Manufacturer wants a new rule for determining prizes in South Dakota video lottery

Capitol News Bureau

PIERRE, S.D. (KELO) — The South Dakota Lottery Commission faces a big decision that, depending on your perspective, is both simple and bizarrely complicated.

Much like the video lottery terminals that would be affected.

A company that makes terminals wants a new rule. It would let manufacturers add features that would change the amounts of prizes based on the amount that a person bet.

The state commission considers the proposed changes September 12 in room 412 of the state Capitol in Pierre.

Lottery administrators said Friday they expect that a representative of the company will testify that day at the 9:45 a.m. CT public hearing.

They didn’t identify the company that requested the new rule or the possible witness.

The Legislature created the South Dakota Lottery in 1987, with Governor George S. Mickelson scratching off the first instant ticket. The question for the commission now is simple: Will the new feature directly lead to more revenue for state government?

“That’s to be determined,” replied Norm Lingle, the lottery’s executive director.

A KELOLAND reporter asked whether two players, using identical machines with the proposed feature, and betting the same amounts, would win the same prizes. Lingle said they would.

Clark Hepper, the lottery’s deputy director, added that the prize amounts would vary depending on the amounts bet.

Hepper said state government’s take would depend, in turn, on how popular the new feature becomes with players and business operators.

“It’s not easy to explain,” Lingle acknowledged.

Video lottery terminals in South Dakota can be found in nearly every establishment that sells alcohol for consumption on the premises. The Legislature required that a business have an on-sale beer or liquor license in order to offer video lottery.

There were 8,943 of the privately-owned terminals spread across 1,317 licensed establishments throughout South Dakota as of May 31, according to a presentation at the commission’s most-recent meeting June 13.

State government takes 50 percent of the money that players leave in the machines, with one-half of one percent going to the video lottery operating fund. Owners and establishments keep the 50 percent.

The state treasury received $123.8 million in the fiscal year that ended June 30 from the lottery’s various scratch-ticket, lotto and video lottery products. Lottery is state government’s second-largest source of general-fund revenue, after the 4.5 percent state sales and use tax.

The state’s share of video lottery net machine income — the money players don’t win — represented about $112 million of the fiscal 2019 total.

Fiscal 2019 marked the first time since South Dakota’s smoking ban took effect in late 2010 that video lottery revenues exceeded the pre-ban level. The commission has been trying to encourage more establishments to convert to the more-profitable lineup terminals.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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