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.