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Representatives of Deadwood casinos, however, warned that the rule changes could be struck down in court because they say the state constitution authorizes slot machines only in Deadwood -- not in video lottery establishments elsewhere.

The Lottery Commission voted unanimously to approve the rule changes, which would not take effect for at least another two months because a legislative panel must review them. Businesses also could not install games resembling slot machines until the commission tests and approves software submitted by manufacturers.

Nearly 1,500 businesses throughout the state operate more than 9,000 machines, which until now have offered video poker, blackjack, keno and bingo. Proponents say line-up games -- where the symbols look like those on a slot machine -- were previously authorized, but other rules actually allowing them to be implemented didn't exist. The change approved Friday will make it possible for those slot-like games to be put into operation.

Norm Lingle, executive director of the South Dakota Lottery, said video lottery revenue has dropped substantially since voters statewide approved a smoking ban in bars and casinos. Revenue since the ban took effect Nov. 10 is down 16.8 percent compared to the same period a year earlier, he said.

The state and video lottery businesses split the money players lose in the video lottery machines. The state's share, the second-largest source of general fund revenue, is projected to fall from $106.5 million last year to $95.5 million in the current budget year that ends June 30.

Lingle said the financial impact of adding the slot machine-like games cannot be predicted because it's unclear how many of the games businesses will offer.

Bob Riter, a Pierre lawyer representing the South Dakota Music and Vending Association, said the new games could help the video lottery industry recover from a slump caused by the economic downturn as well as the smoking ban. Increased play would help both the state budget and businesses that operate the machines, he said.

"This industry is in difficult circumstances," Riter said.

Some business owners said their revenue is down much more than the state average. Rich Ward of Pierre said play in his establishments is down 42 percent since the smoking ban.

State Sen. Tom Nelson, R-Lead, who is also president of the Deadwood Gaming Association, said casino owners in the northern Black Hills gambling town oppose allowing video lottery establishments to have slot machine games.

The South Dakota Constitution authorizes slot machines in Deadwood casinos, and a 1994 constitutional amendment did not permit slot machines in the video lottery business, Nelson said.

Tom Harmon of Pierre, a lawyer for the Deadwood Gaming Association, noted that after the state Supreme Court struck down the video lottery as unconstitutional in 1994, voters quickly approved a constitutional amendment making it legal. That approval did not include slot machines, he said.

If video lottery businesses install games resembling slot machines, they run the risk of having the court system declare those games unconstitutional, Harmon said.

"That risk is also speculative, but enormous," Harmon said.

Nelson said he does not know whether the Deadwood Gaming Association would go to court to fight the rule change.

Harmon suggested the only safe way to add slot machines to the video lottery would be to propose a constitutional amendment.

But Riter, the lawyer for video lottery businesses, said a rule referring to line-up games existed prior to the constitutional amendment approved in 1994. A provision of that constitutional amendment ratified those rules, he said. In addition, video lottery machines cannot dispense the coins and tokens that slot machines dispense, Riter said.

"Ergo, they are not slot machines," Riter said.

Source: http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEg-iLKdXJpnKAkMRPcbnwzbIqQiQ&url=http://www.businessweek.com/ap/financialnews/D9M6FBG81.htm

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