City Council passes restrictions on video lottery

After explosive growth in the number of video lottery establishments in recent years, the Sioux Falls City Council took steps Tuesday to limit their expansion.

The council voted unanimously to cap the number of businesses with malt beverage licenses and video lottery at 186, with future increases based on population, similar to how alcohol licenses are regulated.

“The casinos have literally exploded in growth,” said Councilor Greg Neitzert, who sponsored the ordinance change.

“Video lottery is their business. They don’t consider themselves a bar or lounge. They say they’re a casino.”

That, by definition, was never intended by the state, he said. Video lottery is intended to be an accessory use to a core business – generally a bar and lounge.

However, many casinos provide alcohol and snacks at no charge and “primarily, if not exclusively, are designed for video lottery,” Neitzert said. “They’re certainly not a bar or lounge.”

In the past four years, more video lottery machines have been approved in Sioux Falls than in the previous 25 years, he added.

The city has 165 beer and wine licenses operational with associated video lottery. The number within the city limits will be capped at 186, reflecting some business plans already in process, and once those are used up, there won’t be new ones issued until the city adds 5,000 people to its population.

The City Council also voted to curtail a trend of casinos locating next to each other in retail centers with interior hallways, allowing customers to visit them without going outdoors.

That has created situations where adjacent storefronts combine to offer “20, 30, 40, even 50 machines,” Neitzert said. “Does it meet the spirit of the 10-machine casino? I would challenge you to go into a casino with 40 or 50 machines and tell me whether it feels like a casino-type atmosphere.”

The ordinance change caps side-by-side establishments at three with malt beverage licenses and potentially four if one had a liquor license. Those establishments are required to use the interior halls only for employees and access to shared refrigeration.

“Is there a free market? Absolutely. At the exact same time, we regulate medical marijuana. We regulate liquor,” said Councilor Rich Merkouris, who called it “common-sense legislation” and brought forward the three-storefront limit. “There are highly regulated industries in our state, and this is one of them.”

The votes were challenged by Drew Duncan, attorney for Commonwealth Gaming, who argued there is no delegation of power to municipalities to control video lottery, with the statutes instead regulated only through the state.

“You can control through zoning where bars or beer bars are located,” he said, adding these changes are more than zoning and could be deemed unconstitutional.

Councilors push for limits on video lottery