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Internet Sweepstakes to Take a Tumble

Posted on April 2nd, 2011

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In a sweeping move to characterize various forms of gaming, Virginia state lawmakers are looking to banning sweepstakes cafes while endorsing betting on horses. State officials are convinced that horse betting is a legal and beneficial pastime ,while internet sweepstakes are “illegal and preys only on low income residents.” The measure has already passed legislative review and voting and is currently on Gov. Bob McDonnell’s desk for signing prior to implementation. The move comes as many officials in other states are deciding how best to address the growing number of sweepstake cafes popping up in various venues nationwide. The option rests between banning or regulating the practice to generate extra state revenues. “If Virginia’s not getting anything out of it, they don’t want it here,” said Godfrey, 61, regular sweepstakes player at Lucky Internet Sweepstakes Café.

The new gaming fad first came up last year in Virginia after North Carolina partially banned some forms of the game. Argues the games supporters, these are no different than the promotional offers by McDonalds and other companies who give customers the chance to win money, prizes, or food simply by buying a hamburger or any pre-determined product. In the case of internet sweepstakes, the patrons purchase products over the internet – usually DVD rentals, phone cards, even internet time – and as a result gain points that are in turn wagered, saved and accumulated, or cashed out for real money. Anti-sweepstake protestors, on the other hand, argue that the method only serves to bypass gambling laws and because they are unregulated, operators can easily fix the odds in order to earn more.

The cafes proclaim as much: “What is more thrilling than to win cash prizes? Making an abundance of money from those who believe they can win against the odds,” says the Internet Sweepstakes Network’s website. The ad is common to a coalition of owners and sweepstake supporters who collectively constitute the biggest Internet sweepstakes provider in the world. The network representing the coalition defended the sweepstakes industry by arguing that the process has already been in place for decades. With the internet, a broader demographic is made accessible but it is nothing new to the concept of sweepstakes raffles.

For those who seek to ban the games, there are several legal hurdles that have to be dealt with. For starters, there is no law in many states explicitly prohibiting the conduct of these games. In states like Texas, Massachusetts, Alabama, Florida, Utah, Virginia, Ohio and Georgia for example, there is no legal precedent to prosecute internet sweepstake cafes. Multiple cases of banning have been observed but none have been so legally conclusive enough that it is considered the standard for all future actions. As such, many are looking to the legislature for clarification. In Virginia, the office of the Attorney General has taken action regarding the games but operators have found a way to exploit a loophole intended for food sweepstakes. The games are now back and subject to another legislative action.

In Ohio, the Attorney General has called for the regulation of the industry in the face of widespread and growing acceptance. In North Carolina, a law banning cafes was implemented in December but this has done little to dissuade operators from findings ways to make it work. They have managed to change gaming policies to be compliant with a court ruling on the issue; it’s currently under another round of legal contention. If banning isn’t the solution to a pervasive industry, then perhaps regulation can provide the necessary antidote. North Carolina governor Bev Purdue suggesting as much as a means to address up to $2.4 billion in state budget deficits. “The governor does not want this industry in the state, and the Legislature has tried to ban them. But every time, the operators find a way around the law. And so the governor has raised the question if we can’t get rid of them, should we regulate them and collect some revenue for the people of the state,” explained Gov. Purdue’s spokesman Mark Johnson.

In the case of Virginia, Bryan Coleman, co-owner of the Church Hill Internet Café, believes that the industry has multiple options to appeal the new law. It can file a case to challenge the House’s decision before it takes effect on July 1. Whatever the case may be, the issue is sure to heat up in the state.