Making the News

News & Record, Greensboro, N.C.

Originally Published:Sunday, September 6, 2009
http://www.news-record.com/content/2009/09/05/article/sweepstakes_machines_are_spreading

Sweepstakes machines are spreading

By Mark Binker
News & Record, Greensboro, N.C.

 

GREENSBORO - Don't call it video poker. Video slots is right out, too. Those are illegal in North Carolina.

That machine blipping away in the corner of your gas station or back of the corner bar is a sweepstakes terminal. You also can find them in standalone parlors, mini-casinos wedged into strip malls next to dollar stores and nail salons.

Thanks to a combination of legislative inaction and a pair of Superior Court rulings, those machines are legal, virtually untaxed and spreading virtually unregulated throughout North Carolina.

That's a problem, say lawmakers on both sides of a debate over legalization, gambling-addiction specialists and even some of the machines' owners.

"They're everywhere, they're all over Greensboro," said Rep. Earl Jones , a Greensboro Democrat who has been advocating for a bill that would fully legalize, tax and regulate the machines. A quick survey of convenience stores and gas stations on South Elm-Eugene Street, East Market Street and Battleground Avenue confirms Jones' assertion.

Players may look like they're spinning virtual tumblers or choosing which in an array of electronic chips to flip. But the results are predetermined, say machine operators. Really, people are buying phone or Internet time and as a bonus get sweepstakes points.

Those points, under current North Carolina law, are much like tickets in a raffle.

"The games are just a form of entertainment to expose those tickets," said Chase Brooks , who runs Three Sweeps Technologies, a Burlington company that provides the sweepstakes terminals. In theory, the people entered in the sweepstakes don't have to sit down at a machine to reveal their entries, although most do.

Brooks is part of a group of amusement machine owners who back Jones' bill. To understand why business owners would ask to be taxed and regulated, consider:

lVideo poker has a recent and sordid history in the state, including ties to the downfall of former House Speaker Jim Black . Video sweepstakes advocates are quick to point out that while Black was sent to prison, none of the charges directly related to video poker. But the initial State Board of Elections investigation that cracked the door with investigators did focus on the games.

"If we have Department of Revenue over the top of this thing...you won't have issues arise, or suspicions arise," Brooks said.

lNorth Carolina's 100 sheriffs asked lawmakers to outlaw the games. The General Assembly did so twice in the past five years. The sweepstakes machines are operating under the protection of a trio of Superior Court cases. They include a High Point case in which the judge has enjoined law enforcement across the state from charging video sweepstakes operators.

"They're literally one court ruling away from being shut down," said Brad Crone about the video sweepstakes owners. Crone has been hired by the owners to help lobby for legalization of the machines .

lCompanies from out of state are now bringing machines into North Carolina. Under Jones' bill, only operators who lived in the state would be able to lease and service the machines. Brooks and Jones argue that local operators will be more responsible and more likely to adhere to state laws.

"I've seen a lot of out-of-state people trying to come into the state and explode it just as fast as they can," Brooks said. "We want the state to regulate it so this thing won't get out of hand."

For some players, things are already out of hand, said Gary Gray , director of the N.C. Council on Problem Gambling.

"There are some weeks, all the calls I get are over the Internet cafés," Gray said. The call log for his Greensboro-based gambling help line shows that three-quarters of his calls over the past eight months have been related to the sweepstakes games.

Numbers collected by the state's own gambling help line, which is funded by N.C. Education Lottery Proceeds, also reflect a jump in issues related to sweepstakes.

In the 12 months leading up to June 30, 2008, requests for help related to "video poker" made up only 8.6 percent of the 257 calls to the line. In the next 12 months, video poker, which includes calls over the sweepstakes machines, made up 18.2 percent of the calls.

Problem gambling related to the lottery made up the largest portions of calls in both years, in no small part because the help line's number is printed on every lottery ticket.

Jones argues that it's unfortunate but logical that a greater proportion of problem gambling calls have concerned the sweepstakes machines as they have grown more prevalent throughout the state.

"Should those people impact on the hundreds of thousands of people enjoying this in their leisure, just like they enjoy the lottery?" Jones asked. If the state regulated and taxed the games, he said, then there would be extra money for the relatively few people who do develop an addiction. He argues, video sweepstakes - or video lottery as he calls it - could operate just as cleanly and rake in more money than the state-run lottery.

Officials with the N.C. Department of Revenue said it is unclear if the state is getting any revenue related to the machines or whether it should be. For example, sales tax might apply depending on what kind of phone cards are being sold, but without seeing the contracts, it's impossible to say for sure.

This lack of certainty adds to the frustration that proponents of poker legalization like Jones and opponents have expressed with the General Assembly leaders.

Bills that would have created a fully legal space for the games, as well as measures to outlaw them entirely, were filed this year. Neither gained traction before lawmakers adjourned in August.

"It's very irresponsible and not very practical since we're already in the game with this," Jones said. The state, he said, could have avoided much of a $1 billion tax hike this year if his colleagues had been willing to embrace the games.

Rep. Melanie Wade Goodwin , a Democrat from Richmond County, argues the state should have gone in the opposite direction.

"The danger we have seen in my community is that video poker is an immediate way to lose everything in your pocket and then your family is left without money to pay the rent or money to buy food," Goodwin said. "We could legalize all sorts of things and find new sources of revenue, but it doesn't make them right. We need to put them out of business."

Still, the question remains, what exactly the machines are. One of the hangups that stopped a blanket bill from being considered has to do with other sorts of sweepstakes run by soda bottlers and fast-food chains. Language that would have outlawed the video sweepstakes also could have stopped those games, lobbyists for those industries argued.

Although a judge in High Point has ruled that video sweepstakes makers are likely to prevail in the case under his purview, that lawsuit has seen little progress over the past two years and was designated as a "complex business case," meaning it could linger for years more.

Without a definitive appellate court ruling or action by the  legislature, video sweepstakes will continue to occupy a gray area of state law.

"If you look at gambling machines throughout the world, there are myriad variations, many of which are designed to work around laws and regulations," said Joseph Weinert , an industry analyst with the Spectrum Gaming Group in New Jersey.

"In the end," he said, "if it looks like a duck and quacks like a duck, it's a duck. The demand for gambling around the world is very strong. And as long as the demand is there, you'll find enterprising people ready to fill it."

 

Contact Mark Binker at (919) 832-5549 or [email protected]

 

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