Internet Sweepstakes Cafes Proliferate as Government and Casino Industry Sound Alarms

The attention of legislators, state regulators and licensed casino operators has increasing turned to an alternative gambling trend—Internet sweepstakes cafes. Calls for bans have spurred legislative efforts in Pennsylvania, Ohio, Florida, Virginia, North Carolina, Massachusetts and other states. The cafes exploit state gambling laws which generally permit sweepstakes–defined as free game promotions which avoid characterization as gambling or illegal lotteries by managing the operative variables of consideration, chance and prize.

Internet sweepstakes cafes provide patrons with free sweepstakes entry or entry through the purchase of phone cards or computer time. The predetermined sweepstakes winners are revealed to the patrons through the results of video games such as poker, keno, blackjack, roulette, slot machine-like games, etc. as the participants play via their computer time. The “gamers” accumulate points which can be banked, exchanged for additional computer time or cashed out from accounts established at the introduction to the café experience.

According to published reports, there are more than 1000 of the parlors in Florida taking in an estimated $1.0 billion.

Opponents find the businesses to be illicit gambling dens, not subject to taxation, and with no rules or oversight. There have been reports of crime associated with the store-front operations. A notorious gun-battle occurred in April, 2011 in a café in Apopka, Florida, where an armed robber was killed by a security guard while more than three dozen patrons were sitting at the computer terminals.

Sweepstakes café owners have battled the bans in court claiming that the sweepstakes are legal and the “reveal”, (disclosure of the prizes) through video games is constitutionally protected commercial free speech.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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