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Internet sweepstakes games concern Pennsylvania officials

Jason Cato
| Sunday, March 11, 2012

Kenny Gibson flipped a switch at 10:59 a.m. Thursday and overhead lights illuminated rows of computer terminals that looked a lot like video poker machines inside Laurel Games Internet Cafe, an electronic sweepstakes business he opened more than a year ago on one of Uniontown's busiest corners.

His first customer walked in at 11 a.m., opening time, and bought $7 worth of Internet time — a purchase that came with 700 sweepstakes entries, or 700 chances to win cash. She passed on surfing the web and skipped straight to slot-style and other casino-like games on the computer.

"This is not gambling, contrary to what anyone will tell you," said Gibson, 53, of Lemont Furnace in Fayette County. "I am not a casino."

Prosecutors and law enforcement officials aren't so sure.

"We are concerned about whether they are legal," said Mike Manko, spokesman for Allegheny County District Attorney Stephen A. Zappala Jr.

While winning and losing entries are predetermined, the games are a way to entertain players before they find out if they hit it big, said James Mecham, managing director of SweepsCoach, a Sacramento, Calif.-based company that offers start-up consulting services to business owners and provides electronic sweepstakes games. All prizes are paid in cash.

"The beauty of it is this is no different than any other sweepstakes out there. We just do it in a unique way," said Chris Taylor, 43, of Swissvale, who opened his Steel City parlor in Monroeville last April. "It's a hell of a lot more fun than opening a McDonald's Monopoly game piece, and it's a lot more entertaining than opening a Pepsi bottle.

"But legally, it's the same damn concept."

The Tribune-Review identified at least nine Internet sweepstakes businesses that opened in the past year across Western Pennsylvania, including others in Allegheny, Fayette and Mercer counties. Two others opened and closed in Belle Vernon and Greensburg.

The Pennsylvania District Attorneys Association supported a bill that bans revealing the results of sweepstakes electronically, said executive director Richard Long. State House members passed it unanimously last year, and a Senate committee is now reviewing it.

"Once things get out of hand, it becomes very difficult to address it," said Rep. Randy Vulakovich, R-Shaler, who drafted the House bill. "We're trying to nip it in the bud."

The fact that it looks like gambling, which is highly regulated in Pennsylvania, concerns lawmakers, said Bill Thomas, the Democratic executive director of the House gaming oversight committee who helped in the drafting of Vulakovich's bill.

"If it walks like a duck and quacks like a duck, it's normally a duck," Thomas said. "They know exactly what they are doing and what the attraction is."

Both gambling and sweepstakes offer prizes and chance, said Mecham, who encourages lawmakers to regulate the industry rather than attempt to prohibit it. The difference is that gambling includes consideration, or the requirement of paying to participate in the game. Sweepstakes do not. Customers must purchase a product, usually either Internet or phone time with the Internet cafes, and the sweepstakes entries are provided for free.

Pennsylvania isn't the first state to face the question of what to do with Internet sweepstakes businesses, just the latest.

A Senate subcommittee in South Carolina in February passed a measure to prohibit sweepstakes video games. A state appeals court in North Carolina last week tossed out a ban on video sweepstakes enacted in 2010, deeming that it unconstitutionally infringed on free speech. Lawmakers from Ohio to Florida to Utah struggle over how to best handle the Internet sweepstakes industry, either through bans or regulation.

"I would opt for regulating it instead of shooting it in the head because it looks like a duck," Mecham said.

Mecham estimated 4,000 to 5,500 Internet sweepstakes businesses operate across the country, up 30 percent from last year.

A state lawmaker from Chester County recently estimated 13 such businesses exist in Pennsylvania.

"I'd be shocked if there are not 40, at least," Mecham said. "Maybe 50."

In Allegheny County, Aces Sweepstakes moved into an old Pizza Hut next to the Penn Hills YMCA on Frankstown Road. Mega Internet Cafe opened in Clairton's Dollar General Plaza. In Monroeville, Steel City Internet Cafe is squeezed between a nail salon and an optometrist's office at Haymaker Village.

Penn Hills police received a few calls last year after Aces opened, but they were from business owners with registered video poker machines, not residents, Chief Howard Burton said.

"I'm not sure what they do there, but we've had no complaints of issues with them," said Burton, who added some of his officers work off-duty security details at the business.

Sweepstakes are legal in all states, business owners said, often using the popular McDonald's Monopoly game and codes under soft drink bottle caps as examples. With Internet sweepstakes businesses, the video simulation often is a problem for lawmakers and enforcers, they said.

Customers in Uniontown want to be entertained, said Gibson, who explained his business to city officials before opening.

"Does the attraction of winning something come into play• Yeah," he said. "But what people do with their disposable income, it's hard to regulate that. It's hard to moralize that. ...

"This business model is pretty sound. It's faced numerous challenges."

How Internet sweepstakes work

Customers purchase a product at an Internet sweepstakes business, usually either Internet time or long-distance phone minutes. The typical purchase is $20, business owners said.

The Internet and phone time is for customers to use at the business or home.

With the purchase, customers receive free sweepstakes entries. These cannot be purchased on their own, as that would constitute consideration and, thus, gambling.

The industry standard is one free entry for every penny spent, or 100 entries for each dollar. Customers can choose to 1) have a clerk use an "auto-reveal" option to instantly determine whether any entry is a winner or 2) play a variety of casino-style games — such as electronic slots or various video poker games — to find out if they have won anything.

If a player chooses to play electronic games, as business owners said nearly all players do, their sweepstakes entries are accessed either using a swipe card or pin number entered into the game machine. These machines are computers that come equipped with a touch-screen monitor or a mouse.

Players determine how many of their entries they want revealed with each game and then press a button to start the simulated casino game. The process is similar to places bets and playing video poker games or slot machines at a casino.

The sweepstakes games are for show only and do not factor into whether a player has won or lost. A finite number of winning entries is determined before the sweepstakes starts.

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