Despite ban, sweepstakes cafes around the state fight to stay open
Published 12:00 am Thursday, January 2, 2014
CHARLOTTE (AP) — A year after the state Supreme Court upheld a North Carolina law banning sweepstakes cafes, some of the places where people play fast-moving computer games that mimic Vegas-style slots are still open for business.
Over the last year sweepstakes cafes have been shut down by police, and their owners and employees have been charged with violating the law. But some of those arrested have been acquitted of criminal charges.
A few of the operators have turned to the courts for help. They’ve asked judges to issue orders preventing law enforcement from closing their stores, saying they have new software that puts them in compliance with the statute.
The strategy has created an air of uncertainty in some communities that have been trying to close sweepstakes parlors they say prey on the poor.
While some cities and counties are aggressively trying to shutter the businesses, other communities are allowing them to stay open until key issues are resolved.
Attorney General Roy Cooper said it’s clear that sweepstakes cafes are illegal. He said his office is working closely with local law enforcement and prosecutors, providing legal advice and assistance to close the operations.
But he said sweepstakes owners have been pushing back.
“I think law enforcement and prosecutors are just going to have to keep plugging away at this,” Cooper told The Associated Press. “I think overall you’ve seen a reduction in the number of these businesses in North Carolina either who voluntarily go out of business or who have been shut down by law enforcement. I think it’s just going to take a period of time before its eradicated.”
But he warned: The sweepstakes industry might not completely go away.
“You still may have them popping up like we did with the payday lending industry. They come up in different kinds of forms. It’s sort of like whack-a-mole. They come up with a different kind of nuance,” he said.
North Carolina lawmakers first passed a ban on video poker and all other electronic gambling in 2006. The industry quickly adapted, introducing new sweepstakes games they said complied with the law.
Lawmakers responded with new legislation in 2008 and 2010 making it unlawful to possess game terminals that simulate slot machines or are used for the display of electronic sweepstakes. The makers of sweepstakes software then sued the state, saying the ban violated their Constitutional free speech rights. The resulting court fight dragged on two years, culminating in the December 2012 Supreme Court decision upholding the ban.
After the ruling, law enforcement agencies began raiding cafes, seizing computers and making arrests.
But sweepstakes owners protested, asking lawmakers to look at new software that reveals the winners in advance, a move they say keeps them in compliance with the law.
With most sweepstakes operations, patrons buy Internet time that gives them the opportunity to uncover potential cash and prizes with mouse clicks on a computer screen.
To play at the cafes, customers get prepaid cards and then go to a computer to play “sweepstakes.” Winners go back to a cashier with their cards and cash out.
The pre-reveal system software allows participants to find out if they’ve won before they play the game.
That issue was a key part of a recent Duplin County case that involved a Charlotte-area attorney.
Gardner Payne was charged in October with six counts each of gambling, and the illegal use of electric machines and devices for sweepstakes.
He said he used the sweepstakes to promote his businesses, and that customers purchasing Internet time could find out in advance if they won.
The state law makes it illegal to conduct a sweepstakes through the use of an “entertaining display” to reveal a prize. But Gardner said the new pre-reveal software did not use an entertaining display to conduct the sweepstakes.
Prosecutors said buying Internet time was just a pretext.
But in late December, Judge Henry Stevens IV agreed with Payne, and dismissed the charges.
However, the judge’s ruling only applied to this case. So a year after the Supreme Court ruling, the issue is being played out in other counties — one case at a time.
Telephone messages left for Payne were not returned.
Sweepstakes owners also are going to court in their own communities to stop law enforcement from closing down their businesses.
In October a judge in Onslow County granted a preliminary injunction preventing Sheriff Ed Brown from removing computer kiosks that use sweepstakes games to promote the sale of gift cards.
Ernie Lee, the district attorney for Duplin, Jones, Onslow and Sampson counties, said he was disappointed with the recent cases, but said it wouldn’t stop them from “enforcing the law.”
But Donald Pocock, an attorney who has represented sweepstakes owners, said there’s still confusion over the statute.
“There have been several cases that have resulted in preliminary injunctions based on the function of software and the structure of the statute. And due to those outcomes there is a great deal of uncertainty on the part of sheriffs and police departments … how to enforce the statute,” he said.
Cooper said it’s not surprising the sweepstakes industry is trying to “invent ways to try to blur the lines and make it more difficult to enforce the law.”
“I think the bottom line is that there is a lot of money to be made in video poker, and they are continuing their history of doing what they can to get around the law,” he said.