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Wednesday, 19 December 2012 00:00

So long sweepstakes: Supreme Court upholds state’s authority to regulate gambling

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The North Carolina Supreme Court ruled last week that state lawmakers indeed have the power to ban video gambling in its various forms, including the latest reincarnation known as video sweepstakes.

Sweepstakes operations, which have multiplied like wildfire across the region in the past two years, have until Jan. 3 to shut down.

State lawmakers have been locked in a game of cat-and-mouse with video gambling operators for years, with various state bans on video gambling challenged in court, openly flaunted or skirted. State lawmakers returned to the drawing board more than once to close up loopholes, such as the one used by so-called sweepstakes operators.

Throughout the legal challenge over the state’s video sweepstakes ban, lawyers who represented the video gaming companies argued that the ban violated free speech. But, the state Supreme Court justices struck down that argument, saying that the law deals with conduct, not speech, and that states have used police power to regulate gambling since the nation was created.

For years, law enforcement was stuck in the middle of the prolonged fight between the General Assembly and sweepstakes companies, not knowing whether to shut down the small gambling shops that have cropped up in even the most remote areas of North Carolina or to leave them be while the challenges played out.

“Law enforcement has obviously been placed in the middle of it from day one,” said Waynesville Police Chief Bill Hollingsed. “We are just relieved that a decision has been made, no matter what that decision was.”

The decision gives law enforcement agencies a definitive “no” regarding the legality of the video sweepstakes machines.

“I am glad we finally got something that’s got some meat on the bone,” said Swain County Sheriff Curtis Cochran.

The N.C. Department of Justice advised law enforcement agencies Tuesday to wait until Jan. 3 before enforcing the ban.

Hollingsed said that any business operating sweepstakes machines in Waynesville on Jan. 3 will be ticketed, and officers could confiscate the equipment.

Waynesville police officers began visiting sweepstakes operators in their town — some 16 currently operating and two readying to open their doors — and handing out packets of information about the court decision.

Hollingsed said that most were not surprised the ban was upheld.

“I think most of them were just kind of waiting in the wings for the decision,” Hollingsed said. However, the ban does not mean sweepstakes companies will not find a loophole, as they have done in the past.

In a letter to police chiefs and sheriffs in the western counties on Tuesday, District Attorney Mike Bonfoey warned that the sweepstakes industry may still have some fight left in it.“In all likelihood additional appeals and court cases will continue. We have not seen the definitive end of this issue,” Bonfoey said.

 

Sweepstakes parlors prepare to shut down

The court’s decision was bad new to the dozens of business owners who run sweepstakes parlors, or convenience store owners with a machine or two in the corner to bring in extra cash.

Torry Pinter Sr., owner of Vegas in the Valley sweepstakes in Maggie Valley, just opened his doors in mid-October and wasn’t expecting to be closing them so soon. Pinter worried about his five employees, and countless others around the state, going without work just after Christmas as a result of the court’s decision.

“A lot of employed people will be losing their jobs in North Carolina,” Pinter said. “This is tough times right now.”

He also pointed out what he perceived as the inherent hypocrisy of targeting sweepstakes businesses but allowing the nearby Harrah’s Cherokee casino to remain open and lottery tickets to be sold at gas stations.

“People are going to gamble regardless,” Pinter said. “We’re just trying to make a living just like everyone else.”

Many sweepstakes operators will be left holding the bag — losing out big time on the gamble they made when starting their gaming parlors in the first place, especially those who chose to enter into the business only recently.

Leonard Watson, who owns four gambling parlors in Swain and Jackson counties, as well as two in Waynesville, will be laying off about 15 employees when his sweepstakes close in January. Given the loss of jobs and wages should the industry shut down, Watson didn’t believe the Supreme Court would actually uphold the ban — and therefore was willing to put money into starting up sweepstakes businesses despite the uncertainty of the ban and pending lawsuit looming in the background.

“I thought they would go ahead and regulate it and tax it,” Watson said. “I didn’t think it would stand. I didn’t think the Supreme Court would overrule this thing, nobody did.”

But Watson said either way he would follow the lead of law enforcement and shut his business down, or re-tool them as restaurants, bars or dance halls. Even if it meant he would lose a lot of the money he invested in the gambling businesses.

“We’re going to just stand by and abide by the law,” Watson said. “If they want me to close today, the door will be locked.”

 

Loss of sweepstakes fees for towns

Towns and cities in the state are likely looking at the ban as a mixed bag, as many had imposed a license fee on sweepstakes operations.

Waynesville raked in $98,000 in business license fees this year from sweepstakes operators. The money was earmarked to pay for the construction of a skateboard park.

Although Town Manager Marcy Onieal said Waynesville leaders are still committed to funding the skate park, the ruling was a blow to that effort.

“This will be a fairly substantial hole in our budget,” Onieal said.

Sweepstakes owner Leonard Watson, who owns two sweepstakes operations in Waynesville, lamented the fact that he already paid $26,000 to the town as a fee for operating his sweepstakes businesses. He opened his most recent sweepstakes business in Waynesville this past summer, and was worried he would not be getting a refund.

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