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One News Now

‘Gaming’ the System: AKA How to Play Gambling ‘Whack-a-Mole’

An update on the remaining problem of ‘Sweepstakes Cafes’ in N.C.
By Pam Blume
Christian Action League
September 12, 2014

GamingIn 2010, the NC General Assembly passed legislation that would ban internet gambling operations. A state appellate court subsequently ruled the law unconstitutional, but in 2012, the NC Supreme Court reinstated the ban. But, just as a virus eventually adapts to a new drug and learns to thrive, the gaming industry is attempting to adapt and find its way around the law.

In venues sometimes referred to as “Sweepstakes Cafés,” customers typically buy time on a computer and are given access to online gambling games.

According to the website Online Poker, “… thousands of these ‘sweepstakes’ cafés have sprung up across the US raking in more than $10 billion each year in revenues, and not surprisingly they have drawn the attention of state authorities, who view them as nothing more than illegal gambling fronts. Nevertheless, despite their best efforts to shut them down these unlicensed, untaxed operations continue to grow and once closed down often reopen rebranded as ‘office service venues’ or ‘skill game venues.’ As North Carolina Attorney General Roy Cooper explains, these sweepstake cafés are ‘lawyered up pretty well’ and ‘are very good at adapting to whatever law that you write.’”

In North Carolina, the “adaptation” of choice seems to be sweepstakes software called “pre-reveal” that allows the customer to buy internet time or a phone card to play sweepstakes online after the prize has already been revealed—before the game is actually played.

Owners of such establishments say that the software complies with the gambling laws in that the software does not use an “entertaining display” which is prohibited in the statute, and the winning is not up to chance since the prize is revealed prior to beginning the game.

Such is the case in Bladen County where a Dublin town commissioner was arrested for illegal operation of a video gaming café.  Jeffrey Scott Smith was arrested and charged with two counts of misdemeanor for operating video gaming machines at Gold Rush Internet Café along Highway 701 north of Whiteville. He was released on a $1,000 secured bond. Smith had also been charged with operating video gaming machines in Bladen County but the trial ended in a hung jury.

Smith claims the games comply with the North Carolina law because customers purchasing internet time were notified of the winnings before the game, and he claims there are counties in North Carolina running such games because the local DA or sheriff says they are compliant.

There does seem to be some confusion and conflicting opinions on the legality of the “pre-reveal” software in the lower courts and law enforcement. State Attorney General spokeswoman Noelle Talley said her office has received questions from local law enforcement and district attorneys about enforcing the court ruling “and how the law applies to changes the sweepstakes industry claims to have made to games.” Talley said her office recommends that local law enforcement investigate cafés to determine which games are legal. “We believe the law and the ruling are clear, and we’re ready to defend their enforcement,” she said in an email.

Attorney General Roy Cooper has said the state ban makes no exception for “pre-reveal” software and that “pre-reveal” is a made-up word not defined by state law. “However, defendants cleave to the term ‘pre-reveal’ at the trial court … as if it were holy writ.’” In a brief filed after an Edgecombe County court found two sweepstakes operators in violation of the state ban, Cooper said, “Defendants’ argument seems to state that the effect of a ‘pre-reveal’ can overturn statutes and trump language in statutes that actually does have both legal and plain meaning.”

Yet some lower courts have agreed that the “pre-reveal” machines do comply with the law and some local law enforcement has been reluctant to enforce the law until the issue is settled.

Cooper maintains that the law makes it clear that the cafés are not legal. He told Associated Press “I think law enforcement and prosecutors are just going to have to keep plugging away at this…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…. It’s sort of like whack-a-mole. They come up with a different kind of nuance… (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.”