Cat-and-Mouse Games Close to My Heart

December 28, 2012 by

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Since any statute of limitations has clearly expired, sharing the following information does not concern me: the scene is South Boston in the mid-fifties. Almost daily, my then-eight-year-old mom stopped in at Jennie’s local grocery store with my nana – but not for milk or eggs or bread. While my nana slipped into a back room with Jennie to lay a wager, my mom importantly took Jennie’s place at the check-out register, armed with instructions to let the ladies in the back know if anybody came into the store looking for Jennie. My mom was aiding and abetting a numbers operation run by the local mob. It took her until she was ten years old to realize that she wasn’t just “watching the store.”

Without digressing into any Whitey Bulger anecdotes and stating the obvious about ingenuity, let me just say that the cat-and-mouse game that has been underway in North Carolina between the legislature and the gaming industry has piqued a nostalgic cord for me. And the uncertainty that the North Carolina Supreme Court has left in the wake of its recent decision in Hest Technologies, Inc. v. State of North Carolina upholding a ban on sweepstakes games has me wondering what the gaming industry’s next move will be.

The battle between the state and the gaming industry began in 2006, when video poker and other types of electronic games were banned in North Carolina. The gaming industry responded with Internet sweepstakes games, which had a similar interface, similar odds and payouts, but were not technically gambling because the games weren’t “pay to play.” The state responded by banning games that simulate video poker and slots games in 2008.

The gaming industry got more creative and switched to different types of video games that don’t simulate video poker or slots. Basically, internet time is sold and free sweepstakes entries are given to customers when they purchase Internet time. Customers can use the Internet time via onsite computers to check email, browse the web, or access sweepstakes games to see if they’ve won.

A collective “argh!!!” emanated from Raleigh and the legislature then banned all Internet sweepstakes games that use an “entertaining display” to reveal winning entries.

The back-and-forth continued until March of this year, when the Court of Appeals found that operating Internet sweepstakes games amounted to an exercise of free speech, making the games legal. That changed a couple of weeks ago when the NC Supreme Court reversed that ruling finding that the 2010 law regulates conduct, not speech, and as such is constitutional. The ruling makes no concessions or provisions for Internet sweepstakes games already in operation, meaning that when the court opinion takes effect Jan. 3, existing games will be illegal.

Well, maybe. Unlike rulings in similar cases in other states, including Texas and Pennsylvania, the N.C. Supreme Court did not find that Internet sweepstakes games themselves constitute gambling, which potentially muddles the discussion. Without that determination, which would have made Internet sweepstakes games illegal in any case, the gaming industry still has some wiggle room.

The law doesn’t prohibit the games, rather it “bans the operation of electronic machines that conduct sweepstakes through the use of an “entertaining display,’” according to the Supreme Court decision. If the Internet sweepstakes software is updated to reveal sweepstakes results without an entertaining display, then the games might be within the letter of the law.

And then, of course, there’s the appellate process. Because the court ruled on the constitutionality of Internet sweepstakes games – specifically whether operating such games constitutes free speech – the gaming industry, could also appeal to the U.S. Supreme Court.

That collective “argh!” from Raleigh might be resounding once again. For mere observers, the decision evokes more curiosity and keeps in play the conversation about just how much the government should be able to regulate. Is this about legislating morality? Can you tax it and make everybody feel just a wee bit better? Thanks, Justices, for keeping the conversation – and the memory of my naïve mother – alive.