General Assembly Action Needed on Internet Sweepstakes Cafes
By Paul Gable
Federal lawsuits, state arrests, judges giving opposing rulings on the same law and the current head and former head of SLED on different sides of the issue, this is the world of internet sweepstakes cafes in South Carolina.
Sound confusing – absolutely – but it is really an example of the General Assembly fiddling while South Carolina burns.
While the General Assembly spent a large portion of this year’s session determining how to spend an additional approximately $1.2 billion in unexpected excess revenue, it virtually ignored several bills introduced to regulate or outlaw the internet sweepstakes café industry.
In the void, internet sweepstakes cafes have continued springing up throughout the state. SLED chief Mark Keel has said the businesses are illegal and his agency will continue making arrests and seizing the machines. Attorney General Alan Wilson issued a statement pledging “to defend the South Carolina Constitution and laws that prohibit internet sweepstakes games, games of chance or any other type of video poker.”
But, as the law stands today, Wilson and Keel have it wrong. These are not games of chance or any other type of video poker. From the standpoint of the customer they are much worse.
While there are similarities with video gambling, there is one specific difference. Even with the historically low payouts of video poker, the amount a player could win was not specifically defined by the software. There was some element of chance, luck or even possibly skill that goes along with gambling.
Internet sweepstakes cafes sell Internet access or long-distance phone cards. With each purchase, a customer receives free sweepstakes entries to play casino-style computer games for cash prizes.
The winning tickets or chances provided to sweepstakes players are predetermined by sweepstakes software. There is no element of luck or skill involved in the games and, therein, lies the difficulty in proving these games are gambling.
Former SLED chief Reggie Lloyd brought a federal lawsuit this week against the state, Keel and the Sumter County sheriff on behalf of a café owner in Sumter whose café was raided and shut down. He said he expects other café owners to join the suit.
In the suit, Lloyd and his client contend the state is applying arbitrary and undefined standards to enforce gambling laws. This is exactly what is happening as magistrates and circuit court judges throughout the state have ruled on both sides of the law as to whether sweepstakes cafes are legal or not.
Consider this, the 15th Judicial Circuit in South Carolina covers Horry and Georgetown counties. Within Horry County, a county magistrate has determined sweepstakes cafes to be illegal and county police have shut several down in the unincorporated areas of the county. The county government will not sell business licenses to sweepstakes cafes.
However, the cafes are considered legal within the city limits of Myrtle Beach and several are open and operating with city business licenses at this time. In Georgetown County, a magistrate has ruled the café games legal and cafes in the county are currently operating. Within the 15th Judicial Circuit alone, internet sweepstakes cafes have been determined, in various courts, to be both legal and illegal.
When you have this much variation in the court system, regarding interpretation of state gambling laws and how they apply to sweepstakes cafes, the only solution is for the General Assembly to pass new legislation defining and addressing the allowable operation, if any, of internet sweepstakes cafes in the state.
But don’t expect action from the General Assembly any time soon. This is about money – big money! In fact, probably larger income potential for internet sweepstakes café owners than for video poker operations of the past.
The payouts are predetermined by the sweepstakes software and less versus overall money spent than with video poker. Virtually the same end result would occur if patrons went into a café, emptied their wallets into the cash register and turned around and walked out.
Corey Hutchins of Free Times wrote a great article on this subject from a slightly different perspective: http://www.free-times.com/index.php?cat=1992912064227409&ShowArticle_ID=11013107121319514