Missouri Launches Joint State-Federal Probe Into Alleged Illegal Slot Machines

The probe, initiated at the request of federal investigators, examines the ownership, locations, financial flows and operational structures behind thousands of unregulated machines installed across the state. Hanaway revealed the details during testimony before the Missouri House Budget Committee, as lawmakers simultaneously prepare to debate legislation that could fundamentally reshape the market through regulation and taxation.

Following the Money

According to Hanaway, the investigation stems from a federal civil court case in which a jury ruled that machines supplied by Wildwood-based Torch Electronics constitute illegal gambling devices. The state subsequently joined the inquiry to strengthen enforcement efforts.

“We are investigating what the operators of the games are doing, how their money is flowing, where they have locations, how many machines,” Hanaway told lawmakers. “Then we can move forward with enforcement action.”

Federal agencies including the FBI and the IRS are reportedly involved due to concerns related to money laundering and banking practices. While there is no precise count of machines in operation statewide, estimates suggest the number could reach as high as 25,000.

Torch Electronics, widely regarded as the dominant player in the sector, stated that it has not been contacted by investigators. In a written statement, company spokesman Gregg Keller said Torch would “cooperate fully with law enforcement and the Legislature” and reiterated its support for pending legislation that would legalize and regulate video lottery terminals (VLTs).

Regulation Versus Enforcement

Hanaway’s remarks come at a pivotal moment, as the Missouri House considers a bill that would authorize the Missouri Lottery to license and tax VLTs. The proposal has exposed sharp divisions that cut across party lines, narrowly advancing through committee amid intense lobbying.

“Whatever the Legislature decides to do to regulate these machines, we will enforce that law,” Hanaway said. “But right now, it’s illegal, and I’m going after them.”

Currently, the machines—often marketed as “no chance gaming”—operate without state oversight. Unlike Missouri’s 13 regulated casinos, which reported approximately $17 billion in annual slot wagers over the past three fiscal years and contribute hundreds of millions in tax revenue to public schools, these devices generate no public reporting or taxation.

Financial records presented during the federal trial showed that Torch machines generated $32 million between 2017 and 2023 from just 20 locations, highlighting the scale of revenue involved even with limited deployment.

Political Pressure and Prosecutorial Challenges

Efforts to prosecute operators have largely stalled over the past decade, as local prosecutors often declined to pursue charges. Hanaway attributed this to the substantial legal and financial resources deployed by machine owners.

“They brought in the best lawyers in the world and simply overwhelmed local prosecutors,” she said.

Only one felony conviction related to the machines has been secured statewide, while other cases have languished for years. Hanaway noted that her office has concurrent jurisdiction over gambling laws and is better positioned to withstand prolonged legal battles, especially when coordinating with federal authorities.

The issue has also drawn scrutiny due to the industry’s political influence. Torch has been a major donor to political action committees and campaigns, and has aggressively defended its market through litigation and lobbying.

The Video Lottery Debate

Supporters of regulated video lottery argue that replacing unlicensed machines with state-approved VLTs—mandated to return at least 80% of wagers to players—could generate an estimated $350 million in revenue within two years. Those funds are seen as increasingly critical as Republican leaders seek to eliminate the state income tax.

Opponents, however, warn that legalization could entrench gambling expansion without addressing broader social consequences. Senate President Pro Tem Cindy O’Laughlin cautioned against focusing solely on fiscal benefits.

“We talk about taxing gambling to pay for education and veterans, but we rarely talk about the societal cost and what it does to families,” she said.

The bill narrowly passed the House last year but died in the Senate, and legislative leaders have already signaled resistance if it advances again.

As the investigation unfolds, Missouri finds itself at a crossroads: intensifying enforcement against an unregulated market while lawmakers debate whether regulation and taxation offer a more sustainable path forward. The outcome could reshape the state’s gambling landscape—and determine how billions of dollars are monitored, taxed, or shut down altogether.