Could Maryland's state lottery legally add keno or video lottery machines without new legislation?

Plain-English summary

The state budget office asked the Attorney General whether the Maryland State Lottery Agency could legally roll out two proposed new games under its existing statutory authority: "keno," a social, matrix-based number-picking game played on shared video monitors in bars and restaurants, and "video lottery," individual stand-alone video terminals offering games like draw poker, blackjack, and bingo, privately owned by third-party operators who would pay the Lottery Agency a licensing fee.

The Attorney General split the answer between the two games. Keno was authorized under current law because it fit the traditional legal concept of a "lottery," consideration, chance, and a prize awarded through a drawing, and matched a type of game the Lottery Agency's own regulations already contemplated. Video lottery was a different matter: the opinion concluded that individual video terminals where a player bets against a machine, in the style of video poker, are a form of gambling rather than a lottery, and that the video terminals described also met Maryland's statutory definition of an illegal "slot machine." Because the Lottery Agency's authority extends only to operating lotteries, not gambling, the opinion concluded the Lottery Agency could not offer video lottery without new legislative authorization from the General Assembly.

Currency note

This opinion was issued in 1992. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could Maryland's State Lottery Agency legally offer keno in 1992 without asking the legislature first?
Yes. The opinion concluded that keno, as proposed, fit within the traditional legal definition of a "lottery," consideration, chance, and prize, and matched a game type the Lottery Agency's own regulations already described, so it was authorized under the Lottery Agency's existing statutory authority.

Could the Lottery Agency offer video lottery or video poker terminals under the same authority?
No. The opinion concluded that video lottery terminals, where a player wagers against a machine similar to a video poker machine, are a form of gambling rather than a lottery, so implementing them would require additional authorization from the General Assembly.

Why did the classification of a game as a "lottery" versus "gambling" matter so much here?
Because the Lottery Agency's statutory authority under Title 9, Subtitle 1 of the State Government Article is limited to operating a state lottery. Maryland's gaming laws are separate from its lottery laws, and the opinion found no exception in the Gaming subtitle covering the state lottery system, so any game that counted as gambling rather than a lottery fell outside the Agency's authority.

Did the opinion say the proposed video lottery terminals were also illegal slot machines?
Yes. The opinion found the video terminals matched Article 27, §264B's definition of a "slot machine," a device that, on insertion of money or a token, may pay out based on an unpredictable chance outcome, meaning the Lottery Agency was barred from operating them under both the gaming and slot machine provisions.

Background and statutory framework

Maryland's Lotteries subtitle, Article 27, §356 et seq., generally prohibits operating a lottery, but §371A exempts "the State lottery system established in Title 9, Subtitle 1 of the State Government Article." Neither Article 27 nor the State Government Article defines "lottery," so the opinion relied on judicial definitions holding that a lottery requires consideration, chance, and a prize, and on the historical distinction Maryland courts have drawn between lotteries (won by purchasing a ticket or its equivalent, with no further personal participation by the buyer) and gambling or gaming (where the player personally participates in a game of chance and is present when the result becomes known), as discussed in Bender v. Anne Arundel Arena, Inc. The opinion cautioned that this historical distinction is not a precise, modern test, since present-day lottery games already use sophisticated computerized equipment that older cases did not contemplate.

Applying that framework, the opinion found keno close enough to a traditional lottery, a shared drawing from a matrix of numbers with a prize based on matching numbers, to qualify, especially since Lottery Agency regulations under COMAR 14.01.03.12B.(4) already described a similar "keno type" game and the General Assembly had acquiesced in that regulatory description. Video lottery came out differently: individual terminals where a player wagers against machine-generated, randomly drawn outcomes (draw poker, blackjack, bingo) resemble types of gambling, not a lottery, according to the opinion. The opinion also found the video terminals met Article 27, §264B's definition of a "slot machine," since inserting money or a token could, based on an unpredictable chance outcome, entitle the player to a payout, meaning the terminals were independently barred as unlawful gambling devices under §§237 and 264B, on top of falling outside the Lottery Agency's lottery-only authority.

Citations and references

Statutes:

• Article 27, §356 et seq., the Lotteries subtitle prohibiting unauthorized lotteries
• Article 27, §371A, exempting the State lottery system from the general lottery prohibition
• Article 27, §237, prohibiting gaming tables and gambling houses
• Article 27, §264B, defining "slot machine"
• Title 9, Subtitle 1 of the State Government Article, establishing the Maryland State Lottery Agency
• COMAR 14.01.03.12B.(4), Lottery Agency regulation describing a "keno type" game
• COMAR 14.01.03.12A., Lottery Director's authority to offer additional lottery games

Cases:

• Bender v. Anne Arundel Arena, Inc., 248 Md. 181, 189, 236 A.2d 7 (1967), Maryland Court of Appeals
• Ballock v. State, 73 Md. 1, 20 A. 184 (1890), Maryland Court of Appeals
• Silbert v. State, 12 Md. App. 516, 280 A.2d 55 (1971), Maryland Court of Special Appeals
• American Legion v. State, 294 Md. 1, 7 n.3, 447 A.2d 842 (1982), Maryland Court of Appeals

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1992/Volume77_1992.pdf (this opinion appears at printed page 82 of the bound annual volume; Maryland's site does not publish a standalone PDF of this opinion)

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Gaming - State Lottery - Lottery Agency May Offer "Keno"
Game Under Current Law - "Video Lottery" Game May
Be Offered Only With New Legislative Authorization

                         November 13, 1992

Mr. Fred Puddester
Deputy Secretary
Department of Budget and Fiscal Planning

  You have requested our opinion whether the Maryland State Lottery

Agency has authority under current Maryland law to implement two new
forms of lottery games, "keno" and "video lottery."

  For the reasons stated below, we conclude as follows:

  1. The type of "keno" game proposed to be initiated by the State

Lottery Agency is authorized by current law.

   2. A form of "video lottery" that entails a player's bet on a device

like a video poker machine is not authorized under current law. Such a
form of gambling may be offered by the Lottery Agency only with
additional authorization from the General Assembly.1

                                    I

                       Proposed New Games

A. Keno

   In the game of keno, as we understand it, players would be provided

with a game card on which they choose a set of numbers (from 1 through
10) and a dollar value of how much they want to play (from $1 to $20 per
game). The players' selections are registered on a computer terminal by
a licensed lottery agent. A central computer randomly selects numbers,
which would be displayed on video monitors at the authorized keno game
locations. Players win by matching some or all of the numbers displayed
on the video screen with the numbers they have selected. Winning
numbers are displayed on the video monitor every five minutes.

   The Lottery Agency would operate keno in a manner similar to the

manner in which it operates its instant ticket lottery games. The Lottery
Agency would purchase computer terminals for ticketing and video
monitors for players to view the keno game results. The Lottery Agency
would place the keno equipment with authorized lottery agents in retail
establishments like bars, restaurants, and taverns. The lottery agent would
provide game cards to the players, register the players' selections on the
computer terminal, and pay off most winners. The principal difference
between keno and the traditional lottery games currently offered by the
Lottery Agency is that keno would be played mainly in social settings
because of its interactive nature.

B. Video Lottery

    We understand that video lottery games would be played on

individual stand-alone video game terminals that would usually be placed
in retail establishments. One terminal might offer a variety of video games,
such as draw poker, blackjack, bingo, and keno. The player inserts money
or tokens in the video terminal, chooses a game, and then follows
directions displayed on the video screen to play the selected game. In the
case of video poker, for example, a player would be "dealt" cards by the
computer and would match his or her "hand" to the computer's cards,
which are randomly drawn. Wins and losses are based on the traditional
rules of draw poker.

  Unlike keno terminals and monitors, the video lottery terminals

would not be owned by the Lottery Agency. Rather, the terminals would
be owned by private sector entrepreneurs, in cooperation with the owners
of the retail establishments that wish to offer video lottery on their
premises. As currently envisioned, the Lottery Agency would act as a
licensing agency and monitor and audit the video lottery system. The
Lottery Agency would receive a licensing fee for each video lottery
terminal in place, as well as a percentage of net video lottery sales.

                                II

                   "Lottery" and "Gaming"

  The question whether keno and video lottery are authorized under

current Maryland law depends upon whether those games are "lotteries"
within the meaning of Article 27, §356 et seq. of the Maryland Code or are
forms of "gaming" within the meaning of Article 27, §264B. As we
explain, the State Lottery Agency has current authority to offer any lottery
game. If the games constitute anything other than a lottery, the Lottery
Agency would need express authorization from the General Assembly to
implement them.

  In essentially the same form as they now are, the lottery laws and the

gaming laws have been on the books since long before the first Maryland
Code, that of 1860. See Bender v. Anne Arundel Arena, Inc., 248 Md. 181,
189, 236 A.2d 7 (1967). As currently codified, the Lotteries subtitle,
Article 27, §356 et seq., prohibits the operation of lotteries in Maryland.
Section 371A, however, provides an exception to this general prohibition
for "the State lottery system established in Title 9, Subtitle 1 of the State
Government Article."

   While neither Article 27 nor the State Government Article defines

what constitutes a "lottery," that term has been judicially defined to
encompass the essential elements of consideration, prize, and chance.
Ballock v. State, 73 Md. 1, 20 A. 184 (1890); Silbert v. State, 12 Md.
App. 516, 280 A.2d 55 (1971). In many instances, the distinction between
a lottery and "gambling" or "gaming" is unclear. Gaming also has been
defined as consisting of three elements: "price or consideration, chance,
and prize or reward." Black's Law Dictionary 679 (6th ed. 1991). In
Maryland, keeping any gaming table or any house for the purpose of
gambling is prohibited under Article 27, §237.

  The Gaming subtitle of Article 27 is replete with exceptions to the

general prohibition against gambling, such as bingo for charitable or civic
purposes. There is no exception under the Gaming subtitle, however, for
the State lottery system. Thus, the Maryland Legislature intended that the
Lottery Agency be authorized to operate only those games that are in the
nature of a lottery and not those games that are in the nature of gambling.

  In Bender v. Anne Arundel Arena, Inc., the Court of Appeals

discussed the historical distinctions between lotteries and gambling in
Maryland. The Court found that the General Assembly considered bingo
to be a game in the nature of gambling rather than a lottery. The Court
noted that, while other states had held coin-operated gambling machines
and bingo to be lotteries (because they each combined the classic elements
of consideration, chance, and prize), Maryland took "a more restrictive,
precise, and technical" view of the term "lottery" and drew a distinction
between games of chance and schemes of lottery." 248 Md. at 189
(emphasis in original). The Court further stated that "[a]ll lottery is a form
of gambling but all gambling need not be legislatively considered to be or
actually be lottery...." 248 Md. at 192. The Court noted:

        Officials and courts in Maryland appear to have
        considered (a) that the lottery laws covered schemes
        for awarding a prize by lot or chance in which the only
        direct or personal participation by the seeker of the
        prize is his purchase of a ticket or its equivalent; and
        (b) that the gaming laws covered gambling by games of
        chance or gaming tables, as broadly defined (even
        though skill plays no part), in which the player
        participates personally and directly and is present when
        the game ends and the result becomes known.

248 Md. at 189-90.

   As we understand it, this portion of Bender does not reflect an effort

to establish a definitive test for determining whether a given activity is a
lottery within the scope of the Lotteries subtitle or a game within the scope
of the Gaming subtitle. Rather, the Court in Bender simply was engaging
in a historical review of a basis previously used to distinguish between a
lottery and a game. See American Legion v. State, 294 Md. 1, 7 n.3, 447
A.2d 842 (1982).

   That historical distinction is far from a sure guide in an era of

technological sophistication in which lottery games and devices have
significantly evolved. For example, the Court in Bender noted that
gambling laws involving machines or mechanical devices were always
prosecuted under the gaming and not the lottery law. 248 Md. at 190.
Present day lottery games, however, are played using very sophisticated
computerized machines. The General Assembly surely did not intend that
the Lottery Agency be limited to operating its lotteries in the same manner
as lotteries were operated in years past, without the benefit of modern
technology.

  In the case of keno, the Lottery Agency intends to operate that game

in a manner similar to the games that the Lottery Agency already operates.2
The keno game is played in a social setting and not on individual computer
terminals. Numbers are drawn from a computerized matrix, and players
choose numbers that they hope will match the winning sequence. Players
look to a central computer system to determine whether they have won or
lost. The Lottery agency will own the computers that operate the keno
game.

   In our view, keno is sufficiently similar to those games that were

traditionally considered to be "lotteries" to fit within the concept of a
"lottery" envisioned by the Legislature. Indeed, for many years the Lottery
Agency has had a regulation contemplating the advent of:

        Keno type games where a player is required to select
        a group of numbers from a large matrix. The player
        wins by matching the selected numbers against the
        series of numbers drawn for that game. Prizes can be
        either fixed, pari-mutuel, or a combination of both.
        The cost of a play or tickets, the prizes awarded, and
        the drawing frequency shall be determined by the
        Director and published in the consumer brochure
        available at agent locations.

COMAR 14.01.03.12B.(4). The General Assembly has evidently
acquiesced in this regulatory description of one possible type of "lottery"
game. The Lottery Agency may proceed, therefore, to implement that
game.3

   In the case of video lottery, players would make wagers against

randomly derived game results on individual computer terminals. These
games are quite unlike what is, and has always been considered to be,
lotteries. The games offered by video lottery machines - draw poker,
blackjack, and bingo, for example - are generally considered to be types of
gambling rather than types of lotteries. See generally R. Rychlak, Video
Gambling Devices, 37 U.C.L.A. L. Rev. 555 (1990). As such, we believe
that the proposed video lottery game is a type of gambling that the
Legislature did not intend for the Lottery Agency to operate under its
current statutory authority.

  We note further that the video gambling devices at issue appear to

constitute "slot machines" as defined in Article 27, §264B:

        Any machine, apparatus or device is a slot machine ...,
        if it is one that..., as a result of the insertion or deposit
        therein ..., of any piece of money, coin, token, or other
        object, such machine, apparatus or device is caused to
        operate or may be operated, and by reason of any
        element of chance or of other outcome of such
        operation unpredictable by him, the user may receive
        or become entitled to receive any piece of money, coin,
        token or other object representative of and convertible
        into money ....

In the case of video lottery, the player inserts money or a token and plays
a game of chance. A winning player is entitled to receive payment based
on an outcome that was unpredictable by that player. Therefore, the video
lottery machines, in addition to being devices for gambling, are slot
machines, and the Lottery Agency is prohibited from operating them under
both §§237 and 264B.

                                III

                            Conclusion

  In summary, it is our opinion that the keno game proposed to be

implemented by the Lottery Agency is authorized by current Maryland law,
and the Lottery Agency may proceed to implement this game in
accordance with its statute and regulations. It is also our opinion,
however, that the game of video lottery is not authorized under current
law. In order to implement the video lottery game, additional
authorization must be obtained from the General Assembly.

                                      J. Joseph Curran, Jr.
                                      Attorney General

                                      Romaine N. Williams
                                      Assistant Attorney General

                                      Dale E. Cantone
                                      Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

1
These conclusions were set forth in a summary letter sent to you shortly
after our receipt of your request. This opinion explains the basis for our
conclusions.

2
In Bender, the Court noted that bingo is sometimes called keno in this
country. We believe that the Court's passing reference to keno in this context does
not relate to the form of keno that the Lottery Agency intends to implement and that
is the subject of this opinion. See 248 Md. at 191.

3
Under COMAR 14.01.03.12A., the Lottery Director, with the advice and
consent of the Lottery Commission, determines that additional lottery games may
be offered to the public.