The growth of internet sweepstakes cafés is accelerating in many states across the country, a development that the American Gaming Association considers illegal gambling. The businesses, says the AGA, are designed to take advantage of state sweepstakes laws and avoid state anti-gambling laws and gambling licensing restrictions. The organization estimates the parlors will earn more than billion this year with games that closely mimic the experience of traditional slot and video poker machines, but without the consumer protections required of commercial gaming operators.
The AGA’s policy, adopted late last year, says:
“States have longstanding policies that gambling businesses must be specifically authorized, strictly regulated to protect consumers, kept free of crime and fairly taxed to contribute resources for the public good. In recent years, thousands of ‘internet sweepstakes cafés’ with estimated annual revenues exceeding $10 billion have sprung up in more than a dozen states in total circumvention of state anti-gambling laws and gambling license requirements. After making very little investment, these rogue businesses spread quickly and become entrenched, posing a threat to existing state-licensed businesses and the thousands of jobs they create.
“Although they often claim otherwise, internet sweepstakes cafés sell games that involve prize, consideration and chance and, thus, are engaged in the business of gambling. In the vast majority of communities where they operate, cafés lack regulation of (1) the integrity of the owners and operators, (2) the fairness of the games, (3) the exclusion of customers too young to gamble, and (4) their location, including the proximity to schools or churches. They do not educate customers about responsible gaming or contribute funds to combat problem gambling. In addition, neither the cafés nor the software companies that support them pay state or local gaming taxes. To the contrary, their largely unreported profits may siphon revenues from state-authorized businesses.
“The American Gaming Association believes that strict regulation to protect consumers is the cornerstone of gambling policy and should apply to all forms of gambling. Responsible public policy should prohibit internet sweepstakes cafés, as numerous states have done.”
Frank J. Fahrenkopf, Jr., president and CEO of the AGA, says new court decisions and legislative actions (or inactions) have changed the landscape for the businesses.
“Sweepstakes café proprietors claim that these under-the-radar businesses don’t constitute gambling and would like to continue to operate without the accountability of normal gaming establishments, but if they aren’t controlled, states, existing gaming businesses and consumers all stand to lose,” he said. “That is why the AGA is educating governors, state legislators and regulators about this threat and working with them to deal with these establishments.”
