10/19/11 — Law remains unclear on future of Internet sweepstakes cafes

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Law remains unclear on future of Internet sweepstakes cafes

By Gary Popp And Ty Johnson
Published in News on October 19, 2011 1:46 PM

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A customer enters an Internet parlor Wednesday morning on South Berkeley Boulevard. Such businesses were outlawed by the General Assembly last year but enforcement of the law halted when part of the legislation was deemed unconstitutional by a Superior Court judge.

Internet cafes continue to operate throughout Wayne County, despite the passage of a law in late 2010 designed to ban the businesses from offering the computer-based games to the public.

Any enforcement concerning the businesses essentially came to a halt after a subsection of the law was found to be unconstitutional by Guilford County Superior Court Judge John Craig.

After Craig left the door open for Internet gaming cafes to continue their operations, the state Attorney General's office appealed the ruling.

The case is currently being heard by the state's Court of Appeals.

For now, law enforcement agencies in Wayne County are on standby to police the gaming cafes.

Interim Goldsboro police Chief Jeff Stewart and Wayne County Sheriff Carey Winders say they are waiting to receive direction, which they expect to come from the Attorney General's office.

"Basically we are waiting on clarification from the Attorney General," Stewart said. "Everything is unclear at this point."

Winders mirrored Stewart's comments by saying it is difficult to keep up with the legal intricacies of the video gaming offered at the cafes.

"The law is confusing," Winders said. "Somebody has to give some clarity to it."

Both Winders and Stewart said they have received virtually zero complaints or reports of any crimes related to the gaming cafes.

Stewart said the most significant issue the police have encountered concerning gaming-related crimes is from business owners saying that the gaming patrons are using their parking spaces.

Attorney Brian Pridgen, with the law firm Rose, Rand, Wallaceof Wilson, Raleigh and Kinston, said the judge's ruling has created confusion among law enforcement agencies.

"There is lot of hesitancy on their part to actively go out and try to shut any of these businesses down because of the litigation that has arisen because of it," Pridgen, "I think most municipalities are afraid of getting sued for trying to enforce a statute that they are not clearly sure how to enforce."

Internet cafes typically resemble call centers with dozens of cubicles and computers set up, all with Internet access. Patrons buy time on the computers, which can be used either for browsing the web or playing "sweepstakes," which are actually expansive collections of video slot machine games similar to those in casinos.

An individual bets credits on games which range from electronic scratch-off games to Keno and more. The winnings can either be used as credits to continue playing or they can be cashed out at the cashier.

A city ordinance regulating the businesses and creating an additional tax on Internet gaming establishments went into effect on June 21, 2010. A privilege license tax of $2,500 per establishment and $500 per computer is collected from each business owner at the beginning of the fiscal year.

Goldsboro Finance Director Kaye Scott said the seven internet gaming establishments paid $80,000 in taxes to operate in fiscal year 2011-12. That money is placed in the privilege license fee line item.

Wayne County Planning Director Connie Price said there was at least one Internet gaming establishment operating in Pikeville, but said he wasn't aware of any others.

Although Seymour John-son Air Force Base initially was against the establishments -- Goldsboro's Planning Commission denied a rezoning request to put one at the corner of Elm Street and Berkeley Boulevard citing the base's concerns as a major discussion point -- the base's response now is that they respect the city's decision to make the cafes available. Air Force service members are permitted to partake in these video poker establishments "as long as they are not in uniform," according to a release.

An establishment now exists just feet from the base, at the shopping strip mall owned by Chris Boyette, who was chairman of the Planning Commission when the city determined the tax and his board denied the zoning request.

Boyette, who said he has never spent any of his own money in such an establishment, said the tenants weren't causing him any problems whatsoever.

Captain Al King with the Goldsboro Police Depart-ment concurred, saying there have been zero crimes committed or incidents at any of the establishments in the city.

Although Craig took issue with only three lines of the four-page law, the ambiguity that has developed might keep lawmen from enforcing any section of the law.

"I am not aware of law enforcement in any municipality that is trying to enforce any provision in the statute because there is so much confusion as to what they can and cannot do," Pridgen said.

The clarity that would provide lawmen the confidence to enforce the bill might not come anytime soon.

"They are under no set deadline," Pridgen said of the court of appeals, which accepted the case in March.

He said it could take the appellate court more than six months to release a written decision.

"It is generally kind of a slow process, it takes a while to get that decision," Pridgen said. "It could come before the end of this year. It may not."

King said it likely wouldn't be until fall of 2012 before a decision was made.

Pridgen said if the courts allow for full enforcement of the law, local agencies will likely wait for a nod from the Attorney General before acting.

"If the Court of Appeals reverses Judge Craig's decision and says the entire legislation is constitutional and can be enforced, I think most municipalities would probably wait for an opinion from the Attorney General's office on how to proceed," Pridgen said.

He added that if the courts decided all provisions of the law can be enforced, the cafes would likely be permitted to continue selling Internet time, but they would not be allowed to offer sweepstakes gaming as an incentive.

No matter what the decision reached by the appellate court, the case could be heard in the state's Supreme Court, which would extend the status quo of obscurity well into next year.