A New Jersey company will be paying $1 million to the State of Arizona after it was found manipulating its gaming machines to make customers lose.

According to a release from the office of Arizona Attorney General Mark Brnovich, a consent judgement was obtained against Betson Coin-Op Distributing Company, Inc. of New Jersey.

The settlement arises out of Betson’s sales and leases of Sega Key Master Prize Redemption Machines in locations throughout Arizona, like shopping malls, gas stations, and convenience stores.

The Key Masters are electronic gaming devices that have three rows of “keyholes” located adjacent to prizes. Players, oftentimes children, use a joystick and button system in an attempt to guide a mechanical “key” into one of the keyholes in the game play area inside of the device in an attempt to win a particular prize associated with a particular keyhole.

Arizona officials alleged the Key Master machines were equipped with an “Auto-Percentaging” system, which could be set to ensure a certain number of players lost the game before the machine paid a prize, making the machine a game of chance similar to slot machines.

However, games of chance are only permissible in licensed casino facilities, a release states.

“Under Arizona law, outside of casinos, it is illegal for gaming machines to have settings that permit an operator to alter the odds of participants winning the game,” Mr. Brnovich stated.

The settlement follows the prior successful criminal prosecutions of Jonathan Sanborn and his company IQ Vending, which were found to have operated Key Master machines set so as many as 2,200 players had to lose before the machine would revert to a mode where a skilled player could win the game.

That investigation found the machines contained prizes such as iPads, Beats by Dre headphones, and Sony PlayStation handhelds. The machines also offered no instructions and did not have any sign alerting players that they were not games of skill.

The Key Master machines operated by Sanborn and IQ Vending were purchased or leased from Betson, and operated in Arizona for nearly two years before they were seized by state agents several years ago.

As part of the settlement, Beston is paying $1 million to Arizona and agreed not to sell, lease, or finance any Key Master or merchandiser game machines with Auto-Percentaging systems in the state.

If you believe you have been a victim of consumer fraud, contact the Arizona Attorney General’s Office in Phoenix at 602-542-5763, in Tucson at 520-628-6648, or outside the metro areas at 800-352-8431.