California Entertainment Machine Association CEMA Merchandiser Advisory Crane Shutdown CA Bill AB1103 Prohibiting Cash May 30,

, 2013
Crane Shutdowns In early May of this year the California Bureau of Gambling Control, a part of the California Department of Justice (DOJ) issued a letter to one or more major retail chain stores suggesting that the stores vendor remove the cranes. The big name supermarket corporate office reacted by turning off all of cranes within their stores statewide. This has impacted hundreds of cranes and dozens of operators. Attorneys and experts working on the situation have ascertained that the DOJ is of the opinion that all cranes are illegal because the machines offer a tangible prize and are not 100% pure skill. Cited, is a 1956 California Attorney General opinion that opined that diggers and claws are games of chance and illegal gaming devices. Also referenced is the Bureaus November 1, 2010 advisory of the subject. In November 2010, the Bureau of Gambling control issued an advisory opinion that any element of chance and a prize is a violation of criminal gaming device (slot machine) statutes. Apparently, the position that the bureau takes is that the long-standing test of a predominance of skill is not sufficient. While advisories and even Attorney General opinions are not binding law, they carry great weight and highly respected by the courts. AB 1103 In March of this year, California Bill (AB) AB 1103 was introduced and has progressed. The state assembly passed it in a vote of 70 in favor 0 (zero) opposed, that bill has moved to the senate side of the capitol. That bill will, if it becomes law, specifically makes it illegal to offer cash or items exchangeable for cash within a game machine in California. It is very possible that amendments will be added to AB 1103 or a new bill may be created that will restrict amusement games and or prizes, which would impact the entire California coin-operated amusement game industry. A group convened by Richard Scherer of the Pelican Group is currently speaking about putting together a fund to hire a lobbyist. To quote Richard on May 24, 2013, we, as an industry, have one to three weeks to add an amendment to AB 1103 which is moving through the CA legislature right now. This is a unique opportunity to make merchandisers legal in CA or lose them entirely. To get involved in the group working on influencing AB 1103, please contact Richard Scherer, rscherer@pelicangroup.com, or Rich Gerhardt, Rich.Gerhardt@nen-inc.com. They will provide you with a Trust agreement to sign. CEMA is on top of the issues, will keep you informed and is seeking your support by joining CEMA - it is your state association! Page 1 of 1

Background (By Bob Snyder) Factually, in 1956 when the AG opinion was written, diggers and claws were of the type that had a mechanical derrick with a chain suspended 3-inch mechanical claw that could only reach about 30% of the playfield. The modern California Version seen today was designed in the mid 1980s to correct the earlier design shortcomings. The California Version meaning, in part, that it had 100% playfield accessibility, was absent any internal trickery, was of affixed strength, and its prizes of toys were within the weight size, texture, and tested, as retrievable. That version subsequently was approved by numerous police departments and held as a game, predominately of skill, in two California courts and separately in administrative licensing hearings in California and Arizona. Beginning a few years ago, a few operators began putting currency attached to select toys within their cranes. Add to this the increased presence of coin pushers with currency wrapped around rolls of coins or other weighted objects on top of the coins as a lure to play. Even more recent is the thought that dispensing or giving a piece of candy or gum somehow made other illegal pushers legal as a vending machine. (A concept tried and failed in the 1940s with one-arm bandits). Reportedly, law enforcement has found that in one or more cranes that the game operator placed currency attached to unique toys, the currency toys were different than the non-currency toys in that the cash toys were slender in shape and weighted with buckshot on one end. In testing of thousands of plays, toys were retrieved but not one currency toy was actually lifted and retrieved by the claw. Law enforcement reactions have resulted in at least one full week criminal jury trial involving a coin pusher, without candy, resulting in a quick guilty verdict. Law enforcement in turn then sought a legislative bill that became law and dramatically increased the penalties for a second and third conviction to up to $25,000. Press Release 5-17-2013 (By Bob Snyder) A California bill has been introduced, and is working its way through the legislative process, to prohibit offering cash or items exchangeable for cash in amusement games. AB1103 - was sought by the Los Angeles County Sheriffs Department. The amended language will not impact the status of amusement games for prizes. There is currently no prize value language within the bill. The no cash prize will be good for all but the few who like to tie cash on playfield toys or flaunt wrapped and weighted currency on pushers. Both actions by the few have created an increased attention to merchandisers with a result of increased enforcement.

Document Prepared by Michael Martinez, CEMA. Email: CEMA.Information@gmail.com Page 2 of 2