Gaming Machines and Amusement Facility Regulations

Background:

A recent legal precedent may guide future regulatory decisions. In 2014, the City of Fort Worth adopted ordinances restricting the use of amusement redemption machines used for gambling. These ordinances were challenged in court, and after more than nine years of litigation, the Texas Supreme Court declined to hear further appeals in Stephannie Lynn Rylie, et al. v. The City of Fort Worth and David Cooke, in his Official Capacity as City Manager. This left in place the decision of the Second Court of Appeals, which held that "8-Liners" constitute unconstitutional lotteries as they are based on chance rather than skill.

Following this ruling, in December 2024, the Fort Worth City Council adopted final amendments to its ordinances banning "8-Liners." It is important to note that not all machines are considered gambling devices. Machines that dispense prizes directly—such as claw or crane games—or that rely on a player's physical skill (e.g., tossing, flipping, or rolling a ball) are not classified as gambling devices. In contrast, any machine that pays out cash, gift cards, or other items of value based on chance rather than skill is considered a gambling device. This includes machines resembling bingo, keno, blackjack, lottery, roulette, slot machines, or video poker.

Other coin-operated machines such as pool tables, jukeboxes, and pinball machines are not affected by these gambling-related restrictions.

The ordinance under consideration acknowledges the Texas Supreme Court's decision and affirms that "8-Liners" are illegal gambling devices under state law.

This draft ordinance will define key terms, establish regulations on the placement of coin-operated machines, outline licensing requirements and the review process, and detail potential criminal penalties. If approved, the effective date will be October 1, 2025, to allow an adjustment and educational period for the businesses that have illegal machines that will need to be removed and an opportunity to be prepared to pay the license fee and occupation tax for the legal machines.

Application for City License:

All applicants must pass a background check and submit a copy of their Comptroller registration or license, along with a valid sales tax certificate. The business where the machines are located must have a Certificate of Occupancy and display all required licenses, including the City License.

Financial Impact:

A license application fee and an occupation tax will be added to the fee schedule to accommodate these regulations.

• ¼ of the State Occupation Tax per Texas Tax Code 2153.451(b) per machine and,
• License fee for an annual license registering all machines as defined within the ordinance.