News+Opinion » Features

Lucky loophole keeps sweepstakes parlors up and running

You're a Winner


1 comment

Here's how you play a game at the B&G Center on McMillan Avenue in North Charleston: Come inside, away from the sunlight, past the mirror-tinted windows and the banner that reads simply "SWEEPSTAKES." Hand five bucks to the attendant at the cash register, take a hard candy from the snack bowl, and then pick a computer — any computer — from the dozens that line the walls. Sit down and pause for a moment to take in the all-purple interior and the television screen advertising the day's grand community prize, which can be in the thousands of dollars, and then allow your ears to adjust to the near-silence in the room but for your fellow patrons' mouse clicks. If you're in the smoking section, light one up.

Once you log in, pick your game: Top Dawgz, Ritzy Kitty, Tiki Treasure. Bear in mind that they're all basically variations on three- or five-reel slot machines, but you'll want to pick a theme that appeals to your aesthetic tastes. Then click the "Reveal" button and spin away, and if the icons line up in your favor, you could walk away with big money.

In a matter of minutes, your 500 credits (100 for each dollar) are dissipated in the electronic ether, and you return to the front counter to collect your winnings. On a recent visit, those winnings amounted to 29 cents and a raffle ticket for a flat-screen television, but maybe you'll have better luck.

You would be forgiven for thinking this is gambling.

Beside the cash register at B&G, there is a stack of disclaimers for something called Voltac Systems Sweepstakes, which, it says, "promotes the sale of internet service through the use of a proprietary electronic sweepstakes system." In other words, when you plop your money down on the counter, you're not paying to play the slots on a computer. You're buying internet time, and as a bonus, you get to play a videogame and possibly win some money. It's called a sweepstakes because the outcome of each turn is already determined before you ever sit down at the computer. You could just ask to collect your winnings at the cash register, but the games are an entertaining way of revealing your results. It's a fairly Calvinist view of things.

But the S.C. Attorney General's Office doesn't buy the argument that video sweepstakes parlors are different than the video poker machines the state banned 12 years ago. In the last several months, law enforcement agencies across the state have been raiding sweepstakes parlors, some in cooperation with SLED. According to a lawyer with the state Attorney General's Office, SLED agents and other law enforcement officials have raided and shut down sweepstakes parlors in Richland, Lexington, Anderson, York, Greenville, Spartanburg, Cherokee, Horry, Beaufort, and Georgetown counties, and more cases are on the way in Florence County. Meanwhile, many cities have put the kibosh on the opening of any new sweepstakes parlors, including the City of Charleston, where a six-month moratorium is in place until mid-September. The City of North Charleston, meanwhile, has remained hands-off on the issue, and a city spokesman says the city has issued licenses for "a couple of dozen" businesses that identified themselves as internet cafes.

Business owners and customers face gambling charges, and in the event of a guilty verdict, authorities will destroy their computers, just as police busted up moonshine stills in the days of Prohibition. In July, Richland County sheriff's deputies cracked down on a Columbia-area business called Cafe 21, confiscating 21 computers and charging three people with gambling. "This is a warning to all the others in Richland County," Sheriff Leon Lott told The State newspaper. "We got one today, and if the others stay open, we'll get them."

While many individual police and sheriff's departments believe the parlors are in violation of state gambling laws (see sidebar), the courts will ultimately decide their fate. Meanwhile, Charleston County sheriff's deputies and North Charleston police haven't raided any sweepstakes parlors, and the S.C. Sheriff's Association has taken the position that the Legislature needs to clarify its laws to close a loophole the businesses are using.

Maj. Jim Brady of the Charleston County Sheriff's Office explains that they haven't seen anything that looks like criminal activity at the parlors, and they're waiting for some legal direction before they move forward. "Since there's no law yet against it," Brady says, "I guess right now it's one of those cases where you could either be a case study and try and shut them down and see where the court takes it, or wait to see what the Legislature and the courts deem an issue or not."

In North Charleston, on parts of Rivers Avenue and Remount Road, a person can hardly swing a watch chain without hitting a business that bills itself as an internet cafe or sweepstakes parlor. They blend right in with the strip malls they often inhabit. One, at 4307-A Rivers Ave., sports the utterly un-exciting, un-Vegas name "Business Service Center Internet Cafe" on its front window. A banner out front promises something more enticing, though: "Prizes."

Some employees of the sweepstakes parlors — and some of their lawyers — say that what they do is no different than the McDonald's scratch-off Monopoly promotions: You pay for a product or make a donation to a charitable cause, and you get a chance at a prize. But Jared Libet, a lawyer with the S.C. Attorney General's Office who has been arguing for the destruction of contraband computers in sweepstakes cases across the state, says he hears the McDonald's comparison all the time, and he finds it "laughable."

"There are some very, very important differences," Libet says. "One is that you know what McDonald's is selling. You know that McDonald's is selling cheeseburgers, fries, that kind of food product that is obvious from all their advertising, from their signage. You go to one of these internet cafes ... and what do you see on the outside? You see 'Sweepstakes,' or you see 'Win Cash,' or you see '777.' Words like that all indicate that the true product being sold to people are games of chance."

In some sweepstakes parlors, it is actually possible to log on to the internet. At B&G, manager Candy Rice says she has seen college students doing their homework and parents checking in on their children's Facebook profiles. The company provides a useful service in a neighborhood where many families don't have computers, she says.

In at least two local parlors — one on Rivers and one on Remount — customers can't access the internet on the computers. The software on these machines comes from Hest Technologies, a company based in the north Texas town of Haltom City that takes a slightly different tack. Rather than spend money on internet access, the customers are giving money to a charity. It's still a sweepstakes setup, but with a public-relations boost: Some of your money goes to help children.

The charity of choice is Skyeward Bound Ranch, a Texas-based nonprofit organization with the motto "Where hands not only reach ... but touch." During a game — you have the choice between keno and slots — it is actually possible to donate leftover credits to Skyeward Bound via a button at the bottom-right corner of the screen. One North Charleston sweepstakes parlor had posters for the charity on every wall; another kept a single foamboard sign on the floor behind the front counter.

Reached by phone, founder Dalace-Skye Duvall says that Skyeward Bound has been around since 1994 and has received money from Hest Technologies for the past five years. Duvall says that his organization gives money to youth camps, organizations that provide electronic wheelchairs to special-needs adults, and police and fire departments in need of equipment. In April, Skyeward Bound donated money to several families dealing with autism so they could take a cruise out of Charleston. According to the founder of the company Autism on the Seas, Skyeward Bound makes regular donations to families to enable them to go on cruises.

 Opening up a sweepstakes parlor is a risky proposition. One store manager said she didn't want to be quoted or named in a story because, if police started shutting down shops, hers would end up being the first to go.

So what motivates someone to go into that line of business? One manager said he helped open a shop on Rivers Avenue after earning a masters degree in chemistry and being unable to find a job in his field. He had seen similar sweepstakes parlors in his native North Carolina, and he figured it was something he could do until a better career opened up. Now, he sits behind a counter and watches over a bank of desktop computers, all loaded with Hest's sweepstakes software. He keeps a complimentary snack bar stocked and plays the radio when things get too quiet.

The City Paper stopped in five North Charleston sweepstakes parlors in recent weeks, and none of the customers could be seen using the internet. The clientele tended to be older adults; Candy Rice at B&G said her parlor's main competition was the bingo halls.

Some stores are part of chains; others are independent. But all five depend on gaming software from one company or another. In May 2011, before marketing its software in South Carolina, Hest Technologies enlisted the help of Columbia law firms Hall & Bowers and Harris & Gasser to assess the company's legal standing. According to attorney Johnny Gasser, the firms determined that Hest software was legal under the state's gambling laws, and they explained their opinion to senior staff members at the S.C. Attorney General's Office and at least nine of the state's 16 circuit court solicitors.

In their report, the lawyers cite the 1939 S.C. Supreme Court Case Darlington Theatres, Inc. v. Coker, in which the court ruled that a game must have three elements to be considered a lottery: "(1) The giving of a prize, (2) by a method involving chance, (3) for a consideration paid by the contestant or participant." They argued that the third element, the payment or "consideration," is missing in the case of Hest's games because of a "no purchase necessary" clause in the game rules. They also said that, because the computers running Hest games lacked coin slots and a lock-out feature, they are not illegal gambling machines.

Again, Jared Libet at the Attorney General's Office says this argument is bunk. "Hest is confusing our criminal lottery and gambling statutes with our machine forfeiture statute," he says. South Carolina lawmakers fought a long battle over the video poker machines that proliferated in bars and gas stations during the '90s, and the result was a 2000 law requiring law enforcement officers to confiscate and destroy any "device pertaining to games of chance of whatever name or kind."

Let's get back to the McDonald's Monopoly example. When you go to McDonald's during Monopoly season, you're not primarily paying for a chance to win a beach vacation, new car, or cash prize. You're paying for burgers, sodas, and greasy, glorious French fries — and, oh yeah, you might win big-time (but probably not).

The Attorney General's Office holds that this isn't the case at sweepstakes parlors, and that people are going to them primarily to play the games. And a chorus of sheriffs around the state is speaking up in agreement with the A.G.

But there's one other version of the electronic sweepstakes game in South Carolina, and it doesn't involve dark rooms filled with banks of computers. Magic Minutes LLC, based out of Columbia, sells long-distance phone cards, and they promote their product with ATM-shaped videogame machines. When you buy a phone card, you get a shot at a sweepstakes, and the way the sweepstakes results are revealed is through games — keno and poker-like games, for example. Unlike with a B&G Center or a Hest game, customers walk away with a tangible product in addition to their winnings.

Magic Minutes' attorney, Josh Kendrick, works so closely with the company that he says "we" when talking about its affairs. He has defended the machines in a few Midlands cases with mixed results — he lost one on a procedural issue, and another Magic Minutes machine was declared illegal, but a newer one was cleared. He says a case is pending in North Charleston.

"We've got one under advisement that I think will be sort of a good gauge of whether this is going to stay a magistrate issue or move on to the next level," Kendrick says. So far, this year's sweepstakes cases have been decided in magistrates' courts, but Kendrick says it's only a matter of time before a defendant or the attorney general appeals a case all the way to the S.C. Supreme Court. Recently, a sweepstakes cafe owner in Sumter sued SLED, alleging "selective, inequitable, and discriminatory treatment" after authorities raided his business.

Actually, a case about phone card games already made its way to the state's highest court in 2004 with Sun Light Prepaid Phonecard Co. v. State of South Carolina and SLED. In that case, cards came with a built-in pull tab that revealed whether or not a customer was a lucky winner. They were deemed illegal. But Kendrick draws a distinction: Whereas Sun Light charged $1 for a two-minute phone card (effectively 50 cents per minute), Magic Minutes charges 6 to 7 cents per minute, much closer to the normal market rate for the product. He says Magic Minutes machines do well inside convenience stores in neighborhoods where people make a lot of international phone calls, creating a genuine demand for long-distance minutes.

Kendrick doesn't have an opinion on sweepstakes parlors, as the company he represents is trying to defend standalone kiosks in pre-existing businesses, not dedicated parlors full of machines. "I think that would make my argument harder if we did have those," he says. He will say this, though: Cracking down on sweepstakes in a state with a state-run lottery is "the epitome of hypocrisy."

"That's truly gambling. You're getting zero product," Kendrick says. "If you don't win on your scratch-off ticket, you're left with a two-by-two-inch piece of cardboard that probably won't even light on fire."

Jeff Moore, director of the S.C. Sheriff's Association, wants the Legislature to close up any possible loopholes in its video gambling laws. He describes the current legal situation this way:

"I'm going to sell you this bottle of water for $5 ... On the bottom of the bottle is a number, and we're going to draw later in the day a number, and the winning number is going to win $5,000. Now, I'm not selling you a chance to win $5,000, I'm selling you a bottle of water. Is the value of the bottle of water equal to the value of the money you're paying for it? Or are you buying a bottle of water for a chance to win $5,000? That's where we've got the confusion."

In the sweepstakes cases that are working their way through the state's court systems, that bottle of water represents phone cards, internet time, and Caribbean getaway vacations for autistic children.

Moore says he has seen far too much patchwork enforcement around the state. "If you want to make it legal, make it legal. But make it clear that the public policy of the state of South Carolina is that we will legalize video poker ... But if you're not going to do that, don't leave it up in no-man's land."

Some legislators actually tried to color in the legal gray areas in this year's session, but they came up short on votes. Starting in January, Sen. Larry Martin (R-Pickens) pushed a bill, S. 1065, that would have tidied up the laws on bingo, raffles, and sweepstakes, effectively banishing sweepstakes parlors from the state. But the bill stalled out in March when Sen. Robert Ford (D-Charleston) put a minority report on the bill, requiring a two-thirds vote from the Senate to bring it back up for discussion. There was never an attempt to take that vote. It is worth noting that Ford ran for the Democratic nomination for governor in 2010, and part of his platform was bringing back '90s-style video poker. In 2012, Ford has received at least $4,000 in campaign contributions from gaming distribution companies and $1,000 from Magic Minutes LLC. The senator did not respond to requests for an interview.

The House passed a similar bill, H. 4675, by a 98-4 vote, and sent it on to the Senate. But it stopped dead in the Senate Judicial Committee on May 9 after Ford, a member of the committee, submitted yet another minority report.

Even if one of the bills gets taken up for discussion again in 2013, Moore suspects it will meet the same fate. And he's not holding out hope for a speedy resolution in the courts, either. "It could be a year or two or more before the Supreme Court gets a case," Moore says. "And by that time, you're going to have internet and sweepstakes video poker embedded throughout South Carolina — except for those places where there's been an aggressive effort to close them down and prosecute them."

At B&G, Candy Rice says the initial wave of resistance and suspicion will pass, and sweepstakes parlors will be here to stay. "It's like a long, long time ago when people didn't want rock and roll," Rice says, "and then here comes Elvis Presley, and they can't hold it back."

South Carolina’s video gambling laws

SECTION 12-21-2710 . Types of machines and devices prohibited by law; penalties. It is unlawful for any person to keep on his premises or operate or permit to be kept on his premises or operated within this State any vending or slot machine, or any video game machine with a free play feature operated by a slot in which is deposited a coin or thing of value, or other device operated by a slot in which is deposited a coin or thing of value for the play of poker, blackjack, keno, lotto, bingo, or craps, or any machine or device licensed pursuant to Section 12-21-2720 and used for gambling or any punch board, pull board, or other device pertaining to games of chance of whatever name or kind, including those machines, boards, or other devices that display different pictures, words, or symbols, at different plays or different numbers, whether in words or figures or, which deposit tokens or coins at regular intervals or in varying numbers to the player or in the machine, but the provisions of this section do not extend to coin-operated nonpayout pin tables, in-line pin games, or to automatic weighing, measuring, musical, and vending machines which are constructed as to give a certain uniform and fair return in value for each coin deposited and in which there is no element of chance.

Any person violating the provisions of this section is guilty of a misdemeanor and, upon conviction, must be fined not more than five hundred dollars or imprisoned for a period of not more than one year, or both.

SECTION 12-21-2712 . Seizure and destruction of unlawful machines, devices, etc. Any machine, board, or other device prohibited by Section 12-21-2710 must be seized by any law enforcement officer and at once taken before any magistrate of the county in which the machine, board, or device is seized who shall immediately examine it, and if satisfied that it is in violation of Section 12-21-2710 or any other law of this State, direct that it be immediately destroyed.

Source: South Carolina Code of Laws, as published at

CORRECTION: A previous version of this story incorrectly stated that Autism on the Seas was a charity. Autism on the Seas is a for-profit business that does not receive donations. We regret the error.


Showing 1-1 of 1


Add a comment