NC high court to decide if video sweepstakes legal

The Associated PressOctober 13, 2012 

  • Sweepstakes laws in S.C. The internet sweepstakes parlors, which have opened in an increasing number of locations across the state and the Grand Strand recently, have sparked legal debate and lawsuits. Earlier this summer, a Sumter Internet sweepstakes operator filed a federal lawsuit against the State Law Enforcement Division Chief Mark Keel and the Sumter County sheriff accusing them of violating his constitutional rights with a raid and shutdown of his business. In response, S.C. Attorney General Alan Wilson’s office said it would “defend the South Carolina Constitution and laws that prohibit internet sweepstakes games, games of chance or any other variation of video poker.”

— North Carolina's highest court is about to decide whether video sweepstakes cafes that often mimic small, electronic casinos and are found everywhere from big-city strip malls to country crossroads will disappear or multiply.

The state Supreme Court hears arguments Wednesday in two cases in which attorneys for the state defend a 2010 law banning video sweepstakes machines as a form of gambling. The state Court of Appeals struck down the 2010 ban in March.

Amusement machine companies, a software developer, and firms that market long-distance phone and Internet services contend their business is entitled to constitutional free-speech protections under a U.S. Supreme Court ruling last year protecting video games just like books and films.

The case comes at a time the state's only casino recently expanded beyond video poker and slots and started hiring card dealers for live gaming.

The sweepstakes machines have cropped up since the state outlawed video poker machines outside the western North Carolina Cherokee Indian reservation in 2007. Patrons buy Internet or phone time that gives them the opportunity to uncover potential cash and prizes with mouse clicks on a computer screen.

The Eastern Band of Cherokee Indians is the state's only federally recognized tribe, a distinction that allows members to operate a casino under federal law. The tribe began offering video poker machines in the mid-1990s.

Sweepstakes boosters say no gambling is occurring because the prize or lack of one is predetermined. Opponents say the enterprises feed the same gambling addictions for people as video poker machines.

North Carolina's attorneys say it doesn't matter that the businesses call the activities “sweepstakes,” contending they are games of chance and that no one has a constitutional right to operate a gambling business.

The General Assembly has authority to declare which games of chance are legal and decided that the entertainment value of video screens combined with the chance to win a prize in a game of chance “has the same seductive and deleterious effect as video poker and other types of gambling,” state Solicitor General John Maddrey wrote in outlining North Carolina's argument.

The companies who want to preserve video sweepstakes games said the state could achieve its goals by accepting and regulating electronic sweepstakes, but chose instead to first criminalize video games and then extend that ban to video sweepstakes.

The state placed unconstitutional restrictions on the terminals “because video games are protected by the First Amendment, and because the state criminalized the use of those games because it believes they too closely resemble illegal gambling,” attorney Adam Charnes wrote.

The Legislature has been trying for more than a decade to eliminate video gambling machines and sweepstakes, saying the games can't be regulated, are addictive to players who lose hard-earned money, and lead to crime and family strife. That view is shared by a coalition of liberals and social conservatives that has opposed gambling on moral and economic grounds.

State lawmakers this summer tried but failed to agree on legislation that would have regulated and taxed video sweepstakes operations. The bipartisan proposal would have allowed the state to assess privilege taxes on sweepstakes establishments and terminals.

Cities already have the taxing authority, and some including Fayetteville and Lumberton have hit sweepstakes parlors with whopping tax bills to stay in business. Lawsuits challenging city officials said Fayetteville raised its tax on sweepstakes cafes from $50 a year to a minimum of $4,500 and Lumberton raised it from $12.50 to a minimum of $7,500.

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