Charlotte, NC — North Carolina has tried to outlaw sweepstakes cafes where people played fast-moving computer games that mimic Las Vegas-style slots for years.
Law agencies started cracking down and closing dozens of sweepstakes parlors after the state Supreme Court last year upheld a North Carolina law banning the games that used a ‘entertaining display’.
Some sweepstakes operators used new tactics to stay open instead of folding. Lawsuits were filed against the very communities trying to close their doors. New software puts their businesses in compliance with the law, said the owners.
In several cases, judges have sides with the sweepstakes owners, and they are also fighting criminal charges. Uncertainty has been caused by the battle in some communities trying to close sweepstakes parlors which they say prey on the poor,
Some communities are saying that they will allow sweepstakes parlors to stay open until key issues are resolved and whether the software known as pre reveal actually conforms to the law.
Gilbert Chichester, city attorney for Roanoke Rapids, says that it’s a tough issue because there’s a gray area involved.
However sweepstakes operator William George is optimistic as he and his cohorts are fighting for their livelihoods.
He says that “With pre-reveal, I can’t see how you can say it’s not legal.”
In 2006, North Carolina Carolina lawmakers first passed a ban on video poker and all other electronic gambling following a political scandal involving political donations from the games’ operators. However, the industry quickly adapted, introducing new sweepstakes games they said complied with the law.
Then in 2008 and 2010, lawmakers responded with new legislation that made it unlawful to possess game terminals that simulate slot machines or are used for the display of electronic sweepstakes.
The state was then sued by the makers of sweepstakes software arguing that the ban violated their Constitutional free speech rights. This dragged on for two years in court and ended in December 2012 with the Supreme Court decision upholding the ban.
Law enforcement agencies began raiding cafes as a result of the ruling, seizing computers and making arrests.
Sweepstakes owners then protested, asking them to look at the pre-reveal system. Sweepstakes parlor patrons bought Internet time that let them uncover potential cash and prizes while clicking on the mouse on a computer screen. Customers got prepaid cards in order to play at the cafes, and then went to a computer to play “sweepstakes.” Winners went back to a cashier with their cards and then cashed out. This pre-reveal system software allows participants to check if they had won before they played the game.
In Hickory a recent sweepstakes arrest was the issue when a woman pleaded innocent in April to operating an illegal sweepstakes parlor. The pre-reveal software made the operation legal her lawyer said, and after a day in trial, District Court Judge Amy Sigmon agreed.
However, the judge’s ruling only applied to her case. A month later, Clark Consulting Group filed a lawsuit. The company operates a different Hickory sweepstakes parlor and it accused the city and Catawba County sheriff of threatening to to close his business and arrest his employees.
The Group now wants an injunction to prevent police from shutting his business, and also asked the judge to issue a “declaratory judgment” that they did not violate the new law. This judgment could carry over to other cases.
The group said that the sweepstakes was used only as a promotion to help attract business, pretty much similar to how McDonald’s uses it’s Monopoly game to draw in customers.
The lawsuit claims that “North Carolina law permits businesses to market and promote the sale of their products through promotion sweepstakes.”
Darlene Kaminske, a Hickory spokeswoman said that the lawsuit won’t stop police from doing their job.
She said, “Just like any crime we are made aware of or observe, we will take the appropriate action to enforce state law. A pending lawsuit would not stop police from doing their job.”
The lawsuits are making some communities still hesitate.
The Roanoke Rapids attorney, Chichester, said he was asked to examine the sweepstakes issue. It was made illegal by law to conduct a sweepstakes through the use of an “entertaining display” to reveal a prize. The new software did not use an “entertaining display” to conduct the sweepstakes Chichester said.
He wrote in a letter to Halifax County Sheriff Jeff Frazier that “On the converted system the customer simply presses the ‘Reveal’ button on the screen and the prize, if any, will be revealed to the customer in plain text format.”
He believes, as a result, that sweepstakes parlors with the new software are legal.
Sweepstakes parlors in Halifax County that are currently open, are the ones that have the pre-reveal type feature to it, Chichester told the Associated Press.
The sweepstakes industry is constantly modifying the software to stay in compliance he said.
If the court of a law enforcement agency says, ’This does not comply with the state law,’ almost overnight they switch it and come out with a different version, no matter what particular program they are using. It’s a moving target and the one thing that makes it pretty difficult.
Nil Entertainment attorney Donald Pocock, filed a lawsuit in Wake County against the city of Garner for trying to shut down a sweepstakes café.
He said, “I think there is a lot of confusion across the state as to what the meaning of any of these decisions has and whether it applies to other jurisdictions.”
Even if the law is constitutional according to the state Supreme Court, it didn’t decide how it should be applied, said Pocock.
It still has a chilling effect on the industry, he said, which had hundreds of sweepstakes parlors and thousands of employees.
Pocock said, “Nobody wants to play (a game of) chicken with criminal prosecution. The fact of the matter is, the people I represent have worked very hard to be in compliance with the law, and they believe they are in compliance with the law.”
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