A BILL TO BE ENTITLED
AN ACT to establish the North Carolina gaming commission and authorize the regulation of video lottery terminals and fantasy football leagues.
The General Assembly of North Carolina enacts:
SECTION 1.  Chapter 18C of the General Statutes is amended by adding a new Article to read:
"Article 9.
"Video Lottery Entertainment.
"Part 1. General Provisions.
"§ 18C‑200.  Definitions.
In addition to the definitions in Article 1 of this Chapter, the following definitions apply in this Article:
(1)	Central monitoring system. – The system that maintains on a real‑time basis the financial, integrity, and security controls on video lottery terminals and associated equipment and provides administrative services for its operation.
(2)	Distributor. – An individual, partnership, corporation, trust, association, joint venture, limited liability company, or other business entity that distributes or sells video lottery terminals or associated equipment in the State of North Carolina.
(3)	Gross income. – Wagers inserted into a video lottery terminal minus any credits.
(4)	License. – Authorization granted by the Commission permitting an applicant to engage in the defined activities of video lottery.
(5)	Manufacturer. – An individual, partnership, corporation, trust, association, joint venture, limited liability company, or other business entity that manufactures, assembles, services, or produces video lottery terminals or associated equipment in this State.
(6)	Operator. – An individual, partnership, corporation, trust, association, joint venture, limited liability company, or other business entity that owns and/or services a video lottery terminal for which a video lottery terminal permit has been issued by the Commission and that places video lottery terminals or associated equipment for public use in the State of North Carolina.
(7)	Video lottery games. – Electronically simulated games of chance approved by the Commission that are displayed and played on licensed video lottery terminals.
(8)	Video lottery retailer. – An establishment under contract with the Commission to place video lottery terminals on premises authorized by the contract.
(9)	Video lottery terminal. – A device operated under the authority of the Commission that shall be exempt under G.S. 14‑306.1A and is any electronic computerized video game machine that, upon the insertion of cash, player's club card, or other form of lottery prize or promotional credit, is available to play a video lottery game authorized by the Commission, and which uses a video display and microprocessors in which, by chance, the player may receive free games or credits that can be redeemed for cash. The term does not include a machine that directly dispenses coins, cash, or tokens.
(10)	Video lottery terminal permit. – A permanently affixed tag or other device issued to a licensed operator for each video lottery terminal approved by and registered with the Commission.
(11)	Wager. – A sum of money or thing of value risked on an uncertain occurrence.
"§§ 18C‑201 through 18C‑202.  Reserved.
"§ 18C‑203.  Video lottery; allocation of revenues.
Subject to the limitations set forth in this Chapter, the Commission may initiate video lottery games played using a video lottery terminal. The Commission shall determine the allocation of net income from video lottery terminals and the procedures for the monitoring, collection, and distribution of income from the video lottery terminals, provided that no less than forty‑six percent (46%) of the total annual revenues shall be transferred to the North Carolina State Lottery Fund following the procedures in Article 7 of this Chapter and no more than eight percent (8%) of the total annual revenues shall be allocated for administrative expenses of the Commission, which shall include all costs associated with the central monitoring system. To the extent that the expenses of the Commission are less than eight percent (8%) of total annual revenues, the Commission shall allocate any surplus funds to the North Carolina State Lottery Fund.
"§§ 18C‑204 through 18C‑209.  Reserved.
"Part 2. Licenses and Permits.
"§ 18C‑210.  Video lottery permit required on video lottery terminals.
(a)	The Commission shall make available a video lottery permit that shall be affixed to all approved video lottery terminals in a location and manner set forth by the Commission. The placement of the video lottery permit represents that the machine has been registered, inspected, and approved for operation in the State.
(b)	The Commission shall issue the video lottery permit annually, based on the number of approved terminals registered with the Commission per licensed operator.
(c)	No person other than authorized Commission personnel and the licensed operator may affix or remove a video lottery permit.
(d)	Manufacturers, distributors, licensed operators, and video lottery retailers must make video lottery terminals and associated equipment available for inspection by the Commission. No video lottery terminal shall be issued a permit unless the machine's software is compatible with the Commission's central monitoring system and the games initiated and approved by the Commission.
(e)	Any terminal or machine that does not display the video lottery permit as required by this section is illegal and subject to confiscation by any law enforcement officer.
(f)	No video lottery terminal may be transported out of this State until the video lottery permit has been removed.
"§ 18C‑211.  Reserved.
"§ 18C‑212.  Types of licenses.
The Commission shall issue the following types of licenses associated with video lottery entertainment:
(1)	Manufacturer's license.
(2)	Distributor's license.
(3)	Operator's license.
"§ 18C‑213.  Reserved.
"§ 18C‑214.  Minimum qualifications for all licensees.
(a)	Except as provided in subsection (b) of this section, an individual, group of individuals, corporation, partnership, or association whom the Commission determines is qualified to receive a license under this Article shall be issued a license.
(b)	The Commission may not approve a licensed manufacturer applicant if any of the following apply:
(1)	The applicant has been convicted of a felony or any gambling offense in any state or federal court of the United States within 10 years of issuance of the license or employs officers and directors who have been convicted of a felony or any gambling offense in any state or federal court of the United States within 10 years of issuance of the license.
(2)	The applicant is less than 21 years of age.
(3)	The applicant has falsified the application.
(4)	The applicant is not current in filing all applicable tax returns to the State and in payment of all taxes, interest, and penalties owed to the State, excluding items under formal appeal under applicable statutes. Upon request of the Director, the Department of Revenue shall provide this information about a specific person to the Commission.
(5)	The applicant fails to provide all information and documentation requested by the Commission.
(6)	The Commission is not satisfied that the applicant is all of the following:
a.	A person of good character, honesty, and integrity.
b.	A person whose background, including criminal record, reputation, and associations do not pose a threat to the public interest of the State or to the security and integrity of the Commission.
c.	A person who, either individually or through employees, demonstrates business ability and experience to establish, operate, and maintain the business for the type of license for which the application is made.
d.	A person who demonstrates adequate financing for the business proposed under the type of license for which the application is made.
(c)	The applicant must furnish all information, documents, certifications, consents, waivers, individual history forms, and other materials required or requested by the Commission for purposes of determining qualification for that type of license. If the applicant is a public company, the applicant must file with the Commission a copy of any disclosure statement involving ownership of the public company required to be filed with the United States Securities and Exchange Commission.
(d)	The applicant must submit to a background investigation, including each partner, director, officer, and all stockholders of five percent (5%) or more of any business entity, except for institutional investors. The application shall be accompanied by the fee to cover the cost of the criminal and financial record check conducted by the Commission.
(e)	The burden of proof for establishing qualification under this section shall be on the applicant.
(f)	No licensee or applicant to be a licensee shall pay, give, or make any economic opportunity, gift, loan, gratuity, special discount, favor, hospitality, or service, including food and beverages, to the Director, to any member or employee of the Commission, or to any member of the immediate family residing in the same household as one of these individuals.
"§ 18C‑215.  Reserved.
"§ 18C‑216.  Distributors and operators license.
(a)	In addition to the criteria set out in G.S. 18C‑214(b), the Commission may not approve an application for a distributor's or operator's license if the applicant has not been a resident of North Carolina for at least three years immediately preceding the application.
(b)	A licensed distributor or operator may not make available more than the maximum number of video lottery terminals, as established by the Commission, in the State to be played or operated at any one time.
"§ 18C‑217.  Reserved.
"§ 18C‑218.  Minimum qualification for video lottery retailers.
(a)	In addition to the criteria set out in G.S. 18C‑214(b), the Commission may not approve an application for a video lottery retailer's license if the applicant meets any of the following criteria:
(1)	Is a person whose establishment would be engaged exclusively in the business of housing video lottery gaming machines.
(2)	Is a person who resides in the same household as a member of the Commission, the Director, or any other employee of the Commission.
(3)	Is a person who does not possess an on‑premises malt beverage permit, on‑premises unfortified or fortified wine permit, or mixed beverages permit by the North Carolina Alcoholic Beverage Control Commission under Chapter 18B of the General Statutes.
(b)	Any applicant who holds more than one permit as issued by the North Carolina Alcoholic Beverage Control Commission must submit a separate application, qualification, and fees for each premises for licensure by the Commission.
(c)	The applicant for a video lottery retailer's license shall provide, in addition to other information required by the Commission, all of the following information:
(1)	Name of the licensed establishment.
(2)	Address of the licensed establishment.
(3)	Phone number of the licensed establishment.
(4)	Name, address, and phone number of each owner of the licensed establishment.
(d)	There shall be no more than one licensed establishment per single roofline.
(e)	The establishment shall meet all siting requirements set forth by G.S. 18C‑330.
"§ 18C‑219.  Reserved.
"§ 18C‑220.  Fees.
(a)	The Commission shall charge each applicant for a manufacturer's license an annual fee of ten thousand dollars ($10,000).
(b)	The Commission shall charge each applicant for a distributor's license an annual fee of ten thousand dollars ($10,000).
(c)	The Commission shall charge each applicant for an operator's license an annual fee of five thousand dollars ($5,000) and an annual terminal fee of one hundred and four dollars ($104.00) per terminal.
(d)	The Commission shall charge each applicant for a video retailer's license an annual fee of five hundred dollars ($500.00) plus a weekly telecommunication fee as established by the Commission.
(e)	The Commission shall charge each applicant for a service technician's license an annual fee of fifty dollars ($50.00).
(f)	In addition to the annual license fees, the Commission may charge a one‑time license application fee not to exceed fifty dollars ($50.00) and the cost of the criminal and financial record check.
(g)	Failure to pay the specified fees shall be cause for revocation of the entity's license.
(h)	All licenses issued by the Commission are renewable annually unless sooner cancelled or terminated. No license issued by the Commission is transferable or assignable.
"§ 18C‑221.  Reserved.
"§ 18C‑222.  Multiple types of licenses prohibited.
(a)	A video lottery terminal manufacturer may not be licensed as a video lottery terminal operator or own, manage, or control a licensed establishment. A video lottery terminal distributor may not be licensed as a video lottery terminal operator or own, manage, or control a licensed establishment. A video lottery terminal operator may not be licensed as a video lottery terminal manufacturer or distributor. An owner or manager of a licensed establishment may not be licensed as a video lottery terminal manufacturer or distributor.
(b)	Nothing in this section restricts an owner or manager of a single licensed establishment from owning video lottery terminals licensed and placing such machines on the premises, provided they meet the same requirements of video lottery terminal operators, including the payment of all required operator licensing and terminal fees.
(c)	Nothing in this section prohibits the Commission, after prior notice to all licensed video lottery terminal operators, from authorizing the placement of video lottery terminals by a manufacturer in an establishment that satisfactorily demonstrates that it is otherwise unable to obtain appropriate machine placement of service.
"§ 18C‑223.  Reserved.
"§ 18C‑224.  General duties of licensees.
(a)	All video lottery license holders shall do all of the following:
(1)	Promptly report to the Commission any factors or circumstances related to video lottery operations that constitute a violation of State or federal law.
(2)	Conduct all video lottery activities and functions in a manner that does not pose a threat to the public health, safety, or welfare of the citizens of this State and that does not adversely affect the security and integrity of the lottery or harm the video lottery industry.
(3)	Hold the Commission and the State of North Carolina harmless from and defend and pay for the defense of any and all claims that may be asserted against a license holder, this State, or the Commission and its employees arising from the license holder's participation in or operation of the video lottery.
(4)	Assist the Commission in maximizing video lottery revenues to the State.
(5)	Maintain all records required by the Commission.
(6)	Keep current in all payments and obligations to the Commission.
(b)	All video lottery retailers shall remit XX percent of net income of each video lottery terminal to the Commission on a schedule established by the Commission.
"§§ 18C‑225 through 18C‑229.  Reserved.
"Part 3. Video Gaming Machines.
"§ 18C‑330.  Possession.
(a)	Only video lottery terminals with a video lottery permit may be placed in a licensed establishment. No more than the maximum number of video lottery terminals with a video lottery permit, as established by the Commission, may be located in any licensed establishment.
(b)	In order to control access to video lottery terminals by minors, video lottery terminals may be placed only on the premises of an establishment issued an on‑premises malt beverage permit, on‑premises unfortified or fortified wine permit, or mixed beverages permit by the North Carolina Alcoholic Beverage Control Commission under Chapter 18B of the General Statutes.
(c)	Video lottery terminals with a video lottery permit may not be played by persons less than 21 years of age.
(d)	All video lottery terminals in licensed establishments must be physically located in compliance with all of the following:
(1)	In the sight and control of the owner, the manager, or an employee of the licensed establishment from the location at which alcoholic beverages are dispensed.
(2)	In an area that ensures public access to the terminals is restricted to persons legally entitled by age to be on the premises.
(3)	In an area that is at all times monitored by the owner, manager, or employee of the licensed establishment to prevent access to or play of video lottery terminals by persons under the age of 21.
(e)	Licensed operators shall file with the Commission the location of any establishment in which permitted video lottery terminals are located, and those locations shall be licensed establishments. The Commission shall not issue any license for an establishment located within 50 feet of a church, public school, or any nonpublic school as defined by Parts 1 or 2 of Article 39 of Chapter 115C of the General Statutes at the time of licensure.
"§ 18C‑331.  Reserved.
"§ 18C‑332.  Play and posting of odds.
Video lottery terminals with a video lottery permit may not allow more than the amount established by the Commission to be played on a single wager. The odds of winning each video lottery game shall be posted on or near each video lottery terminal. The manner in which the odds are calculated and how the odds are posted shall be established by the Commission by rule.
"§ 18C‑333.  Reserved.
"§ 18C‑334.  Video lottery contract.
(a)	The Commission shall develop a model contract to be used between licensed operators and licensed video lottery retailers. The Commission may seek input into the development of the model contract from licensed operators and video lottery retailers.
(b)	All contracts between licensed operators and licensed video lottery retailers shall address the need to report to the Internal Revenue Service and the Commission any credits paid out in cash to individuals playing the video lottery terminal.
(c)	Other than the share of net income authorized by the Commission under this Article, a licensed operator shall not offer any item of value to a licensed video lottery retailer or an employee of a licensed video lottery retailer in exchange for allowing the licensed operator to place video lottery terminals in the licensed video lottery retailer's establishment.
"§ 18C‑335.  Reserved.
"§ 18C‑336.  Transportation between licensed video lottery retailer's establishments in the State.
Any person transporting a video lottery terminal from one licensed video lottery retailer's establishment to another in the State, other than for servicing or repair, shall notify the Commission in writing prior to the transportation of the video lottery terminal. The written notification shall contain at least all of the following:
(1)	The full name and address of the person or entity transporting the video lottery terminal.
(2)	The reason for the transportation of the video lottery terminal.
(3)	The full name, address, and license number of the licensed video lottery retailer's establishment where the video gaming machine is currently located.
(4)	The full name and address of the person or entity to whom the video lottery terminal is being delivered and the destination of the video lottery terminal if it is different from the address.
(5)	The serial number and model number of the video lottery terminal.
(6)	The video lottery terminal permit number.
(7)	The expected date and time of the transportation.
"§§ 18C‑337 through 18C‑339.  Reserved.
"Part 4. Enforcement.
"§ 18C‑400.  Enforcement.
The Commission shall have sole administrative enforcement authority of this Chapter.
"§ 18C‑401.  Reserved.
"§ 18C‑402.  Inspection of premises, records, activities.
At any time during normal business hours, the Commission or the Department of Public Safety, Alcohol Law Enforcement Branch, may inspect an establishment of a licensed video lottery, licensed operator, licensed distributor, or a licensed manufacturer. The inspection may include the examination of records, equipment, and proceeds related to the operation.
"§ 18C‑403.  Reserved.
"§ 18C‑404.  Criminal offenses.
(a)	Any person who tampers with a video lottery terminal with intent to interfere with the proper operation of such terminal is guilty of a Class 1 misdemeanor.
(b)	Any person who, with intent to manipulate the outcome, payoff, or operation of a video lottery terminal, manipulates the outcome, payoff, or operation of a video lottery terminal by physical tampering or any other means is guilty of a Class 5 felony.
(c)	A machine owner who falsely reports or fails to report the amount due required by the Commission is guilty of a Class 6 felony and is subject to termination of his or her license by the Commission.
(d)	Any video lottery retailer or operator who pays a prize to any person in the amount less than the specified prize won is guilty of a Class 6 felony and is subject to termination of his or her license by the Commission.
(e)	The Department of Public Safety, Alcohol Law Enforcement Branch, shall have sole enforcement authority under this section."
SECTION 2.  Recodification; Name Change; Technical and Conforming Changes. – The Revisor of Statutes shall recodify Part 2 of Article 37 of Chapter 14 of the General Statutes, Bingo and Raffles, and Article 68 of Chapter 143 of the General Statutes, Regulation of Boxing, into new Articles under Chapter 18C of the General Statutes.
When recodifying, the Revisor is authorized to change all references to the North Carolina State Lottery Commission to instead be references to the North Carolina Gaming Commission. The Revisor may separate subsections of existing statutory sections into new sections and, when necessary to organize relevant law into its proper place in Chapter 18C of the General Statutes, as amended by this act, may rearrange sentences that currently appear within subsections. The Revisor may modify statutory citations throughout the General Statutes, as appropriate, and may modify any references to statutory divisions, such as "Chapter," "Subchapter," "Article," "Part," "section," and "subsection," adjust the order of lists of multiple statutes to maintain statutory order, correct terms and conform names and titles changed by this act, eliminate duplicative references to the Lottery Commission that result from the changes authorized by this section, and make conforming changes to catch lines and references to catch lines. The Revisor may also adjust subject and verb agreement and the placement of conjunctions. The Revisor shall consult with the North Carolina State Lottery Commission, the Alcohol Law Enforcement Branch of the Department of Public Safety, and the State Bureau of Investigation on this recodification.
SECTION 3.  G.S. 18C‑103(4) reads as rewritten:
"(4)	"Game" or "lottery game" means any procedure or amusement authorized by the Commission where prizes are distributed among persons who have paid, or unconditionally agreed to pay, for tickets or shares that provide the opportunity to win those prizes."
SECTION 4.  G.S. 18C‑114 reads as rewritten:
"§ 18C‑114.  Powers and duties of the Commission.
(a)	The Commission shall have the following powers and duties:
(1)	To specify the types of lottery games and gaming technology to be used in the Lottery.
(2)	To prescribe the nature of lottery advertising and video lottery entertainment advertising, which shall comply with the following:
a.	All advertising shall include resources for responsible gaming information.
b.	No advertising may intentionally target specific groups or economic classes.
c.	No advertising may be misleading, deceptive, or present any lottery game as a means of relieving any person's financial or personal difficulties.
d.	No advertising may have the primary purpose of inducing persons to participate in the Lottery.
(3)	To specify the number and value of prizes for winning tickets or shares in lottery games, including cash prizes, merchandise prizes, prizes consisting of deferred payments or annuities, and prizes of tickets or shares in the same lottery game or other lottery games.
(4)	To specify the rules of lottery games and the method for determining winners of lottery games.
(5)	To specify the retail sales price for tickets or shares for lottery games.
(6)	To establish a system to claim prizes, including determining the time periods within which prizes must be claimed, to verify the validity of tickets or shares claimed to win prizes, and to effect payment of those prizes.
(7)	To conduct a background investigation, including a criminal history record check, of applicants for the position of Director, which may include a search of the State and National Repositories of Criminal Histories based on the fingerprints of applicants.
(8)	To charge a fee of potential contractors, lottery contractors, and applicants under Article 9 of this Chapter, to not exceed the cost of the criminal record check of the potential contractors and lottery contractors.
(9)	To specify the manner of distribution, dissemination, or sale of lottery tickets or shares to lottery game retailers or directly to the public.
(10)	To determine the incentives, if any, for any lottery employees, lottery retailers, lottery contractors, or electronic computer terminal operators.
(11)	To specify the authority, compensation, and role of the Director, and to specify the authority, selection, and role of the other employees of the Commission. All of the following apply to all employees of the Commission:
a.	No employee of the Commission may have a financial interest in any lottery potential contractor or lottery contractor, other than an interest as part of a mutual fund.
b.	No employee of the Commission with decision‑making authority shall participate in any decision involving the retailer or potential contractor with whom the employee has a financial interest.
c.	No employee of the Commission who leaves the employment of the Commission may represent any lottery contractor, potential contractor, or retailer before the Commission for a period of one year following termination of employment with the Commission.
d.	A background investigation shall be conducted on each applicant for employment with the Commission.
e.	The Commission shall bond all employees with access to lottery funds or revenue or security.
(12)	To approve and authorize the Director to enter into agreements with other states to operate and promote multistate lotteries consistent with the purposes set forth in this Chapter.
(13)	Any other powers necessary for the Commission to carry out its responsibilities under this Chapter.
(14)	To adopt rules to implement this Chapter, including establishing reasonable regulation of video lottery entertainment.
(15)	To establish requirements for linking all video lottery terminals under a central monitoring system to provide auditing program information, including creating and maintaining a central monitoring system, which may not limit participation to only one manufacturer of video lottery terminals by either cost of implementing the necessary program modifications to communicate or the inability to communicate with the central monitoring system.
(16)	To establish criteria for information system, operating procedures, reporting, and accounting criteria for video lottery entertainment.
(b)	Article 15 of Chapter 143B of the General Statutes shall not apply to the Commission."
SECTION 5.  G.S. 18C‑120 reads as rewritten:
"§ 18C‑120.  Selection of the Director; powers and duties.
(a)	The Commission shall select a Director to operate and administer the Lottery and to serve as the Secretary of the Commission. Except as to the provisions of Articles 6 and 7 of Chapter 126 of the General Statutes, the Director shall be exempt from the North Carolina Human Resources Act.
(b)	The Director shall have the following powers and duties, under the supervision of the Commission:
(1)	To provide for the reporting of payment of lottery game prizes to State and federal tax authorities and for the withholding of State and federal income taxes from lottery game prizes as provided in State and federal law.
(2)	To conduct a background investigation, including a criminal history record check, of applicants for employment with the Commission, lottery retailers, lottery potential contractors, and applicants under Article 9 of this Chapter, which may include a search of the State and National Repositories of Criminal Histories based on the fingerprints of applicants.
(3)	To set the salaries of all Commission employees, subject to the approval of the Commission. Except for the provisions of Articles 6 and 7 of Chapter 126 of the General Statutes, all employees of the Commission shall be exempt from the North Carolina Human Resources Act.
(4)	To enter into contracts with lottery retailers, lottery contractors, lottery suppliers, or licensees under Article 9 of this Chapter upon approval by the Commission.
(5)	To provide for the security and accuracy in the operation and administration of the Commission and the Lottery, including examining the background of all prospective employees, lottery potential contractors, lottery contractors, lottery retailers, and applicants under Article 9 of this Chapter.
(6)	To coordinate and collaborate with the appropriate law enforcement authorities regarding investigations of violations of the laws relating to the operation of the Lottery and make reports to the Commission regarding those investigations.
(7)	To confer with the Commission on the operation and administration of this Chapter and make available for inspection by the Commission all books, records, files, documents, and other information maintained under this Chapter.
(8)	To study the operation and administration of other lotteries and to collect demographic and other information concerning the Lottery and make recommendations to improve the operation and administration of the Lottery to the Commission, to the Governor, and to the General Assembly.
(9)	To provide monthly financial reports to the Commission of all revenues, prize disbursements, expenses, net revenues, and all other financial transactions involving lottery funds.
(10)	To enter into agreements with other states to operate and promote multistate lotteries consistent with the purposes set forth in this Chapter and upon the approval of the Commission.
(11)	To engage an independent firm experienced in security procedures, including computer security and systems security, to conduct a comprehensive study and evaluation of all aspects of security in the operation of the video lottery terminals. At a minimum, such a security assessment is to include a review of network vulnerability, application vulnerability, application code review, wireless security, security policy and processes, security and privacy program management, technology infrastructure and security controls, security organization and governance, and operational effectiveness."
SECTION 6.  G.S. 18B‑500(b) reads as rewritten:
"(b)	Subject Matter Jurisdiction. – After taking the oath prescribed for a peace officer, an alcohol law‑enforcement agent shall have authority to arrest and take other investigatory and enforcement actions for any criminal offense. The primary responsibility of an agent shall be enforcement of the ABC, gaming, and lottery laws."
SECTION 7.  The North Carolina Gaming Commission, as established by this act, may take the necessary actions to develop and implement any licensing and application process authorized by this act. Beginning _____, the North Carolina Gaming Commission may accept applications, charge and collect fees, and issue licenses, as authorized by this act.
SECTION 8.  Sections 1 through 6 of this act become effective January 1, 2018. The remainder of this act is effective when it becomes law.