MRSC Research Briefs are published periodically to address issues of current interest to cities, towns, and counties in Washington State.
Regulating Gambling in Washington Cities
October 2005
Robert Meinig, Legal Consultant, MRSC
Gambling, like liquor sales and use, is an activity that is generally controlled by state law, and cities are quite limited in their ability to regulate it locally.
What Cities Can Do
Cities are allowed by state law to: (1) prohibit any or all gambling activities for which licenses, issued by the Washington State Gambling Commission, are required; (2) tax certain gambling activities; and/or (2) enact as local ordinances any of the state gambling statutes that, if violated, constitute a misdemeanor or gross misdemeanor crime.
Cities Can Allow All or Just Some Gambling Activities
The most significant authority that cities have with respect to gambling is to decide what, if any, gambling activities to allow within their boundaries. A city may prohibit all gambling activity, or it may chose to allow one or more of the following gambling activities permitted by state law and regulated by the Washington State Gambling Commission: amusement games; bingo; raffles; punch boards; pull-tabs; and social card games (mini-casinos). There are a few gambling activities for which the commission does not require licenses, such as sports pools when conducted within specified statutory limitations and certain limited gambling activities conducted by nonprofit or charitable organizations for fundraising purposes; a city may not prohibit such gambling. If a city chooses to permit any gambling activities that the Gambling Commission does license, it has no authority over how those gambling activities are conducted, which is an area that is solely within the authority of the commission.
Mini-Casinos
Much attention recently has been focused on what are nicknamed "mini-casinos" that have been established or proposed in some cities as a result of 1996 and 1997 legislation that permits gambling establishments offering card room gambling to have up to 15 tables and to have "house-banked" card games with higher stakes. A number of cities have wrestled with the issue of whether to allow these mini-casinos, which have the potential for generating significant tax revenues while also presenting the potential for significant adverse social impacts. If a city has allowed one or more mini-casinos to establish within the city and it wants to prevent any more from being established, it cannot prohibit new mini-casinos while grandfathering existing ones. Basically, allowing mini-casinos or some other type of gambling means that a city cannot limit the number of establishments offering that type of gambling.
Zoning Regulations
A city may have the authority to limit, through zoning regulations, where such gambling activities it allows may locate in the city. Legal counsel for cities in the state who have considered this issue are in general agreement that cities have this zoning authority over gambling uses, but the Gambling Commission does not agree. Legislation to clarify that cities have this authority has been introduced in the past few legislative sessions, but nothing has yet passed. If the legislature does not address this issue, it will likely become one that the courts will decide.
Gambling Tax Revenues
As noted above, cities can generate revenue by taxing certain gambling activities. The maximum tax rates that cities may impose range from two percent of net receipts for amusement games to 20 percent of gross receipts for social card games (mini-casinos). Revenues from local gambling taxes must be used "primarily for the purpose of" enforcing the gambling laws. The state supreme court has interpreted this statutory language to mean that a city must first use these tax revenues for gambling law enforcement purposes. It does not mean that most or a substantial amount of the revenue must be used for that purpose.
This taxing authority obviously provides an incentive for cities to allow at least some gambling. The potential tax revenues must, of course, be weighed against the potential, yet uncertain, negative effects of gambling. So, the decision whether to allow gambling can prove to be a difficult one, particularly in tight financial times.
More Information
For more information on this subject, see MRSC's "Gambling in Washington State" Web page.