Luck may have run out for sweepstakes
City native George Brown opened the doors of his business, Liberty Corridor Sweepstakes, four months ago.
Now Brown, a R.J. Reynolds retiree, is facing the very real possibility that he might have to close. Brown, a grandfather of five, is among the dozens of local sweepstakes owners who may have to close their doors because of a ruling by the North Carolina Supreme Court. The General Assembly had banned the use of simulated slot machines video gambling in “server-based electronic game promotions.” However, sweepstakes halls have continued to operate under a loophole in that legislation. The sweepstakes industry, represented by Hest Technologies, Inc. and International Technologies LLC, challenged the law, calling it an unconstitutional restriction on the industry’s freedom of speech. The Court of Appeals ruled in favor of the plaintiffs, but on Dec. 14, 2012 the state Supreme Court struck the ruling down.
“Since the founding of this nation, states have exercised the police power to regulate gambling,” the Court’s opinion reads in part. “State legislatures have weighed the social costs of gambling against the economic benefits and chosen different paths according to each legislature‟s conclusions. North Carolina’s approach has evolved from a total ban on casino gaming and lotteries to authorization of a state-run education lottery and limited casino activity on Native American lands within the state… While one can question whether these systems meet the traditional definition of gambling—because plaintiffs have ostensibly separated the consideration or ‘bet’ element from the game of chance feature by offering ‘free’ sweepstakes entries—it is clear that the General Assembly considered these sweepstakes systems to be the functional equivalent of gambling, thus presenting the same social evils as those it identified in traditional forms of gambling…”
Many sweepstakes businesses in the local community and across the state closed their doors at the start of the year, saying they were modifying their machines to be in compliance with the law. Brown was among those who took steps right away to convert his machines, at the advice of Liberty Corridor’s parent company, New Jersey-based BS2. He said he was hopeful the conversions would prevent him from having to shut down completely, but the Carver High School alumnus said he objects to the Court’s ruling.
“I think it’s ludicrous that they’re trying to handle other people’s affairs,” he declared. “It’s no different than the lottery, it’s no different from Cherokee (casino). You can’t control people’s money; if they can’t spend it here in the city, they’ll take it somewhere else.”
City Attorney Angela Carmon says the legality of the machines – even those that have been converted to new systems – is still in question.
“I can’t tell you they’re in compliance,” she stated. “Their attorneys will tell you they’re in compliance, but I don’t think anybody has rendered an opinion from my office or the Attorney General’s office or the district attorney’s office that those machines are in compliance.”
Carmon said her office is coordinating with the Attorney General and the district attorney to determine the best course of action in addressing the sweepstakes machines.
“It’s going to take a team effort to enforce the ban and prosecute violators of the ban,” she said. “…I think we all have to be on one accord with respect to the status of these converted machines before we move forward.” Carmon said her office is currently “taking inventory” of the converted machines and working to learn more about their operation, however there are some machines that she says are “without a doubt clearly illegal.” The Pot of Gold machines, which simulate slot machines, will be the first priority for those seeking to enforce the ban, Carmon says. The Winston-Salem Police Department will begin to address violators of the ban in the coming months, she added.
Brown says the industry is generating valuable revenue for the city, to the tune of $500 per machine per year. Putting the sweepstakes companies out of business would be a big mistake, he said.
“It’s going to hurt the economy,” said the 67 year-old, who started his company last fall to supplement his income. “It’ll hurt employment; it’ll hurt different establishments. You’re going to have vacancies (in buildings) where right now, they’re full.”