing program information as required by the director.
new text end

new text begin Subd. 5. new text end

new text begin Games. new text end

new text begin The director shall specify the games that may be placed on
a gaming machine as provided in section 349A.04. Gaming machines may conduct
pari-mutuel wagering and display horse races under specifications provided by the director.
new text end

new text begin Subd. 6. new text end

new text begin Examination of machines. new text end

new text begin The director shall examine prototypes of
gaming machines and require that the manufacturer of the machine pay the cost of the
examination. The director may contract for the examination of gaming machines.
new text end

new text begin Subd. 7. new text end

new text begin Testing of machines. new text end

new text begin The director may require working models of a
gaming machine to be transported to the locations the director designates for testing,
examination, and analysis. The manufacturer shall pay all costs for testing, examination,
analysis, and transportation of the machine model.
new text end

new text begin Subd. 8. new text end

new text begin Prizes. new text end

new text begin A person who plays a gaming machine agrees to be bound by the
rules and game procedures applicable to that particular gaming machine game. The player
acknowledges that the determination of whether the player has won a prize is subject to
the rules and game procedures adopted by the director, claim procedures established by
the director for the game, and any confidential or public validation tests established by
the director for the game. A person under 18 years of age may not claim a prize from the
operation of a gaming machine. A prize claimed from the play of a gaming machine game
is not subject to section 349A.08, subdivision 8.
new text end

new text begin Subd. 9. new text end

new text begin Prohibitions. new text end

new text begin (a) A person under the age of 18 years may not play a
game on a gaming machine.
new text end

new text begin (b) The director or any employee of the lottery, or a member of the immediate family
residing in the same household, may not play a game on a gaming machine or receive a
prize from the operation of a gaming machine.
new text end

new text begin Subd. 10. new text end

new text begin Compulsive gambling notice. new text end

new text begin The director shall prominently post, in the
area where the gaming machines are located, the toll-free telephone number established
by the commissioner of human services in connection with the compulsive gambling
program established under section 245.98. The director and the location provider shall
establish a responsible gambling plan in consultation with the National Council on
Problem Gambling or the Minnesota affiliate. By January 15 of each year, the director
shall submit a report to the legislature, of not more than five pages in length, setting forth
the status of the responsible gambling plan.
new text end

new text begin Subd. 11. new text end

new text begin Local licenses. new text end

new text begin Except as provided in subdivision 1, no political
subdivision may require a license to operate a gaming machine, restrict or regulate the
placement of gaming machines, or impose a tax or fee on the business of operating
gaming machines.
new text end

Sec. 13.

Minnesota Statutes 2010, section 541.20, is amended to read:


541.20 RECOVERY OF MONEY LOST.

Every person who, by playing at cards, dice, or other game, or by betting on the
hands or sides of such as are gambling, shall lose to any person so playing or betting
any sum of money or any goods, and pays or delivers the same, or any part thereof, to
the winner, may sue for and recover such money by a civil action, before any court
of competent jurisdiction. For purposes of this section, gambling shall not include
pari-mutuel wagering conducted under a license issued pursuant to chapter 240, purchase
or sale of tickets in the state lottery, new text beginpurchase of gaming machine plays as authorized under
chapter 349A,
new text endor gambling authorized under chapters 349 and 349A.

Sec. 14.

Minnesota Statutes 2010, section 541.21, is amended to read:


541.21 COMMITMENTS FOR GAMBLING DEBT VOID.

Every note, bill, bond, mortgage, or other security or conveyance in which the whole
or any part of the consideration shall be for any money or goods won by gambling or
playing at cards, dice, or any other game whatever, or by betting on the sides or hands
of any person gambling, or for reimbursing or repaying any money knowingly lent or
advanced at the time and place of such gambling or betting, or lent and advanced for any
gambling or betting to any persons so gambling or betting, shall be void and of no effect
as between the parties to the same, and as to all persons except such as hold or claim
under them in good faith, without notice of the illegality of the consideration of such
contract or conveyance. The provisions of this section shall not apply to: (1) pari-mutuel
wagering conducted under a license issued pursuant to chapter 240; (2) purchase of tickets
in the state lottery new text beginor other wagering authorized new text endunder chapter 349A; (3) gaming activities
conducted pursuant to the Indian Gaming Regulatory Act, United States Code, title 25,
section 2701 et seq.; or (4) lawful gambling activities permitted under chapter 349.

Sec. 15.

Minnesota Statutes 2010, section 609.75, subdivision 3, is amended to read:


Subd. 3.

What are not bets.

The following are not bets:

(1) a contract to insure, indemnify, guarantee or otherwise compensate another for a
harm or loss sustained, even though the loss depends upon chance;

(2) a contract for the purchase or sale at a future date of securities or other
commodities;

(3) offers of purses, prizes or premiums to the actual contestants in any bona fide
contest for the determination of skill, speed, strength, endurance, or quality or to the bona
fide owners of animals or other property entered in such a contest;

(4) the game of bingo when conducted in compliance with sections 349.11 to 349.23;

(5) a private social bet not part of or incidental to organized, commercialized, or
systematic gambling;

(6) the operation of equipment or the conduct of a raffle under sections 349.11 to
349.22, by an organization licensed by the Gambling Control Board or an organization
exempt from licensing under section 349.166;

(7) pari-mutuel betting on horse racing when the betting is conducted under chapter
240; and

(8) the purchase and sale of state lottery tickets new text beginand plays on a gaming machine
new text endunder chapter 349A.

Sec. 16.

Minnesota Statutes 2010, section 609.761, subdivision 2, is amended to read:


Subd. 2.

State lottery.

Sections 609.755 and 609.76 do not prohibit the operation of
the state lottery or the sale, possession, or purchase of tickets for the state lottery under
chapter 349Anew text begin, or the manufacture, possession, sale, or operation of a gaming machine
under chapter 349A
new text end.

Sec. 17. new text beginSEVERABILITY; SAVINGS.
new text end

new text begin If any provision of this act is found to be invalid because it is in conflict with a
provision of the Minnesota Constitution or the Constitution of the United States, or for any
other reason, all other provisions of this act shall remain valid and any rights, remedies,
and privileges that have been otherwise accrued by this act, shall remain in effect and may
be proceeded with and concluded under this act.
new text end

Sec. 18. new text beginEFFECTIVE DATE.
new text end

new text begin This article is effective the day following final enactment.
new text end

ARTICLE 2

INDUSTRY IMPROVEMENT FUND

Section 1.

Minnesota Statutes 2010, section 240.13, is amended by adding a
subdivision to read:


new text begin Subd. 5a. new text end

new text begin Purse payments. new text end

new text begin To mitigate the cost to the horse racing industry
resulting from the dilution of pari-mutuel consumption at a racetrack having a location
contract with the director of the lottery, any person, licensed under this chapter, who enters
into a location contract with the director of the lottery, must transfer, on a quarterly basis,
an amount of money equal to 14 percent of the amount the licensee receives or retains
pursuant to the location contract. This transfer is required of the licensee regardless of
any financial consequences resulting from the location contract. The money transferred
pursuant to this subdivision shall be used as follows:
new text end

new text begin (a) Eighty percent shall be used to augment purses for live races conducted at the
class A licensed facilities. The commission shall routinely transfer the money in the purse
fund accounts to the licensees conducting racing for each breed and direct the licensee
to augment the purses for that breed with the funds received from the commission.
Purse augmentations required under this subdivision are in addition to purse payments
otherwise established by law or contract. The location contract holder and the organization
representing the majority of horsepersons racing at the location contract holder's racetrack
may, by written contract, agree to use a portion of the transferred funds for racing-related
purposes other than purse augmentation. The commission shall determine the percentages
of the purse fund account to be designated for the augmentation of the purses of each breed
racing at a class A facility. The determination shall be based on consumer preference, the
percentage of the pari-mutuel handle generated in Minnesota by each breed, and a goal of
maximizing the economic impact of horse racing in Minnesota.
new text end

new text begin (b) Sixteen percent shall be transmitted to the breeder's fund to be used for each
breed racing at a class A licensed facility in amounts determined by the commission.
Amounts transferred to a breeder's fund shall be used for the purposes of section 240.18,
subdivisions 2, paragraph (d), and 3, paragraph (b), subject to the proportionality
requirement in section 240.18, subdivision 1.
new text end

new text begin (c) Four percent of the contributions received from the licensee shall be placed in an
equine industry enhancement fund established by the commission. The commission shall
award grants from this account designed to support and improve the nonracing equine
industry including, but not limited to, construction of facilities and trails, production of
shows, and issues related to retired horses.
new text end

Sec. 2. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, section 240.30, subdivision 8, new text end new text begin is repealed.
new text end

Sec. 3. new text beginEFFECTIVE DATE.
new text end

new text begin This article is effective the day following final enactment.
new text end