Authorities say ‘sweepstakes’ machines still fit in legal loopholeMacon County News: Thursday, 21 January 2010
By Davin Eldridge Contributing Writer
In February of 2009, gaming manufacturers took the state to court challenging the validity of banning video games statewide. Superior Court judge Howard E. Manning issued a controversial decision in that case, ruling that “the state acted unlawfully in authorizing the Eastern Band of Cherokee Indians to possess and operate video gaming machines on tribal lands,” while the rest of the state was not authorized to operate such machines.
Manning’s judgment rendered the ban null and void. But when this ruling went to the Court of Appeals recently, it was overturned. Yet law enforcement authorities have been halted by loopholes in the previous legislation, leaving the newer “sweepstakes” machines legal for the time being, and even paying out in cash.
In July of 2007, the state of North Carolina banned video gambling everywhere except for Cherokee lands, following the corruption charges of Buncombe County Sheriff Bobby Medford, who was found guilty in 2008 of receiving $300,000 in bribes from illegal gambling operators.
The bill banning video gambling, North Carolina General Statute 14-306.1A, was written after pressure from all 100 county sheriffs throughout the state pushed for legislation banning the business. The bill defines video gaming machines as “a video machine which requires deposit of any coin or token, or use of any credit card, debit card, or any other method that requires payment to activate play.”
Shortly after the ban, the video gaming industry reprogrammed their products as “sweepstakes machines.” Because the ban defines video gaming as any game resembling a video poker, bingo, craps, keno, or lotto game, game manufacturers absolved their machines from being defined as an outlet for gambling. Players of the game can now purchase predetermined winning or losing numbers, through phone cards.
In response to the loophole gaming manufacturers operate through, North Carolina General Statute 14-306.3 was written in December of 2008. Gaming manufacturers then promptly filed lawsuits challenging the constitutional fabric of the statute, claiming their products were no longer based on gambling.
“The video sweepstakes rooms and sweepstakes centers are not considered video poker and are a different class of game based on the state’s sweepstakes law,” said William Thevaos, president of the Entertainment Group of North Carolina.
On June 26 of 2009, Superior Court judge Paul C. Ridgeway ruled in favor of Sandhill Amusements Inc. out of Wake County, N.C. By demonstrating to the courts that the company could “suffer irreparable harm,” the judge entered a preliminary order of injunction. This order provided the industry with a “remedy at law,” and restrained state law enforcement agencies from taking any administrative action against video gaming companies.
Macon County Sheriff’s Office staff attorney Brian Welch explained Sandhill Amusements contended in the case that all counties throughout North Carolina are subdivisions of the state and must comply with the order. “I disagree with that opinion,” said Welch in a statement, “but the main problem for us is that state law enforcement agencies do have to comply with the order and they have the expertise, and expert witnesses, we would need to file charges that would result in convictions.”
The Ridgeway ruling has emboldened the industry, which will continue to operate. The case will be reexamined later this year.
“Law enforcement agencies across the state have written orders regarding the legality of the sweepstakes games and we believe that law enforcement agencies will uphold the judicial ruling,” Thevaos said. “Clearly, the different rules and regulations for what games can be played and can’t be played is a mess. That’s why we continue to advocate for state regulation and taxation of the video gaming industry in North Carolina,” stated Thevaos, who feels state oversight would create accountability and transparency within the gaming industry.
In the spirit of state oversight, the Sandhill Amusements order of injunction requires all retail establishments to clearly state the rules of the sweepstakes, and have no more than four machines on the premises of any retail outlet.
“A regulated and taxed video gaming industry in North Carolina could provide up to $500 million in new revenue for the state without raising any new states,” Thevaos said. “Let’s face it, the state is already in the gaming business with the N.C. Education Lottery – by regulating and taxing video gaming, the state can access another reliable stream of revenue without increasing sales or income taxes.”
Thevaos said the Entertainment Group of North Carolina will make another legislative push during the May 2010 session of the General Assembly for the state to regulate and tax video gaming.
“The State is looking at another major deficit. It’s an election year. Do you think the politicians want to raise more taxes? We believe the Legislature will take a serious look at a regulated and taxed video gaming industry to provide the revenue the state needs to fund education, mental health and public safety programs,” added Thevaos.
“As we move forward, the General Assembly and Governor need to look at what other states are doing when it comes to video gaming and the creation of another reliable revenue stream for the state. Illinois is implementing their video gaming law right now. They will have rigid state control, clear-cut rules, regulations and standards required for all video gaming distributors and operators. If you want to clean up video gaming, rid it of corruption and scandal, then you need to regulate it and tax – it’s just that simple,” said Thevaos.
The Illinois Video Gaming Act Thevaos refers to requires every gaming terminal be tested and approved by a state gaming board, and comply with federal regulations. Each gaming terminal in Illinois must also represent an accurate representation of the game, as well as record all money put into the machine, and money won from the machine. In May Thevaos will lobby for this kind of state oversight of video gaming.
