HomePublicationsNewsletter ArchiveNewslettersVolume 18Issue 27AGA Prepares White Paper on Sweepstakes Cafes

As part of its continued regulatory reform efforts, the American Gaming Assocation (“AGA”) has prepared a white paper on internet sweepstakes cafes. The paper, tentatively titled “Internet Sweepstakes Cafes: Unregulated Storefront Gambling in the Neighborhood,” discusses the rise of internet sweepstakes cafes and the current efforts on behalf of states to regulate the growing industry. It is authored by David O. Stewart, partner at Ropes & Gray and respected expert in the field of gaming law.

The white paper follows the recent expansion of internet sweepstakes cafes, a variation of the traditional internet café where a patron can purchase a set amount of internet time to use on an on-site computer terminal. These locations, however, also include a number of entries into various sweepstakes contests as part of the purchase of internet time, allowing the patron to play sweepstakes games on the computer and win prizes. The AGA has taken the position that the inclusion of sweepstakes entries with the purchase prize effectively turns these outlets into gambling operations and, therefore, should be treated as such by state and local officials.

Earlier this year, the Michigan Gaming Control Board published a guide on the topic which put forth the laws governing the conduct, noting the state’s ban on the operation of unauthorized lotteries and gift enterprises. While the guide focuses on providing the applicable state statutes that regulate the activity, it does note that “[t]hese establishments may be run under the false premise they are conducting legal promotionalsweepstakes. But there is no such exception for this type of gaming under Michigan law.”

Furthermore, the state attorney general has taken action against certain operations in the state, including issuing cease-and-desist letters to nine internet sweepstakes cafes on June 8, 2012 which accuse the locations of operating illegal gambling activities. In response to a similar letter issued by the state attorney general, the Flint Business Center, one of the targeted sweepstakes cafes, filed a request for a preliminary injunction against the state in order to prevent the state from taking enforcement measures against the business. However, the injunction was denied by the Genesee County Circuit Court on June 18, 2012.

The AGA is planning on publishing its white paper on the topic this Fall.

 

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