says i have a tough time good morning kim walberg on behalf of the interveners illinois gaming machine operators association jane jane ventures gaming and excel entertainment one related to profit splitting and other related to always so let me focus on the administrative rule the circuit court found our claims related to the rule move and it did so incorrectly and that's for at least three reasons one we have didn't ask just for in our complaint we didn't ask just for the policy to come down we also asked for declarations with respect to what is the board's authority to regulate these particular topics so that's that's one reason why it's a lot of  previously before the twenty seventeen policy there was a twenty fourteen policy and while this is a kind of new industry there's now been i think five or six different iterations of policy with respect ever ties into promotions the board is constantly changing them and hanging over our heads i mean our clients even today have to go through audience on how they're interacting with their terminal operators with respect to sharing these types of fees and expenses and basically what the board did in twenty seventeen was say what was previously illegal is now illegal and subject to enforcement actions and they've never gone back and so what we used to say was legal is legal that's why we have a problem and it was a major problem for our business and that's how we got here today i mean we brought our challenges to this to the policy and to the authority for several under several different theories first of the that the board ballot violated the a p a on second thought its action was without authority third that was arbitrary and then we had constitutional challenges with respect to the rules well and i think i was wrong that's that's clearly the concession that it's wrong and that came about because of the windy city promotions case which is the third district case that dealt with a similar rule where the board took the rule down and then said oh well this is a moot issue and the third issue said no it's not a issue and that's the third reason why the claims downward and that's a capable of repetition evading review policy exception although i don't know that you even need to address that because the board would have to establish that the claims are moot to start and i don't think they can do that so let me briefly that issue is the balmoral racing case and in balmoral racing which is the supreme court's decision from one thousand nine hundred two it's the the most up to date presidential authority on this issue the supreme court said that even a retrospective determination about the validity of a rule or ministry of action presents a live controversy because it has real impact on the parties with respect to the fee provision a p if the provision the supreme court has also said is designed so that when a party leader like our clients find a doubtful rule and that's what the supreme versus a forest preserve district and both of those cases the actual in baker it was whether a forest preserve district could purchase a property or a mortgage and then about more racing it was related to racing dates for the one thousand nine hundred one season the same in our case if we get a favorable ruling and the archer potations of the board story is correct that provides meaningful relief for clients and that brings me to last reason where cases a mood in that's capable of repetition and evading review exception that's courts jump right to that particular exception but they don't need to in that it's the same reasons that the more racing and fourth or wise people because the board i think and if you look at their briefing it's clear that they're taking the position that their interpretation is right and ours is wrong debating review is clear i mean the policy itself has changed six different times over the years it's an industry that's only been here for four years so that i mean i think that the exception would definitely apply if you need to reach that issue so those are the reasons i think that our claims on the ministry of re morning the morning may please the court my name is david office i will be addressing the two constitutional challenges to two provisions of the only video gaming act specifically the prophet the version provision and the dual licensing prohibition the first pla government's position and we think both the mandatory for profit split of a fifty fifty profit sharing after tax profits between an unrelated party a third party here the terminal operators represented by the interviewers for today that provision as well the riverboat gambling at which is the predicate to the video gaming in the video game ect itself have those those legitimacy the interest to prohibit it and guard against corruption bribery sort of all of those are proper state interest however the manufacturers distributors terminal operators locations establishment which are our clients their total license handlers there are six different categories here it's a very different set you're completely different we should not be looking to be  industry that used to be right certainly merits regulation absolutely however certain public that regulation must be rationally relieved that legitimacy entering the to the right court was the route course bribery as well as economic concentration we submit that neither is true our clients seek the freedom to contract the freedom to be able to contract with a third party out of their own profit split based on the dynamics of their own business to kind of prevent one large rock labrat from controlling everything no your recent absolutely not if that were true if there were this position one large company could control the profit off margin doesn't this everyone else there are different portions of the only video game at that control and speak specifically to them with respect to economic concentration twenty five up i'll concede that the statute can have multiple ways to control that however and this is not it's not our position to decide whether the way they're controlling it is the wife no but it is your position to decide whether the statute as written is rationally related to that legitimate state interest and these two which do not talk about bribery and corruption do not talk about economic concentration are not rationally related to those ballots and legitimate state interests in an arbitrary selection of a fifty fifty arrangement for two parties that are forced together by the state arbitrarily is not a promotion or in an effort to larger on one hundred establishment across the state of illinois so there are a far greater number but smaller in size are there limits on how many corporations how many establishment yet you know there's a the number of terminals that can be within a single establishment of five but a business can't have more than want to salvage when our clients having a hundred and the eternal operator side believe there's actually forty terminal operators and that there is competition on both sides and we would say that the scales are far greater on the turmel operator side as far as the size of the company and we have with i detail a lot of this in our complaint as to the size of the disparity of the negotiating there and that's what we're tempting to correct for we're tempting to correct and allow our clients the actual establishment who are there working directly with the patrons and putting the sizeable investment in order to allocate that through a free market system like  here are i'm sure we unfortunately this is a nascent industry and others there's only four years of of really walk here so there's nothing directly into think those realities we think they're analogous right now how are they because those those license are structures as they were set up was an economic favoritism an economic protectionism of one group from somebody that didn't need protection there or in those cases they tried to argue that well only one only funeral home should be able to sell caskets because otherwise these are grieving people will need to or will be taken advantage of the other  based on again a rational about the rational basis for quite a rational basis of bribery and corruption but the stated basis was that he was afraid that if the plaintiffs here were seen opening up terminals in order to service them that would undermine public confidence in in the ability to regulate gaming that's a factual misstatement in a factual error because they do that today one of the license structures that we talk about is a license terminal handling where can and do have that license can open up their terminals can access them in order to service that it happens routinely and enter the circuit court to believe that that is undermine public confidence if that were true could be happening today under the current structure so that is a legal false and under the revoking act which is the predicate to below the video game e a has seen as an riverboat casinos can and do own their own machines and operate and service their own machines are asking for the similar type of treatment to occur here so that the disparity that currently exists where a terminal operator who in our view is really the to me of a middleman who despite the investment that is put in by our clients in order to invest in the academic opportunity they have the terminal operators merely purchase the machines from a distributor and then sell them or place them in an establishment and for that they are rewarded handsomely with a mandatory fifty percent after that that is not rational really because they do not serve that function there is a third party monitor that is in place in the statute that is in required to monitor the gaming throughout the state is real time monitoring they only state of the union that allows video games not all states to allow video games but the only thing i'm sorry i lack of a finish my sense and i may answer your question the only state that has two bars that one it prohibits the establishment from owning their own machines and then also requires them to allocate a fifty percent of their profit after tax profit to that entity so we are unique and not in a good way thank you  right pennsylvania i believe also has multiple licensing worst prohibition and has a set of profit share it's not fifty fifty it's a different percentage and i believe in indiana and perhaps that a operators it's my understanding that if the operators get roughly two to one over the establishment's although it's kind of a different situation there because the restrictions on what types of the stablish well i can't do that anymore because the antichrist with prohibition if they could just and said instead structure of profit share agreement that favors the establishment it's a very easy way around b and scientists and probation plaintiffs do not challenge the validity a video gaming location there has there's it's a joint venture that's what the what that was required by the multiple licensing restrictions and so i don't know how the legislature got fifty fifty but there were two parties and i think it  really relate because there's two groups and so they just split it down the middle they evenly share the profits they both jointly run the videogaming operation and it makes sense just to split it down the middle so what here  decisions are being made based on quality of service or types of games there's a whole slew of reasons why the status with which is one operator over another that's independent of whether they're receiving money and the second important  interest is is preventing under economic concentration among a handful of large operators which again plaintiffs can see that that's a legitimate state interest and although the act also  i think it's both i mean that that's one of the overriding concern of those statutory framework as a whole it's important to remember that these provisions shouldn't be read in isolation they're part of a larger statutory framework which  rushnell basis which is very important and so the extent that plaintiffs argue that there are better ways to accomplish state goals that's not enough to sell social recreational basis that would be a stronger argument if we were on strict scrutiny but that's not the case here and so the fact that some states do it differently actually shows that there are multiple rational ways to set up the service of a structure and here what the state has done is they've created they've highly regulated just about everything that happens in this industry because of the unique situation of having a brand new industry that's displacing what had been an ongoing illegal operations and so in broad strokes what the what the act does is it divides up the operations into three groups you have the you have the manufacturers and distributors who make the machines then they sell it to the second group or the terminal operators who own the machines in r and service maintain them so they're in charge of the machines and the saddle students are in charge of location and then by required by and what the multiple licensing restrictions does which is critical to the whole structure because without the multiple licensing restrictions one party that own all the licenses could run the entire operation from building the split is probably a byproduct of the multiple licensing restriction because once you have multiple licenses you create a situation where you're going to have to have choice operation over a location and so then the question becomes what do we do with that based on the history of of gambling the legislature decided that to avoid to avoid situations where there's bribery or corruption or any of those concerns we're just going to set exactly what the after tax profits are and  get in your opinion so that that regulation is rationally related right if you got rid of the profit split then you would have bargepole operators that can afford to provide more favorable profit establishment and whether that and an operator does it directly by payment of money or just slightly more convoluted through the agreements of a favorable profit distribution you still end up in the same place and so if you this significant investments on both sides many of these samples from supreme system establishment so that when your part you know you have to have a liquor license there are most of you know if you already have a bar or a restaurant or whatever this is just additional income i mean there are investments on the establishment side with their investments on the operator side too they have to buy the machines or at least machines they have to take on the costs of maintaining them this is really  hard working so that goes to the multiple licensing restriction i would say that there are numerous rational reasons for the multiple licensing research one is the one that says that the court mentioned  life and the court could have moved on to other ones as well once upon the rational basis was satisfied so any one of the critical components of this is that by requiring an operator in an establishment jointly operate a gaming location it creates a level of self policing because which is an expression important here because as there are so location scared probably the state trying to oversee these tiny locations in every corner of the state is very difficult which is why this is a fundamentally different situation from casinos where you have to wrecked oversight and constant surveillance over what's going on it's it was entirely reasonable and rational for the general assembly to think well we actually need a lot more of self regulation because it's going to be difficult to oversee all these different locations and it works in a couple ways for run each licensee has incentives to report the others misconduct because they have an obligation under the board's rules to report violations of the act it prevents misconduct in the first place because you know they're going to rig the games now not only do you have to hide it from the board but you have to hide it from your the other license and in addition to that the licensees have an incentive to do their due diligence and make sure that they're entering into a partnership with somebody who's trustworthy because if the other entity by leads to act that could jeopardize the entire  whether or not the policy is valid or not this can be done in the future but in addition there they are entitled to their fees well if the court said this is not this is not something that it got to the exception of capable of repetition yet baiting of you hear what you have is be have the administrators affidavit stating that the policy simply won't be repulsor light upon the future that every time there's an allegation agency sed statements of this nature and secondarily this is different from windy city in an important way because unlike the city there was a challenge to a policy entering with a geisha in on that challenge the board took down their calls on that basis likely any new policy is not going to be identical to the old one the board whatever policy is challenge in a future proceeding is going to be different than the one they're changing this proceeding so even to the extent that plaintiffs want guidance about certain things a ruling about this policy that way and then that's a better review i want to see because then you're reviewing the actual policy that's at issue and like the prior policy has multiple pages and there's a lot of little issues that good morning may please the court and warburg on behalf of the intervenors if it pleases the court i'd like to use my limited time to focus on what i think the court is most troubling with here and that's the fifty fifty we call profit sharing i understand the plaintiffs have characterized this profit diversion and that's a mis characterization on behalf of the industry the terminal operators that i represent view this as a partnership it's a true equal fifty fifty split right down the middle and we believe that that's why the legislature to your honor's point it was not arbitrary they did not pull fifty fifty after tax play out of the air this was understood to faster a true partnership between different entities in the two cheers the terminal operators and the establishment and i'd like to speak specifically to the level of investment that the terminal operators have in this industry so they have to purchase the video gaming terminals which run between fifteen to twenty thousand dollars per terminal and they are constantly updating these terminals with additional software it's important to no their machines in those locations and so the only way that they have to draw locations to contract with them is to make sure they are the best service or in the best fighters that they can be and that often involves having the best machines is a partnership in the sense of service partners working together again there's there's no overlapping ever ship between the two they're there can't be bought it is a partnership in the sense of the terminal and i would say it's twofold one i don't think this may be in the record by anecdotally i understanding is that prior to the legalization of video gaming in illinois there was an amusement industry  practice if you well and in that practice there was a fifty fifty split between the providers of the machines in usenet devices and the establishment and so again the actual speculation here the legislature did not spell out why they did this or how they did this but they don't need to do that in order to pass constitutional muster under rational basis we can use post hoc speculation so it's possible it's certainly sexually many casinos they can afford to get other locations that are independent eighty percent of the after tax profits and they take twenty well the small mom and pop trimmer operator it's family run like some of the members of our association can't afford to do that they need the fifty fifty split in order to continue to operate and so they get squeezed out of the market as i believe your honor had mentioned previously  oh absolutely and again goes back to my initial comment where we believe that we are operating as a fact a partnership where we serve on an equal whale again that the terminal operators in addition to providing  the remainder of the net terminal income to fifty percent share that goes to the establishment they have to maintain a safe separate bank account for that purpose to believe we stated in the briefs and offered evidence to the fact existence this was just to provide an additional revenue source for them these terminal operators had to come from nowhere because this was the first time that you had video gaming of the cell you know annoyed that was legalized and so much risk if not more just as much stake less sure i don't have any additional questions for me on that point i'd like to just remind the panel obviously the standard that we have here today which is rational basis the plaintiffs have the burden of demonstrating that there is no conceivable threat of facts under which the challenge statutory provisions are rationally related to its current found a didn't carry that burden provision to create a a combined terminal operator vocation license but also to do away with the fifty fifty split and that died in committee so it's pretty clear the legislature is not thank your honour's to brief points if i may first your eyes are asking valid questions that we have a lack of a record i heard the other counsel cite pure and dawdle evidence we don't have a record the court here prematurely dismissed this and a motion to dismiss phase as a result while there are important questions related to the legitimate basis and see the legitimacy basis here this court does not need to decide that question today merely whether the complaint has alleged sufficient facts in order to allow the case to proceed forward your honour's last alfonse of questions that we don't have answers to because we don't have a record but we went back to be able to develop that record before the trial court as well for this court to proceed further second on the fifty fifty profit split  counsel mentioned that this is a partnership this is the strangest partnership i've ever heard of where the state requires you to contract with a person and requires you to give them fifty percent of your profit i've never heard of that type of  partnership is where able to sit down at the freedom of contract the partners are able to weigh the equities that they bring to the table balance that out and come up with the usually agreed upon contract this is in it and it's the authority to review those contracts and accept or deny them if they have concerns about that that is where it is tempered not in this arbitrary which they did pull out of the sky writers if there was a prior anecdotal es around the terminal operator side certainly not on the establishment side we are asking for this to become a fair arrangement the arbitrary provisions that have to put in the statute today are simply not fair let's let the freedom of contract govern