PUERTO RICO
and online sports betting, fantasy contests, esports, and route machines, marking a major shift in the local market. 2 Among these new verticals, the slot route market is most promising. In 2018, Puerto Rico’s government amended Act. No. 11 of August 22, 1933, authorizing the expansion of slot routes or route machines across the island. Initially, the law allowed for 25,000 machines to be installed, within a period of 2 years, and with a cap of 45,000 machines. This article examines the regulatory framework of the slot route market, its growth potential, and the benefits it could bring to Puerto Rico’s economy and society. Regulatory framework of the industry The route machine market is governed by a regulatory framework designed to oversee the activity of slot machines that use random number generators (RNG) technology. Act. No. 11 outlines the specific requirements for the installation, operation, and monitoring of slot machines, excluding those located in land-based casinos and off-track betting shops (covered in a previous IMGL magazine 3 ) Under the legislation, the Puerto Rico Gaming Commission (hereinafter, “Commission”) is the government entity responsible for regulating this sector. Initially, Act. No. 11 permits the installation of 25,000 slot machines across authorized locations in the island. After two years, the Commission can approve an increase of up to 10,000 additional machines based on an economic impact study that evaluates market saturation in all gaming verticals in Puerto Rico. Once the total number of machines reaches 35,000, further expansion to a maximum of 45,000 machines may be approved. Is important to highlight that all these processes require legislative review and approval. 4
Licensing the industry is among the powers of the Commission granted by Act No. 11. The licenses that are authorized are: wholesale owners or operators, business owners, manufacturers and service providers. These licenses are personal and non-transferable, ensuring that each applicant meets the regulatory criteria. Currently, the licensing regulation is still pending for approval, although is expected to be fully operational in the next year. A key feature of the regulatory framework of the sector is the requirement for operators to implement an interconnection system that each of their machines is linked to. This feature will provide real-time monitoring of their operations. The system will ensure that data on machine performance, revenue and player activity is available for auditing and oversight. Operators will be responsible for the cost of their system, which must comply with the technical standards of the Commission and be approved by them. This element will bring reliability and transparency to the activity generated, including revenue. An important element to highlight is that with this framework, existing machines in the market will need to meet the technical standards established by Act No. 11. Therefore, a transitional period is needed to ensure that all the machines comply with the new technical standards. Act. No. 11 establishes a one- year transitional period 5 but it is anticipated that this will need to be extended. Route machine market overview and revenue potential The route machine or slot routes market on the island represents a significant opportunity for both local and external stakeholders. Once the regulatory framework of Act No. 11 is fully implemented and the transitional period is completed, a
2 Act No. 81 of June 29, 2019, as amended, known as “Government of Puerto Rico Gaming Commission Act” created the Puerto Rico Gaming Com- mission and authorized sports betting, fantasy contest and esports 3 See https://www.imgl.org/publications/imgl-magazine-volume-3-no-1/15-years-of-slot-machines-in-o%ef%ac%80-track-betting-locations-in- puerto-rico/
4 See section 6, Act. No. 11 of August 22, 1933 5 See section 8, Act. No. 11 of August 22, 1933
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IMGL MAGAZINE | DECEMBER 2024
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