By L.A. Williams, Correspondent
Christian Action League
RALEIGH — Disappointed but determined — that seems to be the attitude of some Tar Heel lawmakers in the wake of Tuesday’s Court of Appeals ruling which struck down the state’s ban of video sweepstakes.
“I was deeply disappointed in the Appeals Court ruling but remain undaunted in my determination to rid North Carolina of this blight,” said Rep. Ray Rapp (D-Haywood) who has already met with the Attorney General’s staff to urge them not only to appeal the case, but to request an expedited hearing before the N.C. Supreme Court.
Sen. Don Vaughan (D-Guilford), who said he’s not a fan of gambling and sweepstakes and the “aura” these businesses tend to create, said he believes a bill can be crafted to address the problem.
The North Carolina Court of Appeals declared the state’s current law against video sweepstakes overly broad and unconstitutional. Because the ruling of the three-judge panel was not unanimous, the case can be appealed to the state’s highest court.
“We are stalwart defenders of free speech, but this case is about thinly veiled gambling — something we believe our state’s lawmaking body has a right to ban, especially as a means to protect their electorate,” said the Rev. Mark Creech, executive director of the Christian Action League. “We agree with Judge Robert C. Hunter’s dissenting opinion that this statute regulates conduct rather than speech and should have been upheld.”
Judge Ann Marie Calabria and Judge Linda M. McGee assert in their ruling that video games are entitled to full First Amendment protections and that “banning the dissemination of sweepstakes results through entertaining displays cannot be characterized as merely a regulation of conduct” but regulates protected speech. They say that although the General Assembly can set parameters for games of chance, they cannot “forbid sweepstakes operators from conveying the results of otherwise legal sweepstakes in a constitutionally protected manner.”
But Judge Hunter, citing a similar case in Florida, points out that the ban on video sweepstakes does not prohibit operators from allowing customers to play their video games, but instead prohibits “conducting or promoting their sweepstakes through the use of a video game.”
“Because the statute merely regulates conduct and not speech, it is not subject to strict scrutiny, as plaintiffs contend,” he wrote, adding that the State’s prohibition of the use of “entertaining displays” for sweepstakes is related to its legitimate governmental purpose of protecting the morals of the State’s inhabitants.
“It is my considered opinion that the state can regulate behavior, which is what the video sweepstakes law does, and it is not a violation of ‘free speech,’” he said. “After reading the minority opinion of Judge Robert Hunter, I think the law will be upheld in the Supreme Court using his logic, reasoning and references to current law and the recent federal case in Florida.”
Meanwhile, Rapp said he is working with staff on new legislation in case the Supreme Court upholds the appellate court ruling. Further, ideas from Vaughan’s Senate Bill 3, introduced in January as a means of tightening the sweepstakes ban, may get another look. The proposed legislation harkens back to a 1915 State Supreme Court ruling.
“It is the one playing at the game who is influenced by the hope enticingly held out, which is often false or disappointing, that he will, perhaps and by good luck, get something for nothing, or a great deal for a very little outlay,” the 1915 Supreme Court wrote in State v. Lipkin.
Vaughan’s bill says it is the intent of the General Assembly to make it unlawful to provide an electronic machine or device to a person who believes that, in the words of the earlier case, by “hope enticingly held out” that he or she will get “something for nothing or a great deal for a very little outlay.”
Vaughan said Thursday that he would like for the General Assembly to “try to find, in the short session, a remedy that would solve the problem,” but that he didn’t know if that would be possible until hearing from the State Supreme Court on the matter.
The Legislature passed a law against video sweepstakes in 2010 after the games began to spread across the state as a replacement of video poker, which was banned in 2006. Lawmakers worked to tweak the measure so that it would outlaw addictive video-based gambling but would not prevent fast-food restaurant peel-off games or instant-win promotions under soda bottle caps.
Part of the law had been struck down by a Guilford County judge in November 2010. Since then gaming enthusiasts have continued their push to have the sweepstakes games legalized and taxed. No doubt, the gambling industry will call for such legislation when the General Assembly goes back into session.
“Fortunately, there has been strong support in the past to keep this video gambling illegal, and we trust the majority of lawmakers will continue to protect citizens by crafting a ban that can stand up in court,” said Dr. Creech. “Despite this setback, we are confident it can be done.”
Meanwhile, municipalities can take action to try to control the number of sweepstakes businesses popping up within their limits. Late last month, the N.C. Court of Appeals ruled that the City of Lumberton could levy a substantial privilege license tax on such businesses.
Lumberton had increased its tax on internet sweepstakes concerns to $5,000 per establishment plus $2,500 per terminal or computer. Four businesses challenged the fees on a number of legal grounds, all of which were rejected by the court, including the claim that the tax was too high to be considered “just and equitable.”
“I think the Lumberton decision provides strong support for the authority of North Carolina’s cities and towns to levy privilege license taxes on internet sweepstakes businesses,” wrote Chris McLaughlin, assistant professor of Law and Government at UNC on the N.C. Local Government Law Blog. “It seems likely that the only open question is how high those taxes can rise before they violate the N.C. Constitution.”
A similar case involving taxes in Fayetteville is still pending.
Nearly two years ago, when communities began searching for ways to discourage video gambling, Dr. Creech warned municipalities not to get attached to sweepstakes revenues or to grant the businesses legitimacy.
“While we urge them to use fees, zoning or whatever power they can to fight this blight on our communities, they should understand that these fees are not a viable budget funding source,” he said. “Any revenue from gambling will always be overshadowed by the social costs — welfare, addiction, increased crime — that it brings with it.”