FLORIDA'S GRAY MARKET: THE SUPPRESSION OF ILLEGAL SLOT MACHINES

James A. Lewis , who practices gaming law at Duane Morris LLP, analyzes the Sunshine State's new regulatory dynamic concerning the proliferation of slot machines.

Eighty five years ago, the Florida Supreme Court held that, “Gambling, like many other practices in modern life, has had its evolution and in no field has the wit of man been shrewder; but if the elements constituting gambling are present, the name by which called will not defeat the penalty.” Creash v. State, which defined “gambling” in Florida, is widely cited as a seminal decision in the state’s ever-evolving gambling jurisprudence. This definition read, “Chance actuated by the hope of getting something for nothing is the controlling element in gambling.” However, the court’s declaration ‒ that illegal gambling constitutes illegal gambling not withstanding the name of the activity ‒ never fully deterred the widespread use of illicit slot machines within the peninsular state.

Change may be coming, albeit nearly a century later. In May, the Florida Gaming Control Commission’s (FGCC) Division of Law Enforcement announced statewide raids targeting illegal slot machine operations. The FGCC made several arrests and seized millions in cash, and illegal “gray market” gambling machines, from alleged “adult arcades” in a sweeping joint law enforcement operation. It is one of the FGCC’s first major policing operations conducted since its inception and it also comes on the heels of other states’ efforts to address the prevalent use of similar gambling machines in the last 18 months; including Kentucky, Nebraska, Virginia and Wyoming.

Every jurisdiction in the US maintains gambling statutes, which vary in scope and sophistication. Florida is no exception. There, most forms of gambling are illegal unless exempted by statute or court decision. Section 849.14 of the Florida Statutes provides a lengthy, 129-word prohibition on staking, wagering and betting anything of value on any contest of skill, speed, or power or endurance of human or beast. Section 849.15 prohibits unlicensed slot machine operations. Given the state’s formidable statutory proscription against illegal gambling activities and its abundance of political infrastructure, it is ostensibly a mystery why so-called adult arcades pervade strip malls, standalone structures and the dimly lit backrooms of dive bars across the Sunshine State.

This does not mean the adult arcades and the illegitimate gambling they're in went unnoticed. Florida officials were aware of the rise in adult arcades for years, but the state’s responses were minimal and its operations isolated. Occasionally, county law enforcement agencies, utilizing the assistance of the state’s Division of Alcoholic Beverages and Tobacco, conducted minor raids on illicit gambling operations, often making a small number of arrests and seizing cash and gambling devices. Largely absent from these law enforcement operations was the former entity tasked with regulating gambling – the Florida Division of Pari-Mutuel Wagering (DPMW). The DPMW, despite being Florida’s then-gambling regulatory agency, was unauthorized to conduct law enforcement operations. This changed in 2021 when the DPMW was transformed into the FGCC as a component of the gaming compact between the state and the Seminole Tribe of Florida. The rectification includes, inter alia,