Can a West Virginia charitable raffle licensee use a ticket dispenser machine to sell raffle tickets, and can the State Tax Commissioner enforce five operating criteria he set for those machines, including a ban on paying money or tokens directly to players?

Plain-English summary

Beginning in 2001, charitable organizations operating raffles in West Virginia started asking the State Tax Commissioner whether they could use ticket dispenser machines to sell raffle tickets, instead of having a worker hand out the tickets. The Commissioner approved the use of such machines but imposed five operating criteria:

1. The device uses traditional pre-existing paper raffle tickets at the time play is initiated.
2. If the machine has a video display, it dispenses tickets prior to or simultaneously with any video display, and the display is irrelevant to the game.
3. The device cannot pay money or tokens directly to the player.
4. The device cannot mechanically or electronically credit winning prizes for further game play.
5. Use of the device requires traditional redemption of winning paper tickets with a cashier.

These criteria were not codified in any statute or legislative rule. The Commissioner asked the AG three questions about their legal status.

The AG answered:

1. Are the dispenser machines permitted? Yes. Although the statutes (W. Va. Code §§ 47-21-1 et seq. and 47-23-1 et seq.) and the rules at C.S.R. § 110-37-3 do not specifically authorize the machines, they do not prohibit them either. The Commissioner reasonably interpreted the definitions of "raffle," "charitable raffle board," and "charitable raffle game" to allow the machines, provided they fit within those definitions and met the five criteria. The Limited Video Lottery Act (§ 29-22B-331(a)(1)) expressly excludes Charitable Bingo and Charitable Raffle Act devices from the "video gambling machine" prohibition, which reinforces the conclusion that machines used for raffle ticket dispensing are different from illegal video gambling machines.

2. Can the Commissioner enforce the five criteria? Yes, with a qualification. The five criteria are interpretive rules under W. Va. Code § 29A-1-2(c), so the Commissioner cannot directly prosecute a licensee for breaching the criteria themselves. He can, however, charge a licensee with violating the underlying statutes and legislative rules, since a machine that fails the criteria is being used in a way that does not satisfy the statutory definitions of a raffle or charitable raffle board/game. A licensee may be allowed to argue good-faith reliance on the criteria as a defense, but only as a factual matter, not as an absolute bar to enforcement.

3. Is the prohibition on machines paying money or tokens directly to players consistent with the rules? Yes. C.S.R. § 110-37-3.1.8 already requires that a licensee worker verify all winning raffle tickets before any prize money is distributed. A machine that paid out money or tokens directly would prevent that worker verification from happening and would not satisfy the definition of a raffle (which contemplates buying a paper ticket for a chance at a prize). The criterion does not impermissibly expand the rule; it is consistent with it.

The AG also recommended that the Commissioner reconsider criterion #2's video-display allowance. To avoid blurring the line between legitimate raffle dispensers and video gambling machines, the Commissioner might either disallow video displays entirely or specify that machines must be designed so they can only dispense valid raffle tickets and cannot pay any prizes or credits.

Currency note

This opinion was issued in 2009. 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

Q: What is the difference between a raffle ticket dispenser machine and a video gambling machine?
A: A raffle ticket dispenser machine sells pre-printed paper raffle tickets in a way that fits the statutory definition of a raffle. A video gambling machine, defined in W. Va. Code § 29-22B-331(a)(1), is a device whose primary function is to allow play of a gambling game. Operating a video gambling machine outside the limited video lottery system has been a felony in West Virginia since December 31, 2001, under § 29-22B-1705(a). The five criteria are designed to keep dispenser machines on the raffle side of that line.

Q: Why is the AG's distinction between interpretive and legislative rules important?
A: An interpretive rule (under W. Va. Code § 29A-1-2(c)) is the agency's view of what the statute means; it does not have the force of law on its own. A legislative rule, by contrast, is approved by the Legislature and has statutory force. The Commissioner's five criteria were never adopted as a legislative rule. So a licensee cannot be sanctioned simply for violating the criteria, but can be sanctioned for the underlying conduct that the criteria describe (using a machine in a way that does not fit the statutory definition of a raffle).

Q: Can a charity rent a ticket dispenser machine from a vendor?
A: Under W. Va. Code § 47-21-26, a licensee may use raffle equipment that it owns, borrows without compensation from another licensee, or leases for a "reasonable and customary" amount from another licensee. So a charity can rent a machine, but the lessor must also be a licensed charitable raffle organization, not a commercial vendor.

Q: Does the wholesaler or distributor of the machine have to register in West Virginia?
A: Under W. Va. Code § 47-23-7a(a), a wholesaler or distributor supplying charitable raffle boards or games to retailers in West Virginia must register to do business in the state. Nonresidents must also designate the Tax Commissioner as a resident agent for service of process under § 47-23-7a(b). The AG read these requirements as applying to ticket dispenser machines too.

Q: What kinds of penalties apply to misuse?
A: A range. Felonies (up to 5 years imprisonment and substantial fines) for fraudulent operation under § 47-21-18. Misdemeanor for fraud in obtaining a license under § 47-21-19. General misdemeanors for other violations under § 47-21-20. License revocation, suspension, or non-renewal under § 47-21-21. Felony for video gambling machine possession under § 29-22B-1705(a) if the machine functions as a video gambling device.

Background and statutory framework

West Virginia banned gambling and lotteries in its Constitution from statehood in 1863 until 1984. The 1984 amendment to W. Va. Const. art. VI, § 36 created a narrow exception, allowing state-controlled lotteries and authorizing charitable bingo, charitable raffles, and the State Fair to use limited gaming for charitable or public-service purposes. The Legislature followed with the Charitable Raffle Act (W. Va. Code § 47-21-1 et seq.) and the Charitable Raffle Boards and Games Act (W. Va. Code § 47-23-1 et seq.), and the Tax Commissioner promulgated implementing rules at C.S.R. § 110-37-1 et seq.

The Limited Video Lottery Act, in turn, prohibited possession of video gambling machines after December 31, 2001, but expressly excluded Charitable Bingo and Charitable Raffle Act devices from its definition of "video gambling machine." That carve-out was central to the AG's analysis: the Legislature deliberately distinguished raffle equipment from video gambling devices and allowed the Tax Commissioner to interpret the boundary.

The AG's framework combined Chevron-style deference to agency interpretation (W. Va. Health Care Cost Review Authority v. Boone Memorial Hospital, citing Appalachian Power Co. and Chevron) with the rule from Apollo Civic Theatre that the Tax Commissioner's interpretations get "considerable deference" and "ought not to be discarded without cogent reason." Because the Legislature had not directly addressed dispenser machines, and the agency's reading was reasonable, courts would defer.

The interpretive-vs-legislative distinction came from W. Va. Code § 29A-1-2(c). The AG's opinion was clear that an interpretive rule cannot itself be the basis of penalty, but that the agency could still enforce the underlying statutes when a licensee's conduct strayed beyond what the statutory definitions covered.

Citations and references

Constitutional provisions:
- W. Va. Const. art. VI, § 36 (lottery prohibition with charitable carve-out)

Statutes:
- W. Va. Code § 47-21-1 et seq. (Charitable Raffles Act)
- W. Va. Code § 47-23-1 et seq. (Charitable Raffle Boards and Games Act)
- W. Va. Code § 47-21-2(n) (definition of raffle)
- W. Va. Code § 47-23-2(e) (definition of charitable raffle board or game)
- W. Va. Code § 47-21-18 (felony fraud in raffle)
- W. Va. Code § 47-21-21 (rule-making, license actions)
- W. Va. Code § 47-21-26 (equipment ownership)
- W. Va. Code § 29-22B-331(a)(1) (video gambling machine definition with charitable carve-out)
- W. Va. Code § 29-22B-1705(a) (felony for unauthorized video gambling)
- W. Va. Code § 29A-1-2(c) (interpretive rule definition)

Rules:
- W. Va. C.S.R. § 110-37-3 (raffle operations)
- W. Va. C.S.R. § 110-37-3.1.8 (worker verification before prize distribution)

Cases:
- Appalachian Power Co. v. State Tax Department, 195 W. Va. 573, 466 S.E.2d 424 (1995)
- W. Va. Health Care Cost Review Authority v. Boone Memorial Hospital, 196 W. Va. 326, 472 S.E.2d 411 (1996)
- Apollo Civic Theatre, Inc. v. State Tax Commissioner, 2008 WL 5192218 (W. Va. Dec. 10, 2008)
- Loyal Order of Moose v. State Tax Comm'r, 219 W. Va. 119, 632 S.E.2d 59 (2006)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)

Source

• Landing page: https://ago.wv.gov/media/18156/download?inline
• Original PDF: https://ago.wv.gov/media/18156/download?inline

Original opinion text

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

State of West Virginia
Office of the Attorney General
State Capitol, Building 1, Room W-435
Charleston 25305
Darrell V. McGraw, Jr., Attorney General
(304) 558-2522 / Fax (304) 558-2525

February 2, 2009

The Honorable Christopher G. Morris
State Tax Commissioner
1001 Lee Street, East
Post Office Box 11771
Charleston, WV 25339-1771

Re: Request for an Opinion of the Attorney General pursuant to West Virginia Code § 5-3-1

Dear Commissioner Morris:

This will acknowledge receipt of your letter dated January 16, 2009, in which you requested an opinion on three questions of law in relation to your application and enforcement of West Virginia's charitable gaming laws. Specifically you requested a written opinion of the Attorney General on the following questions of law:

(1) Is the use of a charitable raffle ticket dispenser machine by a charitable raffle licensee permitted under West Virginia's charitable gaming laws? See W. Va. Code § 47-21-1, et seq.; W. Va. Code § 47-23-1, et seq.; W. Va. C.S.R. § 110-37-3.

(2) If the use of a charitable raffle ticket dispenser machine is permitted, may the Tax Commissioner compel charitable raffle licensees to comply with the five criteria set forth for the operation of charitable raffle ticket dispenser machines?

(3) If the criteria are enforceable, may the Tax Commissioner provide that a machine may not pay "money or tokens" directly to a player, as set forth in criteria number three . . . or does this prohibition impermissibly expand the scope of C.S.R. § 110-37-3.1.8, which states that "all winning [raffle tickets] shall be verified by a worker from the licensee organization before any prize money may be distributed"?

The State Tax Commissioner is charged with administering certain provisions of the West Virginia Code pertaining to raffles and charitable gaming, including but not limited to the licensing and enforcement of charitable raffle operations. See W. Va. Code § 47-21-1, et seq. (charitable raffles); W. Va. Code § 47-23-1, et seq. (Charitable Raffle Boards and Games Act).

In 2001, the Tax Commissioner began receiving requests from charitable raffle licensees to authorize the use of certain charitable raffle ticket dispenser machines. The Tax Commissioner, after reviewing the statutes with which he is charged to administer, as well as the rules and regulations, determined that the use of a charitable raffle ticket dispenser machine is proper provided that the machines meet the specified criteria and fit within the definition of "raffle," "charitable raffle board" or "charitable raffle game."

The five criteria for the operation of charitable gaming machines set forth by the Tax Commissioner are as follows:

(1) The device uses traditional paper charitable raffle tickets preexisting at the time play is initiated.

(2) If the machine has a video display, the device dispenses such tickets prior to or simultaneously with any video display irrelevant to the game.

(3) The device cannot pay money or tokens directly to the player.

(4) The device cannot mechanically (or electronically) credit the winning prizes to allow further game play.

(5) Use of the device requires traditional redemption of winning (paper) tickets with a cashier.

It appears that one of the reasons the five criteria were established was to make sure that such a machine could not be mistaken for a machine operated under the authority of the West Virginia Lottery Commission. Also, the five criteria to use charitable raffle ticket dispenser machines will ensure that the use of such machines will not alter or change the character of the authorized "charitable raffle games."

Based upon our review of the statutes and rules and regulations relative to the questions of law presented, we have answered your questions as follows:

Question 1: Yes, provided that the charitable raffle licensee complies with the five criteria established by you for the use of such raffle ticket dispenser machines and the use of the machine is compatible with the definitions of "Raffle" and "Charitable raffle board" or "Charitable raffle game."

Question 2: Yes, qualified. If a charitable raffle licensee were to violate the five criteria, you would enforce that violation by charging the licensee for violating the definitions of a raffle or charitable raffle and the definition of "charitable raffle board" or "charitable raffle game" and for the violation of the other statutes and legislative rules as a result of the wrongful use of the lottery ticket dispenser machine. Since the criteria prescribed by you do not have the force and effect of a legislative rule or the force and effect of law, we believe that it would be a mistake to try to charge a licensee with the violation of those specific criteria. You can reach the same result however, by charging the licensee for using the machine for purposes other than a charitable raffle ticket dispenser machine under the relevant statutes and legislative rules. The fact that the licensee violated the criteria established by you for the use of such machines would be inconsequential on the question of whether the use of the machines violated the relevant statutes and legislative rules. We believe, however, that a licensee would be permitted to show that his use of the charitable raffle ticket dispenser machine was based upon his or her good faith reliance on such criteria. In that event, whether the licensee violated the five criteria would be relevant and admissible.

We believe that the five criteria established by you are proper because they are based upon your interpretation of the provisions of the West Virginia Code § 47-21-1, et seq., West Virginia Code § 47-23-1, et seq., and the Legislative Rules. However, we believe that the Court would state that the purpose of the criteria was to provide information or guidance to the charitable raffle licensees and the public regarding the Tax Commissioner's interpretations of the proper use of a charitable raffle ticket dispenser machine and may not be relied upon to impose civil or criminal sanctions. Our conclusion in this regard is based upon the definition of an "interpretative rule" set forth in W. Va. Code § 29A-1-2(c).

It should be noted that there is no definition of "charitable raffle ticket dispenser machine." Therefore, under the law those words will be given "their common, ordinary and accepted meaning in the connection in which they are used." See Syl. pt. 6, Apollo Civic Theatre, Inc. v. State Tax Commissioner, 2008 WL 5192218 (Dec. 10, 2008). In view of the criteria established by you, if a charitable raffle ticket dispenser machine is used for any purpose other than dispensing valid raffle tickets, such use would be unlawful and the offender could be charged.

Question 3: The answer to the first part is yes because if a machine were to pay money or tokens directly to a player, it would violate your interpretation of the statutes you are charged to administer and C.S.R. § 110-37-3.1.8 which requires that all winning raffle tickets be verified by a worker from the licensee organization before any prize money can be distributed. The answer to the second part of the question is no. This prohibition does not impermissibly expand the scope of C.S.R. § 110-37-3.1.8, but to the contrary is entirely consistent therewith.

History of charitable gaming in West Virginia. West Virginia has a long history of banning gaming enterprises by its Constitution from the time it became a state in 1863, up until 1984. In 1984, the Constitution was amended to create a narrow exception to the ban. As amended, Article VI, § 36 of the West Virginia Constitution provides that the legislature shall have no power to authorize lotteries for any purpose, and shall pass laws to prohibit the sale of lottery tickets, except for state-controlled lotteries and limited charitable activities including raffles, bingo, and the State Fair of West Virginia for charitable or public service purposes.

Soon after the amendment was ratified, the West Virginia legislature passed the Charitable Raffle Act, W. Va. Code § 47-21-1 et seq., and the Raffle Boards and Games Act, W. Va. Code § 47-23-1 et seq. The State Tax Commissioner is charged with administering the provisions of these statutes which includes, but is not limited to, the licensing and enforcement of charitable raffle operations. The Legislature expressed its intent in enacting the Charitable Raffle Act by stating: "The Legislature, in recognition of the need charitable and public organizations have for a practicable way of raising funds, declares its intent to grant the privilege of holding raffles to those" qualifying organizations. W. Va. Code § 47-21-1.

Analysis of Question 1. The Legislature in W. Va. Code § 47-21-2(n) defines "raffle" as: "'Raffle' means a game involving the selling of tickets to participate in such game entitling the holder or holders to a chance on a prize or prizes." The Legislature defined a "charitable raffle board" or "charitable raffle game" in W. Va. Code § 47-23-2(e) as a board or device with folded slips, paper cards with break-open tabs, or other similar games as defined by the Tax Commissioner by legislative rule.

Both acts give the Tax Commissioner express authority and direction to promulgate rules and regulations. West Virginia Code § 47-21-21(a) and (e) (Charitable Raffles) and W. Va. Code § 47-23-11(a) (Charitable Raffle Boards and Games) require the Commissioner to promulgate rules to administer the provisions of these articles. The State Tax Commissioner has adopted legislative rules and regulations for the administration of both acts. See C.S.R. 110-37-1, et seq. for the Charitable Raffle Act and C.S.R. 110-35-1, et seq. for the Raffle Boards and Games Act rules.

The Tax Commissioner interpreted the statutory definitions as giving him the authority to authorize charitable raffle licensees to use charitable raffle ticket dispenser machines provided that they fit within the definition of a raffle and within the definition of a "charitable raffle board" or "charitable raffle game." The Tax Commissioner's primary concern in authorizing the use of these machines was to make sure that the use of the machines did not include games that would not be permitted under the Charitable Raffle Act and the Raffle Boards and Games Act or perform the same or similar function that the limited video machines would perform. Although there is no specific statutory or regulatory authorization for use of charitable raffle ticket dispenser machines, it should be noted that W. Va. Code § 29-22B-331(a)(1) of the Limited Video Lottery Act defines the term "video gambling machine" and expressly contains an exclusion from that definition for computerized devices used pursuant to the Charitable Bingo Act, W. Va. Code § 47-20-1, et seq., and the Charitable Raffle Act, W. Va. Code § 47-21-1, et seq. Therefore the Legislature made it clear that any machines used under the Charitable Raffle Act could not come within the definition of the term "video gambling machine" as defined in the Limited Video Lottery Act.

The West Virginia Supreme Court of Appeals in W. Va. Health Care Cost Review Authority v. Boone Memorial Hospital, 196 W. Va. 326, 472 S.E.2d 411 (1996), provided in Syllabus points 2, 3, 4 and 5 the framework for reviewing legislative rules and statutory interpretations. Following Chevron and Appalachian Power Co. v. State Tax Department, 195 W. Va. 573, 466 S.E.2d 424 (1995), where the Legislature has not spoken to the precise question and the statute is ambiguous, the agency's reasonable construction is upheld. Apollo Civic Theatre confirmed that the Tax Commissioner's interpretation is entitled to "considerable deference" and "ought not to be discarded without cogent reason."

Analysis of Question 2. A licensee using a charitable raffle ticket dispenser machine for any purpose other than dispensing raffle tickets would not satisfy the statutory definitions of raffle or charitable raffle board/game and would be subject to enforcement under W. Va. Code §§ 47-21-18 (felony fraud in conduct of raffle), 47-21-19 (misdemeanor obtaining license by fraud), 47-21-20 (general misdemeanor), and 47-21-21 (license revocation/suspension/non-renewal). A wholesaler or distributor of such machines must register under W. Va. Code § 47-23-7a, and a nonresident must designate the Tax Commissioner as a resident agent. Equipment ownership is governed by W. Va. Code § 47-21-26, which permits ownership, no-cost borrowing from another licensee, or reasonable lease from another licensee.

Analysis of Question 3. A machine that pays money or tokens directly to a player cannot fit within the statutory definition of a raffle, which contemplates the selling of tickets entitling the holder to a chance on a prize. Such a machine would also bypass the C.S.R. § 110-37-3.1.8 requirement that winning tickets be verified by a worker before prize money is distributed. The criterion is therefore consistent with the rules, not an impermissible expansion.

We believe the actions you have taken are lawful for the reasons hereinabove provided and that any violation of using a charitable raffle ticket dispenser machine for any purpose other than disbursing raffle tickets can be enforced in the manner herein provided. However, we recommend that you consider revising criteria number 2 to provide that the machines may not have a video display or in the alternative that the machines be designed or fixed so that they can only dispense valid charity raffle tickets and so that they cannot give any prizes or credits of any kind. Otherwise, those machines may become gray machines in the sense that they dispense raffle tickets but have the capability of functioning as video lottery machines.

If you have any questions concerning any of the foregoing please feel free to contact us.

Very truly yours,

Darrell V. McGraw, Jr.
Attorney General

Ronald S. Brown
Assistant Attorney General