Legal Struggles in 9 States regarding Video Gaming Machines

Here is the Latest update in 9 different states that have legal battles over Video Gaming machines

Illinois
The town of Gurnee, near Chicago, became the latest jurisdiction to opt out of the state's forthcoming operator-run video lottery market. The five-person board of trustees voted unanimously on Feb. 20 to ban VLTs from bars and other locations. Local press outlets said 77 communities and four counties statewide had already opted out, taking advantage of a clause in the 2009 Video Gaming Act, which established regulations for the VLT sector. Chicago, the state's largest potential VLT market, has still not decided the issue.

Ohio
The Ohio House voted 69-24 to pass HB 386, a bill that would permit casino gambling and video lottery terminals -- but not for amusement operators. VLTs would be confined to a few racetracks. The Ohio Coin Machine Association has been lobbying hard since late 2011 to convince legislators to include amusement operators in any gambling expansion bill, but so far without success.

South Carolina
A Senate Judiciary subcommittee on Feb. 22 passed a measure that would explicitly outlaw sweepstakes videogames, which are popping up statewide. The full Judiciary Committee now has an opportunity to consider the bill. Gov. Nikki Haley opposes sweepstakes videogames and other forms of legalized gambling in the Palmetto State. As reported by Vending Times, South Carolina has recently seen legal warfare erupt statewide over the status of sweeps games.

North Carolina. The state Court of Appeals on Feb. 22 upheld, by a vote of two to one, the right of local jurisdictions to impose special taxes on sweepstakes videogames. Local operators in Lumberton had sued the city after it imposed a $5,000 operating fee per location and a $2,500 per-terminal licensing cost.

Georgia
The Legislature is facing a proposal for limited VLT legalization, but only the state lottery would be allowed to operate them. State Rep. Ron Stephens (R-Savannah) has offered a measure to allow the state lottery to operate VLTs in areas with high tourist traffic. Stephens cited a state lottery study that estimated the move could raise $1 billion to support Georgia's underfunded HOPE scholarship program.

Tennessee
Waynesville city leaders said they plan to join jurisdictions such as Maggie Valley, Canton and Franklin that charge up to $32,000 per location annually for Internet sweepstakes café licenses. Video gambling was banned statewide in 2007 and sweepstakes games were banned in 2010, but operators have challenged the latter with multiple lawsuits.

Pennsylvania
Rep. Curt Schroder (R-Chester County) has introduced HB 1893 to ban sweepstakes videogames in the House Committee on Gambling, which he chairs. Schroder told local press outlets that only 13 sweeps cafés are currently operating in the Keystone State but could proliferate if lawmakers fail to act. As earlier reported by VT, in 2009 Schroder asked the FBI, U.S. Attorney General Eric Holder and assorted Pennsylvania law enforcement and tax agencies to investigate the amusement industry. Two years later, the result was a massive bust of organized crime figures who were charged for operating a number of the state's estimated 17,000 illegal video pokers.

Alabama
State prosecutors rested their case in the second trial against electronic bingo operators and associates in late February. Meanwhile in the city of Oxford, a sweepstakes videogame parlor was preparing to open in early March, even while city officials said they planned to shut it down.

South Dakota
Senate Bill 167, which would raise the state's VLT bet limit from $2 to $5, lost a vote in the state Senate on Feb. 6. On Feb. 22, the $5 limit proposal lost a second vote in the House. Unfortunately for VLT supporters, when the House version of the $5 bet limit went down, it took with it a bill -- already passed by the Senate -- that would allow operators to expand the number of VLTs from 10 machines per location to 14.

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South Carolina Still Unclear about legality of Internet Sweepstakes Games

COLUMBIA, SC -- Sweepstakes videogames in bars, restaurants, Internet cafés and even operators' trucks are being targeted for seizure by local sheriffs in South Carolina. Some local judges, who view electronic sweepstakes games to be illegal, are ordering them to be destroyed. But other judges assert they are legal under a state law that permits promotional sweepstakes games.

Surveying the confusion, one prominent state lawmaker predicts that the state Legislature will eventually fight a battle over the legal status of the profitable and highly controversial games. Other observers said the issue could wind up in the hands of the South Carolina Supreme Court.

No wonder the chief of the State Law Enforcement Division, based here, said he is holding off on a previously announced plan to raid video sweepstakes cafés statewide. Two months after taking the job last July, SLED Chief Mark Keel originally vowed that his department would forcefully crack down on sweeps games. Now Keel admits that further investigation, including a legal seminar that touched on the subject, has made him back off.

Simply stated, Keel is uncertain if sweeps videogames are legal after all, as maintained by industry members, according to a story in the State newspaper.

Ironically, Keel's SLED predecessor Reggie Lloyd is now a lobbyist for sweepstakes game companies. Lloyd argues that the devices are legal under state laws that permit promotional games.

In Kershaw County, Sheriff Jim Matthews calls the sweepstakes defense a "scam." County cops seized 10 games at c-stores and even from operators' trucks between Jan. 26 and Feb. 9, said a South Carolina TV news organization.

Police in other jurisdictions have been seizing up to 24 sweeps games at a time from a single Internet café. Raids in Bluffton and Hardeeville confiscated machines made by Texas-based Hest Technologies.

District judges continue to issue conflicting rulings on the legality of the machines. Three magistrates -- from Kershaw County, Georgetown and Greenville County --ruled sweeps games are legal. A judge in Horry County more recently ruled they are illegal. According to local press outlets, the question may eventually land on the docket of the state Supreme Court.

The cities of Greenville, Sumter, Beaufort, Bluffton, Port Royal, Hardeeville and Charleston have also seen actions by police, courts and local governments that either seized, approved or banned the devices over the past several months. In late January, the Charleston City Council imposed a six-month moratorium on new licenses for sweeps cafés.

The growing controversy over sweeps games is increasingly on the radar of state lawmakers. In January, state Rep. Phyllis Henderson (R-Greenville) sponsored a bill to outlaw "casino-type" games, a measure that she said should include sweepstakes videogames. In February, state Rep. Leon Stavrinakis (D-Charleston) predicted the state Legislature would erupt into a battle over the legality of the devices.

One locally produced sweeps game, which is part of a phone-minutes vending machine called Magic Minutes, is manufactured and operated by a former investigator for a South Carolina district attorney and his wife, a former police officer. These previous law enforcement officials said they agreed with sweeps operators and with any number of district judges across the state that sweeps games are legal promotions.

Hest Technologies has advanced another legal argument in favor of its devices, asserting that the machines are collection points for charitable contributions to benefit autistic children, not gambling devices. Some judges have apparently found in favor of Hest under this doctrine.

South Carolina banned video pokers in 2000, eliminating an industry that was variously estimated to generate between $2 billion and $3 billion in annual revenues. Legal poker machines had become a major cause of political controversy in a gubernatorial election campaign.

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North Carolina and Fayetteville Serious about Taxes on Sweepstakes Parlors !

Fayetteville seizes property from sweepstakes firms that owe privilege license fees
Published: 06:47 AM, Wed Dec 14, 2011 The Fayetteville Observer

The city of Fayetteville has taken the unusual step of seizing furniture, computers and other property from two Internet sweepstakes businesses that the city said each owed more than $200,000 in privilege license fees. At the request of The Fayetteville Observer, city spokeswoman Jennifer Lowe on Tuesday identified the two businesses as SWAT Gaming Group at 664 Country Club Drive and 777 Sweepstakes at 6257 Raeford Road. Lowe said SWAT Gaming owed more than $238,000 in delinquent license fees, and 777 Sweepstakes owed more than $200,000.
City officials said police officers accompanied city employees with a moving truck when they took the property from inside the businesses, sometime within the past month. Lowe said the seized property will be sold. The city plans to target other businesses with the highest amounts of delinquent privilege license fees. The fees are an annual tax charged to many entities that do business in the city limits.
Efforts to reach someone at the sweepstakes businesses were unsuccessful. Last year, the city began charging fees of $2,000 per sweepstakes cafe and $2,500 for each computer terminal. The fees add up for owners with multiple terminals. Other cities also have levied hefty licensure fees against the gaming businesses, which have sprung up in old storefronts and strip centers.
At the gambling businesses, customers can buy Internet or phone time to play variations of card and number games on computer terminals. Their purchased time gives them chances to win cash prizes.
Fayetteville City Attorney Karen McDonald said state law gives cities broad authority to enforce the collection of license fees. One way is seizing property, she said. "The city is aggressively pursuing the collection of privilege license fees," McDonald said. McDonald said seizing property from a delinquent business owner doesn't require a warrant or court action. The city is taking the action only after other attempts to collect the money have failed, including warning letters, she said. The action is not unprecedented. The city seized property for similar reasons in the early 2000s, McDonald said.
Other remedies cities can use to collect privilege license fees from business owners, she said, are through attachments of bank accounts, garnishments of state tax refunds and lottery winnings. In city warning letters, delinquent business owners are told that "failure to pay a privilege license could result in the issuance of a criminal citation." McDonald described the seizures under police escorts as a "levy" and "a last resort" to collect a tax that was six months past due. She said it would be incorrect to describe the actions as raids.

Still no ruling on video gaming in North Carolina

Hickory Daily Record
By: Sharon McBrayer Published: November 26, 2011

HICKORY --
Both sides in the Internet Sweepstakes debate are waiting on the North Carolina Court of Appeals to make a ruling on recent appeals.
Two cases currently are pending in the appeals court regarding enforcement of the law against video gambling, said Noelle Talley, public information officer for the North Carolina Department of Justice.
The state Court of Appeals recently heard arguments from the North Carolina Department of Justice and separately from Sandhill Amusements and Hest Technologies, two of the companies that provide Internet sweepstakes software and gaming.
Hest Technologies is appealing a ruling in Guilford County, while Sandhills Amusements is involved in a Wake County case.
The judge in the Guilford County case struck down part of the state’s law that banned the gaming in 2010, while the judge in the Wake County case upheld the law.
Around this time last year, Judge John Craig III of Guilford Superior Court in High Point ruled that the state has the right to limit games that mimic gambling. His order said a game that mimicked card games, bingo, craps, keno, lotto or a game that required a player’s skill was illegal. But he said a subpart of the state’s new law banning Internet sweepstakes gambling is unconstitutional and infringed on free speech.
Before the Guilford ruling, Wake County Superior Court Judge Paul Ridgeway dismissed a lawsuit filed by Sandhill Amusements that challenged the state’s law that went into effect in December last year. In his order, Ridgeway dissolved a preliminary injunction previously entered by the court on June 26, 2009 barring law enforcement from enforcing the previous state law on sweepstakes gaming. Cooper has argued that the two judge’s rulings contradict one another.
“So, basically we are waiting for the Court of Appeals to rule,” Talley said.
A three-judge panel will review written and oral arguments from both sides and then issue an opinion in the cases. Decisions from the Court of Appeals usually come months after the oral arguments, Talley said.
The legitimacy of Internet sweepstakes gambling has been a cat-and-mouse game between the state and its lawmakers and the gaming industry for years. Lawmakers pass a new bill that outlaws gambling and proponents of the gaming industry find a loophole in the law or sue to get the law overturned.
Proponents argue the state allows other forms of gambling — North Carolina Education Lottery and the Eastern Band of Cherokee casino — and it should allow Internet sweepstakes gaming so it can regulate the industry and receive tax revenue from it. They say the gaming is a form of entertainment for people.
Chase Brooks, president of the Internet Based Sweepstakes Organization of North Carolina, argued in an e-mail sent out last week by the organization that the state will now receive tax revenue from the Cherokee casino from its ‘live-dealer’ games such as poker, dice games and roulette.
Brooks says the Internet sweepstakes industry isn’t going away in the state. It will adapt and change as needed, he said.
“Our message is simple. We will find a way to survive. There is a valid market for this type of gaming and entertainment. We will adopt to the law and we will continue to operate,” said Brooks. “We think it is time for the leaders of the state to work with the video entertainment industry to find ways to regulate it and do like they are doing in Cherokee, tax it to generate new revenues with it.”
Opponents say the gaming preys on those who can least afford it by seducing players and taking their money.
For its part, Talley said the state Department of Justice is doing its job.
“Our job here is to defend the state law,” Talley said.

Sweepstakes parlor owners hope to benefit from Cherokee deal

RALEIGH, N.C. — As they battle to overturn a state ban on their video-style games, owners of Internet sweepstakes parlors are now eying a proposed casino deal between North Carolina and the Eastern Band of Cherokee Indians.
Gov. Beverly Perdue and tribal leaders finalized an agreement Monday that would allow live card dealers at the Harrah's Cherokee Casino and Hotel in the mountains in exchange for North Carolina school districts getting a piece of profits from the new games.
"We would also like for the legislature to look at our industry as well," Brian Henry, treasurer of the Internet Based Sweepstakes Organization, said Tuesday. "We would just like a seat at the table with our legislature to have our industry regulated and have it taxed." Read More

South Carolina retailers who offer electronic sweepstakes to customers are feeling jittery.

“The question is, are electronic sweepstakes legal in South Carolina?” said Alexander Shadwick, after Tuesday’s meeting. “They don’t know if the games are legal or illegal, so the courts have to decide,” he said. “But it scares all the retailers.” Shadwick likened the activity to using coupons or putting in $20 and purchasing songs on iTunes while also being entered into a contest.

This month The State newspaper quoted the S.C. State Law Enforcement Division chief announcing a renewed effort to combat illegal video poker games. The industry was banned in 2000 but frequently arises in legislative debates about relaxing the state’s restrictions on raffles.
During Tuesday’s committee meeting, Paula Harper Bethea, the executive director of the S.C. Education Lottery, shied away from the suggestion that she was targeting “sweepstakes” in a warning she issued to retailers. “I’ve heard the whole sweepstakes-game talk, frontwards, backwards, and that’s not for me to decide,” she said. “A magistrate in South Caroline ultimately has to decide that. ... What I do enforce, however, is who sells our lottery products.”
She said she has been working with lottery officials in Georgia and North Carolina on how to address the effects of Internet gaming on state-run lottery programs. In May, Bethea sent a letter to the state’s 3,700 ticket retailers to warn them that the agency could revoke or suspend their lottery license if they violate state laws.

“Please be aware that a machine can be determined to be illegal by a local judge even if cash or other items are not given in exchange for credits earned while playing the machine,” wrote Bethea. “You may wish to consult with an attorney or local or state law enforcement officials to assist you in determining which machines are appropriate under state law and which are not.”
In June the S.C. Attorney General’s office responded to a question from Beaufort County Sheriff P. J. Tanner. The county official was asking whether the owner of a Hilton Head Island restaurant could operate Sweepstakes Promotional electronic games by Products Direct, LLC.
The letter said the office was unable to say if a specific machine was illegal. But if police had probable cause that it was, then the machine should be seized and taken to the magistrate, who could decide on a machine-by-machine basis