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News State / Region NC Court of Appeals contemplates legality of Sweepstakes ban

The debate on whether internet sweepstakes gaming is legal in North Carolina wages on, as the state Court of Appeals heard arguments from representatives on both sides of the proverbial coin last month.

Following two bans and years of legislative cat-and-mouse, attorneys representing the gaming industry challenged a state law passed last December aimed at banning internet sweepstakes gaming before a panel of three judges on Oct. 25.

Gaming industry representatives contend the ban violates free-speech rights and that it criminalizes “story-driven, arcade-style video games,” which is not technically gambling. It was through this style of gaming that the industry was able to find a loophole to continue to operate through, following last year’s ban.

Citing a U.S. Supreme Court ruling last summer that overturned a California law banning the sale of violent video games to children without parental consent, the plaintiffs made their arguments. In the June hearing, the court found that such games were protected free speech, just like books, movies and other forms of media. “I don’t know how you can say video games are banned in some circumstances at some times, and not ban them at other times,” said attorney Kelly Daughtry on behalf of gaming companies Sandhill Amusements and Hest Technologies.

“It has left sweepstakes lawful,” said fellow attorney Adam Charnes. “But what it has done instead is target the video games used as part of the sweepstakes.”

Sweepstakes businesses have multiplied along US 441S as the debate continues on exactly what kind of sweepstakes machines to allow. Photo by Vickie CarpenterState attorneys say the ban is legitimate, arguing that by law, the state can restrict the presentation. By tying sweepstakes results to video games, the gaming industry has violated the ban. John Maddrey, the state’s acting solicitor general who represented the state during two hours of oral arguments, said the law doesn’t interfere with constitutionally protected speech. The state wants the panel to uphold the law, most of which took effect last Dec. 1.

“The statute regulates sweepstakes systems. This is not a referendum on video games,” said Assistant Solicitor General John Maddrey, adding that last year’s ban was reactionary “to what was happening in the real world with these machines.”

“The legislature’s statutory regulation of sweepstakes using entertaining displays to convey a result, the same game free-standing is not prohibited by the statute,” said Maddrey.

The main issue contemplated by the panel was whether or not the law violated the first amendment.

“It also says that there are of course exceptions and it talks about obscenity and incitement and fighting words,” said Judge Robert Hunter. “It doesn’t mention gambling. So how does gaming fit into some of those exceptions are allowed on the first amendment?”

The court made no ruling on the case, and is under no deadline to do so.

A neon-lit background

The sweepstakes scenery has actually grown in Macon County since December’s ban. In fact, all along U.S. 441 from its southern border all the way to Franklin city limits, eight businesses are operating sweepstakes machines. As of Oct. 12, five businesses are operating the machines within Franklin.

Though the machines are often found in what are called “cafes” or “parlors,” they are also beeping and flashing away in convenience stores and gas stations. The parlors in which they are most commonly found are frequented by players who use telephone minutes and internet time to play the games, with the hopes of winning money.

But just before the ban, Guilford County Superior Court Judge John Craig ruled that a portion of the statewide ban violates freespeech protection, provided by the First Amendment. Craig’s ruling also advised that the gambling-like games should be covered by the ban, but that others should not be.

State attorneys appealed the ruling, and the appellate court later ruled on Jan. 7 that the businesses could stay open until the appeal is heard.

So with the flip of a switch, or the change of software, machines across the state were reprogrammed by manufacturers. This time the name of the game is skill and dexterity, instead of chance. The premise, manufacturers and operators insist, is that they simply provide entertainment.

The North Carolina Sheriff’s Association, as well as the North Carolina Association of Chief’s of Police have both publicly opposed the legalization of video sweepstakes.

“The chief’s association is opposed to video gambling,” said Forest City chief of police Jay Jackson. “We have seen that problems can come out of the machines.” At face value, Jackson described sweepstakes machines as a gambling outlet.

Several communities in Western North Carolina have reportedly taken measures in the past to hinder the businesses.

In December 2009, the Franklin Town Board of Aldermen voted unanimously to establish a privilege licensing fee of $2,600 for electronic sweepstakes operators located within city limits. The total amount of revenue collected from the businesses in the 2010-11 fiscal year was $23,400, with nine total businesses within Franklin city limits.

The neighboring town of Sylva set an initial privilege licensing fee of $2,500 for video sweepstakes operators to run just four machines. For every additional machine a fee of $700 was tacked on.

For now, at least in Franklin, the machines will not cost their operators any additional fees.


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