Los Angeles Business Journal

Sweepstakes Not Such Safe a Bet?

GAMBLING: Sheriff may pull plug on games at Internet cafés. By Alfred Lee Monday, September 23, 2013
Bellflower’s I-Biz, a café that runs a sweepstakes promotion.

Bellflower’s I-Biz, a café that runs a sweepstakes promotion. Photo by Ringo Chiu.

A customer who plunks down $5 at I-Biz Internet café in Bellflower gets more than just an hour of computer time or the use of a copying machine. He also qualifies to enter a promotional sweepstakes, and can learn whether he’s won a cash prize by playing a simulated game at a computer at the café.

Business centers like I-Biz offering such promotional sweepstakes have exploded across Los Angeles. But they have also come under attack from local law enforcement agencies that believe the cafés violate local gambling laws.

The L.A. County Sheriff’s Department has raided at least nine cafés in Carson, Compton and Lancaster this year, saying the computers are acting as slot machines. Last month, South Gate city officials instituted a moratorium on new Internet cafés offering sweepstakes prizes, and revealed its police department had begun investigations into three existing cafés.

“It’s a new phenomenon,” said Raul Salinas, South Gate’s city attorney. “We have not had to deal with it before.”

Business owners, insisting they are compliant with the law, are fighting back. I-Biz, which is still open, and LB Net, a Compton Internet café that closed this month after a Sheriff’s Department raid, have started legal proceedings against the department.

“It’s similar to other company sweepstakes at supermarkets, fast food places and so forth,” said John H. Weston, an attorney representing I-Biz and LB Net. “They manifestly do not violate slot machine statutes.”

I-Biz opened in a strip mall on Bellflower Boulevard two to three months ago, offering computer use and copying and fax services. Customers who make a purchase there earn points they can use to enter a sweepstakes offering cash prizes ranging from a few cents to thousands of dollars. In order to comply with California law, customers who don’t buy anything can earn a smaller number of sweepstakes points. State regulations allow businesses to run promotional sweepstakes as long as they do not require customers to make a purchase and do not directly charge for a chance to win. Businesses are not allowed to run lotteries, which charge customers for entry, or to operate slot machines.

According to Weston, I-Biz and LB customers can trade their points in to discover whether they’ve won a prize at the counter or on a computer. If they use the computer, the customer enters a passcode and can either instantly see the results or can opt to play a game that resembles a slot machine, poker hands or non-casino games such as one that features a pirate theme. Weston said that whether or not a player has won is predetermined, and that the playing of the simulated “game” – purchased from a third-party software developer – is just an entertaining way to reveal the result with no effect on winning or losing. He claimed that because the result is predetermined, and because the games are not “house-banked” – that is, contestants are not playing directly against the Internet café – the operation does not meet the legal definition of a slot machine.

Page 1 of 2

Prev