North Carolina lawmakers are renewing an effort to regulate the state’s illegally operated video gambling industry — something the General Assembly has been trying to do for more than a decade.

A bill heard in the House Commerce Committee on Tuesday would legalize video gambling machines if they are granted a license to operate from the state’s lottery commission, and follow rules that would be set by the commission. The machines currently are illegal to operate but have continued to proliferate across the state in recent years.

Rep. Harry Warren, a Rowan County Republican who is the bill’s sole sponsor, told committee members that the illegal gaming industry will continue to thrive across the state if lawmakers don’t take any action.

“The real reason these things flourish is because people play them,” Warren said. “If there were no money in it, they would not be in business.

“We’re a free market economy,” he said. “We’re based on supply and demand, and people are demanding it. But by restricting, regulating and reducing the supply, we can eliminate sweepstakes parlors and the seedy aspects of unregulated gambling, replacing it with a limited supply of gaming entertainment that fulfills the public demand and the safer controlled environments, and safer conditions.”

Warren said it’s difficult to determine exactly how widespread these video gambling machines are, but said he’s heard estimates of anywhere from 60,000 to 100,000 machines across the state.

Most of those can be found in sweepstakes parlors or other gambling businesses. Police departments have cracked down on parlors in some parts of the state, but, Warren said, it’s not always the top priority for departments lacking resources and dealing with more serious crimes.

Funds for NC, community colleges and HBCUs

Under House Bill 512, video gambling machines would only be permitted at bars, restaurants and other businesses that have active off-site or on-site ABC permits.

An analysis from the legislature’s Fiscal Research Division estimates that 20,000 video gambling machines could be licensed and operating across the state within five years, generating more than $1 billion in net income, out of which nearly half — $438 million — would go the state.

The bill would require that 40% of every dollar generated by licensed and legally operated video gambling machines be collected by the state. Lawmakers would decide where to spend most of those funds, but some of the money would fund forgivable scholarship loans for eligible community college students.

An annual $2 million appropriation would also be set aside from the fund for five public historically Black colleges and universities (Elizabeth City State University, Fayetteville State University, N.C. A&T State University, N.C. Central University and Winston-Salem State University), as well as UNC Pembroke. The money would go toward “improving graduation rates and student success or sustainability of the institution,” the bill says.

An additional $10 million would be available for similar grants for private HBCUs.

Concerns about expanding legal gambling

Many of the bill’s opponents spoke against it during Tuesday’s committee meeting and expressed concerns about the “social costs” of gambling.

One critic said that when it comes to the potential for addiction, video gambling machines can be similar to cocaine and other highly addictive drugs.

“Video gambling is known as the ‘crack cocaine of gambling’ because it is so addictive,” said John Rustin, president of the N.C. Family Policy Council. “These machines and games are professionally designed to keep people playing as long as possible.”

The Rev. Mark Creech, executive director of the Christian Action League, asked why lawmakers wanted to invest money into another state-authorized gambling “regime,” when the lottery has “fallen significantly short” of the expectations its supporters set for it.

“If the lottery were a person, working for state government, he would’ve been fired for poor performance,” Creech said. “Yet this bill asks us to keep investing in something because it’s here, and we’ve invested considerable time, money and effort, already spent, even though doing so is likely not the best action moving forward.

“This is referred to as a ‘sunk cost fallacy.’“

The bill’s supporters argued that the current approach of trying to shut down illegal video gambling venues has failed.

Patrick Ballantine, a former five-term state senator and lawyer who spoke on behalf of Southland Gaming, a company based in the U.S. Virgin Islands that helps set up and operate video gaming machines, said that video gambling parlors attract violent crime. They’ll continue to do so as long as they’re being run illegally, he said.

“Free market capitalism suggests that the best way to rid this state of illegal video gambling, is to create a legal, regulated system that brings transparency and sunlight to the dark, shadowy underground economy,” Ballantine said.

What happens next with the bill?

Tuesday’s committee meeting was only to discuss the bill, not to vote on it.

With a bill of this magnitude, Warren said, it’s important to give members of the committee time to get acquainted with the specifics before holding a vote.

The bill will be brought back before Commerce sometime soon for a vote, Warren said, so that it can move on to other committees it would need to pass before advancing to the House floor.

Supporters of the bill will want to make sure it has a clear path toward getting a floor vote, after similar legislation stalled in the House in 2021. Warren said other big-ticket bills the General Assembly has considered this session show a willingness to take up bills that haven’t been successful in the past.

“There’s been a change in attitudes towards different things, whether it’s Medicaid expansion, sports betting, medicinal marijuana, there’s subjects being entertained that five years ago wouldn’t have made it out of Rules Committee,” Warren said. “Plus, this is a very good bill, and so if people take the time to read it, I think they’ll come on board with it.

“As I said in the meeting, not to vote for this bill is to do nothing, and in essence that’s condoning the illegal activity that’s going on now,” he added. “Why would we do that?”