N.C. Judge Puts Hold on Internet VP Enforcement

March 9, 2009 (InfoPowa News) — The always-complicated legal situation surrounding gambling in North Carolina continues to have enforcement officials and operators alike scratching their heads on the subject of Internet-based video machines.
 
Media reports from the Citizen-Times and other publications reveal that police trying to stamp out the genre are being stymied by judicial rulings, notably one from Guilford County Superior Court Judge John O. Craig III, who says the genre does not fall under the NC state ban. Until the issue is resolved, police are barred from shutting down the latest generation of games by an injunction issued by the judge in December 2008.
 
North Carolina has banned video poker since 2006, only to see banned poker machines replaced by Internet-based terminals labeled as “sweepstakes.” Players bought a prepaid phone card at a store counter or bar, then took it to a nearby machine, where they could use it to play games of chance and win cash prizes.
 
Guilford County judge Craig told law enforcement agencies they couldn't shut down the new machines under the state's existing video poker law. To counter this, state legislators voted in 2008 to ban the new machines too, only to be again frustrated by Judge Craig, who found that the manufacturers had made changes to avoid falling under the new ban that took effect early December 2008.
 
Many operators have since replaced cards by a deal in which a customer is ostensibly paying for Internet access, with the games of chance as a bonus.
 
Craig's order allows the latest machines and forbids officials from shutting them down or even saying publicly that they're illegal.
 
Sheriff Van Duncan, of Buncombe County, says he isn't sure exactly how many terminals are in his county. "In my opinion, it is worse than video poker because it's not regulated at all,” he said. “And as long as we have this injunction in place … they can have as many terminals in their stores as they want.”
 
Texas-based Hest Technologies, which makes the machines and initiated the latest litigation before Judge Craig, told the court it was primarily in the business of selling long-distance and high-speed Internet service. And owners of the “phone card”-type machines have told law enforcement and the courts that winning was determined when a card is bought, Duncan said.
 
"That makes the transaction similar to buying a Coke at McDonald's and peeling off the sticker to win a promotional prize," the sheriff said.
 
In the newer versions of the machine software the player picks 20 numbers, and the computer picks 20 numbers. If 10 match, the player wins $500. Fewer matches equal smaller winnings. Another game, called Wild Berries, presents a face similar to the spinning reels on a slot machine. If the fruit matches, the player wins.
 
Authorities are seeking a clear direction from lawmakers, and at least one legislator has confirmed an intention to introduce to the state General Assembly a non-binding resolution that will stress the legislature's opposition to video gambling and urge the courts to expedite such cases.
 
Another option is to pass a recent proposal prepared by state Attorney General Roy Cooper after a request by legislators. This would ban any video machine “used or offered for use in connection with any sweepstakes, lottery, promotion or advertising scheme.”
 
However, there is a concern that such a sweeping definition could negatively impact Internet-based promotions by businesses like McDonald's.
 
The legislature could also pass a less sweeping law to adjust the ban to the new machines, but that may run the risk of again falling foul of revised machines and another adverse judicial ruling.
 
The least favored option is to await a definitive and superior court ruling … but that could take as much as four years to be achieved. Judge Craig's next hearing on the injunction is September 29, 2009.