The American Gaming Association – In recent years, thousands of “Internet sweepstakes cafes” have sprung up in storefronts, gas stations and convenience stores in more than a dozen states. Carefully designed to take advantage of state sweepstakes laws and to avoid state antigambling laws and gambling licensing restrictions, Internet sweepstakes cafes are estimated to earn more than $10 billion a year with games that closely mimic the experience of traditional slot and video poker machines. The cafes advertise and sell a product — usually Internet time or long-distance telephone minutes — that the gambler does not actually want.
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Along with that unwanted product, the customer receives a supposed bonus of “entries” in the Internet sweepstakes. With those entries, the customer can participate in Internet-based games at the cafe’s specially-programmed personal computers. Based on a random allocation of winning and losing entries, the customer may or may not win cash prizes through those games. According to the cafes that are reaping unregulated profits, this elaborate masquerade is not gambling, but a sweepstakes. According to every appellate court that has decided a case involving similar games, it is incontestably gambling.
Nevertheless, through aggressive litigation tactics and high-powered lobbying at state legislatures, the cafes have managed to forestall effective law enforcement against them in many jurisdictions. The result is that many neighborhoods now house gambling venues that are free of the legal restraints that Americans have traditionally demanded for gambling businesses.
In December, the California Bureau of Gaming Control issued an Advisory that state law prohibits “so-called ‘Internet café’s’ that sell Internet time or phone cards in conjunction with a ‘promotional sweepstakes.’” In response to the state Advisory, several local governments adopted ordinances or took enforcement measures to shut down local cafes. Sacramento police raided and closed two cafes and charged the business manager at each location with operating an illegal gambling business. Even before the state Advisory issued, Kern County (Bakersfield) prosecutors sued to stop sweepstakes operators in nine location, and a Kern County judge granted an injunction against them. State v. Collom, No. S-1500-CV-276960.
