Business & Economy
5:00 am
Sun February 9, 2014

Are Internet Sweepstakes Gambling? Wake County Says Yes

Credit Pete Labrozzi via Flickr, Creative Commons

Gambling is illegal in North Carolina. But there is a gray area: It's called an "Internet sweepstakes." And contrary to it's name, such sweepstakes are often not on the Internet. They are operated in small shops, often in strip malls, across the state.

An Internet sweepstakes cafe operate this way: a customer enters the business. Rather than sitting down at a slot machine, the customer purchases "telephone time" or "Internet time".  That purchase triggers a prize: An opportunity to play a game.  And this is where the industry starts to look a lot like gambling. The customer will sit down at a computer terminal, play a game, and then, if they are lucky, win some money.

The American Gaming Association estimates such Internet sweepstakes businesses rake in ten billion a year nationwide.

North Carolina's General Assembly has tried three times in the last dozen years to outlaw such businesses. Some laws have changed, but the sweepstakes industry is nimble enough to make small changes and continue to operate. In addition, compliance with the law is often a matter of interpretation.

"It is sort of like catching folks who are doping in professional sports. It seems like the dopers are always a step ahead of the regulators and you've got that same dynamic here with the sweepstakes." - Jeff Welty

Jeff Welty is a professor in the school of government at the University of North Carolina. He advises public officials on the legal aspects of internet sweepstakes. Welty says that Internet sweepstakes operators depend on the largesse of county officials. "There are some communities where Internet sweepstakes operate openly and with the blessing of law enforcement and local authorities," he says. "[But] in some communities like Wake County, authorities are are vigorously pursuing and prosecuting folks who operate these sweepstakes."

Last month, a grand jury in Wake County indicted three people on charges of operating an Internet sweepstakes businesses in Raleigh.

But even with this crackdown in Wake County, Internet sweepstakes cafes are likely in North Carolina for the foreseeable future. Jeff Welty says, "It is sort of like catching folks who are doping in professional sports.  It seems like the dopers are always a step ahead of the regulators and you've got that same dynamic here with the sweepstakes."

Phoebe Judge talks with Jeff Welty about how internet sweepstakes businesses operate in NC.

 

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