Are Internet Casino Cafes Legal?

Are Internet Casino Cafes Legal?

Are Internet casino cafes legal?

They’re a growing trend.

Have you ever used one of those gas station gambling game machines?

They offer paid internet access in exchange for a few entries to win prizes. Your interest is piqued.

Whose wouldn’t be?

This post explores what internet casino cafes are, how they work, and you should avoid them.

The Basics of Internet Casino Cafes

Internet casino cafes, also known as sweepstakes cafes, are businesses that give consumers the opportunity to buy their goods or services (usually internet access or calling cards)  in exchange for opportunities to win prizes. They began to show up around the mid-2000s in the South. And they quickly multiplied from there. They spread like wildfire in certain communities across the United States.

When the person “buys” the service they get entries that can be used to play a slot machine like video games to win prizes, much like other land-based casino games.

Here’s the general idea:

The player feels more comfortable spending money on the service or product than traditional gambling.

This keeps the player renewing their internet access or buying phone cards to get more entries. You can see the slippery slope that this business model creates.

The player becomes hooked on buying more goods or services for the possibility to win more prizes. The internet casino cafes have become more popular over the years.

And they’ve gained a lot of scrutiny from the gambling community as well as city and state governing bodies.

Legal Controversies and Online Casino Cafes

Internet casino cafes have garnered a lot of notice from local and state gaming authorities and legislators.

The legal validity of cafes has been through a difficult time. At least 20 states have made criminal charges, legal proceedings, and full-on bans of the cafes.

The internet casino cafe industry has created lobbying power to protect its business model and its legal rights. The casino cafe industry has maintained that its business definition and technologies do not legally fall within what is considered gambling in the US.

Some companies have been quite successful proving their innocence.

The national definition of gambling is defined by meeting 3 concepts:

  1. Recognition
  2. Award
  3. Opportunity

The internet casino cafe industry also contends that even without the purchase of their service or product, there are still options provided.

And those options mean that the assessments of the gambling requirements are not met.

2013 brought some hardships for internet casino cafes. The cafes ook some pretty powerful hits:

  1.  Florida, Ohio and serval locations in Califonia made the cafes illegal
  2. Alabama and North Carolina state supreme court cases were filed against the cafe casinos.
  3. The Alabama case claimed the basis of the casino of one of the cafes was found to be a disregard of the states’ gambling laws. During the trial, the defendants attempted to prove that they offered safe legal options for purchase could be accessed.
  4. In North Carolina, the cafes also claimed that their first amendment right was breached via an ‘amusing show”. Ultimately the State’s Supreme Court disagreed and maintained a ban of the online casino cafes.

Online Casinos Court Aftermath

The online gambling cafe continued to attempt to do business under the legal restraints brought to light by the above-mentioned state challenges. The online casino cafe’s solution was to revamp their games.

Online cafe manufactures in North Carolina brought to market “pre-reveal” software steps presumed to fall in line with the ban by showing gamblers the award before the game commenced.

In fear of being banned, a pair of online casino cafes in Florida opened as charitable bingo cafes (in line with state law) in October of 2013. They also added digital pull-tabs (immediate bingo).

After a December 2013 Serasota Herald Tribune article published their business practices, law enforcement filed search warrants on the two businesses requiring release of their financial statements. In protest of following orders, the two locations closed down on their own accord.

In May of 2015, The Federal Court decided to ban 5 online casino cafe software companies from doing business in North Carolina. This was almost the final nail in the coffin for the online casino cafe industry.

Community Outcry

Legal gambling advocates are against the online casino cafes as well. They argue that the cafes are unregulated by local and state laws. Among the main arguments, they claim the online internet cafe games steal customers from the state-run lotteries and other traditional land-based casinos.

In doing so, the lawful gambling advocates argue te online casino cafes are taking away the revenue of government programs funded by legal gambling monies. They also state that states which allow online casino cafes and practice t Indian Gaming Regulatory Act, the cafes can cause runover if the internet casino cafes are not outlawed altogether.

The Florida legal ban of online casino cafes also had disastrous effects on the state’s arcade industry. The law, as written, prohibited machines that are traditional labeled ad ‘betting machines” from awarding values more than 0.75 as well as giving out cards or bills as earnings.

The  Florida law contains protections for arcade restoration games from its coverage. The legislation has gained attention from the amusement industry. The amusement industry is concerned with the Florida law’s prohibitions being also enforced in their attractions.

The particular concern for the amusement sector is the possible prohibition of their installation of card-based credit as opposed to token payouts, as written in the legislation.

January 2015, Disney Parks, Florida’s most popular and highest-earning amusement park, removed claw and extraction devices from their Florida properties in fear of legal response. Dinsey’s representatives support the decision to further clarify the verbiage of the online casino ban in Florida to remove further losses to the arcade and amusement industries.

Where Do Internet Casino Cafes Stand Now?

1.    Florida

Once Florida passed the legislation banning the casino internet cafes, new versions of the business models started to show up around the state. This was the internet casino cafe industry’s attempt to work a loophole around the new law.

Internet casino cafes attempt to rebrand themselves as something new.  The cafes tried to do business as basic office services and arcade game parlors.

Florida has banned the cafes in all instances. In conjunction with a federal probe, the state effectively ended the operation of more than 50 internet cafes. Allied Veterans of the World operated all of them. When the (then) Lt. Governor Jennifer Carroll’s ties to the veteran’s group were questioned by law enforcement, she was forced to step down from her position.

2.    Ohio

Around 800 internet casino cafes were forced out of business in the state of Ohio. Many of the cafes have resumed business as “skilled game” arcades. They are still offering cash payouts in most cases.

Ohio Attorney General, Mike DeWine, said at the time of the shutdowns “They are starting to reinvent themselves. They are going to start coming back.”

3.    North Carolina

North Carolina passed almost identical laws to put internet casino cafes out of business. Like in other states, the NC casino cafes are getting clever in their attempts to reinvent themselves. “They are very good at adapting to whatever law you write”, said North Carolina Attorney General.

It should be noted that gambling is only legal at the two Indian Casinos and the state lottery. Internet casinos have started to employ “pre-reveal” software to work around the state’s gambling laws.

This tactic gives patrons the same reward system for buying internet usage minutes or calling privileges. The only difference is this software gives them the prize before they play the video casino game. The operators of the “new” internet casino cafes claim that they are not breaking the law. Attorney General Cooper has an alternate opinion on the facts.

State officials have been collaborating closely with local DA’s to indict a handful of the owners of the internet casino cafes. Attorney General Cooper commented “they lawyered up pretty well as you can imagine. Numerous cases are still open in North Carolina.

Finally

I think you should have a pretty good idea of the legal issues surrounding internet casino cafes.

Are internet casino cafes legal?

The’ve faced numerous legal challenges.

But they continue to operate under different business guises.

State gambling authorities continue to catch them for skirting state gambling laws, too.

Here’s a quick recap of the legality of internet casino cafes:

  1. States in the US pursued (are persuing) internet casino cafes.
  2. The casino cafes are breaking state and federal gambling laws.
  3. A handful of states have outright banned the operation of internet casino cafes.
  4. Operators are finding new ways to revamp their business models to continue to do business.
  5. The fight legal against the operation of internet casino cafes continues today.

I hope you gained some knowledge about the internet casino cafe industry. I would love to hear your experience and thoughts on this resilient business model. Please feel free to leave a comment below. Happy gaming.

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