Internet Cafe 'Sweepstakes' Expanding in Arkansas

Last week, a security guard stopped a 39-year-old Maumelle woman as soon as she entered Lucky’s Business Center in Little Rock.

“I need to check your purse … to see that you don’t have a gun,” the security guard said.

Lucky’s, located in a strip mall center just south of University and Asher avenues, has more than 50 desktop computers for customers to use the Internet at 25 cents a minute or send faxes at 50 cents a page.

But that’s where the business center ends. Decorated with posters from the movie “Scarface,” Lucky’s also offers customers casino-type video games such as poker and slot machines to play for a chance to win cash prizes.

Although the video games look nearly identical to casino games, representatives of the Internet cafes insist what they are offering is not gambling but a type of sweepstakes promotion. And that business model is thriving.

Within the last several weeks, in addition to Lucky’s, Cancun Cyber Cafe & Business Center Inc. in North Little Rock and Wild Rides Business Center & Internet Cafe in Blytheville have opened.

“Stop them now before it’s too late,” Florida state Rep. Scott Plakon, R-Longwood, said last week. “We now have an infestation of these things.”

He estimated there were 1,000 similar Internet cafes in Florida.

“They call themselves ‘sweepstakes’ because they claim it’s a pre-ordained outcome, so therefore, that’s what separates it from gambling,” Plakon said. “But to the user, it’s the functional equivalent of gambling.”

Representatives from Lucky’s, Cancun and Wild Rides were unavailable for interviews last week.

The businesses aren’t being regulated by the Arkansas State Racing Commission, which said it only regulates thoroughbred and greyhound racing and the “games of skill” that are offered at Oaklawn Racing & Gaming in Hot Springs and Southland Park Gaming & Racing in West Memphis.

Pulaski County Prosecuting Attorney Larry Jegley said he was familiar with the Internet cafe business model, but as of last week no one has brought him a case file to review for possible criminal charges.

He said representatives of an Internet cafe met with him to present their argument for the legality of their business model, but he wouldn’t say whether he agreed.

“We don’t give advisory opinions as far as whether something is legal or not,” Jegley said.

Blytheville Mayor James Sanders said he was unaware of any complaints involving Wild Rides. And he didn’t know that it had opened. Prosecuting Attorney Scott Ellington, whose district covers Blytheville, also didn’t know about Wild Rides.

Ellington, however, said that he had been preoccupied with working on the case of the West Memphis Three, who were released from prison last month after pleading guilty, but maintaining their innocence, to the murders of three boys in 1993.

The Internet cafe issue hasn’t come to the attention of Gov. Mike Beebe’s office, either, “which isn’t terribly surprising,” said Beebe’s spokesman Matt DeCample. DeCample said the issue would reach law enforcement officials first. But if it does become a concern, legislators might introduce a ban on sweepstakes games at Internet cafes, he said.

“It wouldn’t be legislation that would originate from our office, but anything’s possible,” DeCample said.

 

How the Games Work

Upon entering a business cafe, a customer shows his driver’s license and buys Internet time. The customer’s information is placed on a swipe card. Along with Internet time purchased come entries into sweepstakes.

“With the computer age come ways to reveal your sweepstakes entries,” said Casey Rooks, a spokesman for the Internet Sweepstakes Network in South Carolina, which helps owners establish Internet cafes. “It’s very simple, but at the same time, it’s very complex.”

At Lucky’s, an Arkansas Business reporter spent $10 on Internet time. That time, though, was converted into 2,000 points that were used to pay various video poker and slot machine games.

Depending on the amount wagered, points were deducted from those 2,000 points for each play. But for each win, those winning points were set aside in another category and could be cashed in when the player stopped playing or ran out of prepaid Internet time. The Arkansas Business reporter cashed in his 1,200 winning points for $12.

At Lucky’s, free soft drinks and snacks from a vending machine were handed out to customers. One evening last week, an elderly woman said that she had recently won $125 at Lucky’s.

During the about 30 minutes a reporter was at Lucky’s, none of the dozen patrons — all of whom appeared to be over 50 — were using the machines to check the Internet. Customers had to be 21 or older to enter Cancun and Wild Ridges. At Lucky’s, the minimum age was 18.

Rooks said the sweepstakes games were similar to the games that McDonald’s offers.

When “you buy a Happy Meal, you don’t buy access to their novelty game piece on the side,” he said. “You buy access to the Happy Meal. Whether you choose to peel the Monopoly game piece to see if you won or not, that’s your choice.”

Rooks wouldn’t say how much each terminal could generate in revenue. He said it would depend on the location of the machine.

A Bloomberg Businessweek article in April, though, said a single terminal in a thriving cafe could generate $1,000 to $5,000 a month.

 

Florida Games

Some government officials in Florida and other states see the Internet cafes as gambling houses. But attempts to shut them down have been difficult.

When Seminole County, Fla., passed an ordinance in January to prohibit the simulated gambling devices, it was hit with a federal lawsuit. The Allied Veterans of the World Inc. sued the county on grounds that the ordinance violated the First Amendment and due process.

The lawsuit asks for a preliminary injunction to prevent the ordinance from being enforced. That motion was denied, and that ruling has been appealed.

“Allied Veterans has a right to conduct drawings and sweepstakes promotions as part of their speech-related activities,” plaintiff’s attorney Kelly Mathis wrote in his 49-page lawsuit, which was filed Feb. 1.

“Apparently, it would be acceptable for Allied Veterans to use paper or speak through a tin can connected to another with a string to notify its customers that they had won the sweepstakes, but it is not acceptable to communicate the same material using a computer display,” he wrote in the lawsuit.

Mathis said in an email to Arkansas Business last week that the attacks to the business model are coming because “law enforcement is confronted with something with which they are unfamiliar.”

He said if law enforcement officials and politicians inspected the businesses they would see that the Internet cafes aren’t gambling houses.

“Those officials that look closely at the operation and the law usually conclude that the activity is not only lawful but beneficial to the community rather than a detriment,” Mathis said.

A spokeswoman for Seminole County declined to comment on the issue because of the pending litigation.

Plakon, the Florida state legislator, said that the Internet cafes started appearing in Florida about five years ago and had been growing ever since.

His advice to the state of Arkansas was to make the laws on sweepstakes and Internet cafes clear. “Because if it is not crystal clear, these places will run your state over,” he said. “The laws are not entirely clear [in Florida]. That’s why they’ve been able to proliferate.”

Plakon tried to get legislation passed in the 2011 session that would have banned the sweepstakes games at Internet cafes, but it failed to get out of committee. Now, he said, he has more support, and a bill to ban the games has been filed for the 2012 Florida session.

Plakon said some people had developed gambling problems because of the Internet cafes.

Because they aren’t regulated as casinos, however, phone numbers aren’t posted in Internet cafes to help people who have a problem with gambling, said Brian Kongsvik, helpline director for the Florida Council on Compulsive Gambling.

“It’s not our place to say that [the Internet cafes] are gambling,” he said. “But we can state the facts. And the facts are that the individuals that call us that frequent these places are showing the same negative consequences that people would show when they are gambling at a casino. They’re losing money. They’re having problems paying bills.”