Token Crossplay Considerations Its Time Re-evaluate Crossplay Law In Light Of Today’s Token And Acceptor Technology 08/2003 Introduction & Summary Federal law mandates that only the US Government shall have the right to produce money and that tokens must thereby be restricted to use within the issuing establishment. Until recently, the only practical way the government had to manage the mushrooming number of casinos using basically the same tokens was to require that they; a) refuse play of other tokens at table games, b) sell only their own tokens to customers, resulting in c) sorting tokens in the backroom that were taken in by slot machines, and d) hiring a fleet of armored trucks to return/exchange tokens back to the issuing casino. With the advent of X-Mark and SmartMark optically encoded token technology and coin acceptors such as IDX Xeptors to validate them, it is now possible to prevent crossplay between casinos altogether such that numerous nearby casinos can abide by the full intent of the no-crossplay law without the overhead costs of sorting and exchange. Regulators need no longer excuse "inadvertent acceptance of other tokens" when the technology to prevent it is commonly available. Casinos that have made the change have indeed found that operating costs are lower because of both slug and crossplay elimination. Additionally, the direction of gaming regulators is toward requiring no crossplay. Ontario was the first jurisdiction to require no crossplay in all of its casinos and racetracks. Indiana and Illinois have draft or published regulations also to require no crossplay of tokens, while others are expecting to follow. IDX is prepared to provide as many distinctive codes, and Xeptors that reliably read them, as the market requires. Crossplay History The history of token crossplay has been primarily directed by the technological evolution of the coin acceptor. The first coin operated machines had little more than a micro-switch to detect and credit a coin deposited through a slot. It was quickly discovered that any old piece of wood, linoleum, or metal that could be pushed through the slot would crossplay with the desired coin. Coin acceptors then evolved through the 1960's with ever improving mechanical and magnetic testing methods to validate the deposited coin. Methods included diameter and thickness separators, rocker cradles for weight, and magnets to divert magnetic materials. In the late 1970's and on into the 1990's, electronic "coin comparators" became available and basically checked for an electromagnetic signature match between a sample coin held by the acceptor and the coin deposited. In the later 1990's coin acceptors that could read codes minted into the surface of tokens were developed to finally eliminate counterfeits and provide a means to uniquely identify a casino's token to eliminate crossplay. Meanwhile the US Mint had early on enacted bans for various token diameter ranges and alloys to help keep government minted currency coins sufficiently distinct from privately minted tokens. In the developing Las Vegas gaming industry, regulators also enacted diameter and thickness categories for high denomination tokens to help prevent the possible crossplay of a token of one denomination in a machine of a higher denomination at the casino across the street. Of course this increased the likelihood that the same denomination would crossplay at the casino across the street. The 18% nickel silver alloy became popular for casino tokens because it was not readily available to the public like steel, copper, aluminum, and brass alloys, and because it had a nice silvery appearance. Reliance on this single alloy also supported the likelihood of crossplay in the slot machines across the street. For a time, crossplay between Las Vegas casino tokens was rampant. Many local businesses also regularly took casino tokens as payment for goods. The US Mint had major heartburn with the rampant crossplay of tokens between casinos, and even more so with their use as money in local shops because; a.) the constitution authorizes only the US Mint to produce money, b) by definition, a token is for use and only has value within a particular establishment, while money is for use and has value between individuals and establishments, and c) casino tokens were being used between establishments and as money. Because the technology did not exist to prevent crossplay, casinos were required to refuse play of other tokens at the table games and sell only their own tokens to their customers. This had a side effect of requiring backroom activity to visually sort out other tokens taken inadvertently in slot machines, and then hire armored trucks to return the tokens to their sponsors for face value. Today casinos that have installed X-Mark encoded tokens and Xeptors have discovered the cost savings of rejecting both slugs and crossplay tokens. As regulators understand more about the available technology, it appears a trend is starting toward writing into the regulations the requirement for no crossplay tokens as ideally required by federal law. Ontario was the first jurisdiction to require no crossplay in all of its casinos and racetracks. Indiana and Illinois have draft or published regulations also to require no crossplay of tokens Crossplay Costs Some have claimed that it is a benefit to take tokens from across the street because customers get on average 92% of face value when played in slot machines whereas the casino gets full face value when returning it to the sponsor of the token. However, this neglects the fact that the same thing is going on across the street with your tokens, making the benefit a net wash, but still leaving the real cost of accepting crossplay tokens, which includes: 1. When there is no token-exchange relationship with the establishment sponsoring the crossplay tokens being accepted, then it is pretty much a dollar-for-dollar loss on the face value of the crossplay tokens accepted. Such crossplay tokens are little better than counterfeits or slugs. 2. When there is a token-exchange relationship with the establishment sponsoring the crossplay tokens being accepted, then the costs still include: a. Building space and equipment for visually sorting crossplay tokens from emptied slot drop vaults. b. Opportunity cost for not having this space and equipment serving paying customers in a productive way. c. Wages and benefits paid to employees who do the visual sorting. d. Expense paid for armored trucks to pickup and deliver the sorted tokens. Crossplay Federal Laws A short summary of the below attached Federal Laws includes: • The US Constitution in Article 1, Section 8 gives congress the authority to coin and regulate money, to provide punishment for counterfeiting and specifically excludes such power from the states. This exclusive authority has been vested in the Department of the Treasury, US Mint. • The US Mint has defined the physical and usage limits for tokens, clearly prohibiting crossplay of tokens between establishments, using tokens for other than limited purposes within your own establishment, and requiring posted signage to help remind the public. • United States federal laws 18 USC Sections 336 and 491 provides for punishment of anyone producing tokens intending that they can be used in other establishments for goods or services provided there. • Blacks Law Dictionary supports the implied definitions of "money", "coin", "currency", and "token" used herein. U.S. Constitution: Article 1, Section 8 Clause The Congress shall have Power... To coin Money, regulate the Value thereof... U.S. Constitution: Article 1, Section 8 Clause 6 The Congress shall have Power ... To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; U.S. Constitution: Article 1, Section 10 Clause 3 No State shall ... coin Money; Use of Metal Tokens: Final Statement of Policy Volume 50 Federal Register 28679-81 (July, 15, 1985) Agency: United States Mint, Treasury Action: Final Statement of Treasury Policy Regarding the Use of Metal Tokens SUMMARY: The United States Mint, Department of Treasury announces its final statement of policy regarding the use of metal tokens. The Mint has historically been opposed to the production and use of metal tokens because of its concern that widespread use of tokens would lead to their circulation in the community as coinage in violation of the criminal code. Exceptions to this opposition have been granted by the Mint for the use of tokens by gambling casinos on a case- by-case basis. The Department does not oppose the production or use of tokens which meet the following conditions: 1. Tokens should be clearly identified with the name and location of the establishment from they originate on at least one side. Alternatively, tokens should contain an identifying mark or logo which clearly indicates the identity of the manufacturer. 2. Tokens should not be within the following diameter ranges (inches): 0.680- 0.775 0.810- 0.860 0.910- 0.980 1.018- 1.068 1.180- 1.230 1.475- 1.525 3. Tokens shall not be manufactured from a three layered material consisting of a copper nickel alloy clad on both sides of a pure core, nor from a copper based material except if the total of zinc, nickel, aluminum, magnesium, and other alloying materials is at least 20 percent of the token's weight. In addition, tokens shall not be manufactured from material which possesses sufficient magnetic properties so as to be accepted by a coin mechanism. 4. Establishments using these tokens shall prominently and conspicuously post signs on their premises notifying patrons that federal law prohibits the use of such tokens outside the premises for any monetary purpose whatever. 5. The issuing establishments shall not accept tokens as payment for any goods or services offered by such establishment with the exception of the specific use for which the tokens were designed.