In March, the North Carolina 4th Circuit Court of Appeals ruled that a 2010 law that banned sweepstakes gaming machines was unconstitutional.
NC Attorney General Roy Cooper’s office has appealed that 2-1 decision to the North Carolina Supreme Court but, in the meantime, the machines can continue to be operated by private business owners.
“The Court of Appeals denied the ruling that said this type of business was illegal, that it was a free speech issue,” said Ashe County Manager Pat Mitchell to commissioners during a work-session on June 18. “So, the case is now at the North Carolina Supreme Court but because of what the court of appeals did, it opens this type of business so that it is legal at this time.”
North Carolina has prohibited “public gaming,” since 1791, specifically banning slot machines in 1937. The state has also prohibited the use of video poker machines since 2000, and reiterated that ban in 2006.
Since 2006, however, a number of companies have created and distributed electronic “sweepstakes” machines designed to operate within the confines of state law and, “gamble through pretextual sweepstakes relationships with internet service, telephone cards, and office supplies, among other products,” according to NC HB 80 which was ratified and signed into law by Governor Beverly Perdue in July 2010.
SweepsCoach, a California-based company that provides startup services for internet sweepstakes cafes, answers the gambling question on its website www.sweepstakesmachines.com
“In order for an activity to legally be considered “gambling,” it needs to have three elements: prize, chance, and consideration,” reads the website. “The prize is, of course, something that you win. Sweepstakes have that. The chance means that there is a random element involved. This, too, is a part of any sweepstakes game. Consideration means that the participant pays directly to enter into the game.”
The catch, according to SweepsCoach, is that sweepstakes gaming customers don’t actually purchase entries into the sweepstakes.
“They purchase time on the computer (internet time) or, in some cases, long-distance phone time,” reads the website. “When they purchase this “product” they are given free entries into the sweepstakes. Instead of placing game pieces on a Monopoly board, they go to the gaming systems to reveal whether or not they have won.”
Ashe County Sheriff James Williams said that even when the law is clarified, internet gambling operations are hard to stop.
“The way these video gambling outfits work is that every time the legislature passes a law that shuts them down, they can quickly change the machines or software just a little bit to make it legal again,” said Williams.
Williams, who shut down video poker machines operating on the Backstreet while serving as West Jefferson’s chief of police in the late 1990s, said he’s unaware of any machines operating within the county, but said he did think one of the cafes is now operating in nearby Miller’s Creek.
“We’re waiting on the commissioners to see what kind of ordinance they’re going to pass, or what direction they’re going to go,” said Williams.
“Do we want this type of business in Ashe County? These sweepstakes parlors if we couldn’t regulate them in some way?” said Ashe County Manager Pat Mitchell. “I’ve talked to a couple county managers that are also concerned about this type of business.”
Mitchell said NC House Bill 1180, proposed by NC Representative Bill Owens, a Democrat from Elizabeth City, would tax “Video Sweepstakes Entertainment,” machines and would impose a state tax on the “privilege of operating a video sweepstakes establishment,” in the state. Proceeds from the state tax would be used for local law enforcement and public education, and would authorize counties and cities to impose taxes on video sweepstakes establishments.
“Should this legislation pass as it is,” said Mitchell, “counties could actually add a fee on the business and on the machines. That’d be the first time we’ve ever been able to do that. The question now remains, can we regulate them (sweepstakes gaming businesses) as we would a polluting or any other type of industry through our police powers? If that is the case, then that is something that we need to plan for.”
Mitchell told commissioners that the speed at which sweepstakes gaming establishments can be set up should also be a consideration in any decision commissioners make.
Macon County, according to Mitchell, now has at least 11 such sweepstakes gaming businesses along U.S. 441 just north of the North Carolina/Georgia border.
Gambling is, with few exceptions, illegal in Georgia. Ashe County Planner Zach Edwardson told commissioners that a moratorium on sweepstakes gaming machines is also a possibility within the county.
“I know that I would have to do a lot of research for machines that are in gas stations, where the primary use is not these (gaming) machines,” said Edwardson.
Edwardson told commissioners a moratorium would require a specific notification process, and that moratoriums lasting longer than 60 days required extra notifications.
“Even if the county would benefit from them (sweepstakes gaming machines), I still don’t think it would be a wise decision,” said Ashe County Commissioner Gary Roark. “I’d be 100 percent against having them. It’s gambling any way you look at it.”