Online 'sweepstakes' players shocked it's called gambling


POSTED: Friday, May 07, 2010

CASSELBERRY, Fla. » Rick Massa was spending this Friday afternoon as he does every week, sitting at a computer on the lonely end of a strip mall here inside Jacks Business Center and Internet Cafe. He was not checking his e-mail messages or sending a fax. And he was not interested in coffee.

Massa, 73, wanted to win money.

His favorite pastime is Lucky Sevens, an online sweepstakes game that mimics a slot machine. Jacks pays out cash if a customer hits the jackpot. On this Friday, reels were spinning on the screens at the cafe's 34 terminals, and customers—mostly retirees—were buying phone cards encrypted with sweepstakes entries for Internet playtime. They were hoping to get lucky.

But were they gambling?

The owners of Jacks, who are not licensed to run a casino, say no. The authorities around Casselberry, about 10 miles north of Orlando, say most likely yes.

The disagreement is playing out throughout the country as this often unregulated business model known as fringe gambling proliferates, vexing law enforcement agencies and consumer advocates concerned about fraud.

These computer games are designed to look and feel like casino gambling while technically being only “;sweepstakes.”; Because a sweepstakes is said to be predetermined, not a game of chance, it is not gambling and falls outside of state gambling laws—or so the operators say.

These Internet cafes are thriving almost entirely because of the sweepstakes chances; they are not using the sweepstakes as an incentive to buy another product. Many are simply known as sweepstakes cafes.

Frustrated in his effort to police such businesses, Chief James C. Ruf, of the Casselberry police, said, “;We're not getting any clear direction from anyone.”;

Officials in California, North Carolina, Utah and other states are, like Florida, grappling with the legality of gaming cafes, in some cases regulating and tolerating them, and, in others, prosecuting them and winning.

“;It hit North Carolina so fast, the Legislature hasn't had a chance to deal with it, but these are computer casinos ripping folks off,”; said James M. Johnson III, a councilman in Wilson, N.C. “;We approved the first one in the fall, and the complaints started in December.”;

Wilson had nothing on its books to deal with Internet cafes that cross over into sweepstakes cafes, and it found itself not only initially powerless to impose age or business-hour restrictions, but also feeling “;a little hoodwinked,”; in Johnson's words, for trusting that the cafes would really be cafes.

“;The phone card acts like a token in a casino—that's what we didn't understand,”; said Johnson, who helped draft an ordinance to regulate cafes offering sweepstakes, which are allowed under state law. “;We have many counties calling to see a copy of our ordinance so they can put it in place in their areas.”;

In Salt Lake County, Utah, however, District Attorney Lohra L. Miller determined that one cafe was violating the state's gambling law, and won convictions against five people—owners, customers and employees—who could face fines and up to six months in jail. Four cases are pending.

Utah even sought to make its restrictions clearer, putting into effect this year a law prohibiting “;fringe gambling.”;

In Roanoke, Va., the county police said they noticed the first Internet cafe offering casino-style activity in April 2009. Three more cafes have opened since.

“;We started getting complaints almost immediately,”; said Lt. Chuck Mason of the Roanoke County Police. “;Lawyers notwithstanding, the people in the neighborhoods recognized immediately that this was gambling.”;

Many complaints were from people who had lost money. Police raided four cafes two weeks ago, and the locations are closed pending an investigation.

“;We've been into these location numerous times,”; said Detective John J. Loughery, in Roanoke, “;and only on one occasion did we see a single person accessing the Internet.”;

Consumer and public health advocates saythe cafes are not bound by the rules of play like normal casinos, but have a similar impact on problem gamblers.

Pat Fowler, executive director of the Florida Council on Compulsive Gambling, said dozens of people had called her group's hot line in the past nine months, complaining specifically about Internet cafes. According to the council's data, the majority of callers were low-income women who had lost an average of $13,000 at neighborhood Internet cafes.

“;The message to legislatures is, you need to look at the gambling law and make sure it's updated, and that there are clear lines and regulations,”; said Keith Whyte, executive director of the National Council on Problem Gambling. In Longwood, Fla., next to Casselberry, the police chief, Thomas S. Jackson, and Detective Travis Grimm received a visit from a man who showed them proof that his brother had spent $6,000 in three months at a local Internet cafe, which closed in August after a raid.

“;I know that I can get Internet service for about $65 a month,”; Jackson said, “;so for him to spend $2,000 a month for Internet service doesn't suggest that he is there to utilize search engines.”;

The Florida attorney general's office has said that while it considers sweepstakes cafes to be in violation of state law, it is up to local law enforcement to decide whether illegal gambling is indeed taking place.

At Jacks last week, customers said the games were a bargain (you get free sweepstakes entries just for coming in, and a $10 phone card comes with 1,000 chances). And they said they liked playing close to home instead of traveling to a casino.

“;It's close and fun, what can I say?”; explained Elayne Kelly, 84. “;It's given some of the older people something to do.”;

Massa, a retired police officer, said he would never skip a visit. Socializing is half the fun. “;If I had the money, I'd open one of these places myself,”; he said.

Jacks' owners, Alan Sylvester and Darryl Agostino, remain adamant that they are not running an illegal gambling house. And while Casselberry has closed one Internet cafe and instituted a moratorium on new ones, Jacks, for now, appears to have nothing to worry about. It is in an unincorporated area outside the jurisdiction of the Casselberry police.

“;We offer an incentive for phone time,”; Agostino said, “;and people really like the incentive.”;