JUNE 2012 ADVERTISING, MARKETING & … & Gilbert, D&G, internet cafe, Sweepstakes Cafés; Internet...
Transcript of JUNE 2012 ADVERTISING, MARKETING & … & Gilbert, D&G, internet cafe, Sweepstakes Cafés; Internet...
ADVERTISING, MARKETING & PROMOTIONS
>> ALERT
JUNE 2012
GOVERNMENT CHALLENGES INTERNET SWEEPSTAKES CAFÉS Recent legislation and state Attorney General actions relating to Internet sweepstakes cafés may be a sign of greater
legal scrutiny of games and promotional tactics that skirt or come close to the line of lotteries and gambling.
For instance, Michigan Attorney
General Bill Schuette has asserted
that Internet sweepstakes cafés –
in which Internet sweepstakes players
buy something of value, usually
Internet time or phone cards, in
exchange for points that are wagered,
accumulated, and cashed in for
money – violated the state’s Gaming
Control and Revenue Act. Attorney
General Schuette characterized
Internet sweepstakes cafés as
“nothing more than unregistered,
illegal casinos” and directed his
Alcohol & Gambling Enforcement
Division to issue “cease and desist”
letters to nine Internet sweepstakes
cafés that he alleged were operating
illegal gaming operations. The Michigan
Attorney General’s action followed its
pursuit of eight similar operations,
which closed down after the Attorney
General’s office reached an agreement
with a gaming software supplier.
The cease and desist letters warned
of possible legal action if the owners
and operators refused to halt ongoing
gambling operations that Attorney
General Schuette asserted violated
Michigan’s gaming laws, which prohibit
unregulated gambling and authorize
only pari-mutuel horse racing, bingo,
the state-sponsored lottery, certain
charity events, and casino gambling
licensed under the Michigan Gaming
Control and Revenue Act.
Attorney General Schuette said that
should any of the nine locations refuse
to halt operations, he would take
“immediate action” to shut them down
through the criminal or civil court system.
Moreover, he declared that investigations
still were pending against the owners
and operators of these businesses
that, he warned, “may result in
additional criminal or civil charges.”
NEW LEGISLATIONAuthorities also have raided Internet
sweepstakes café businesses in other
states, including Alabama, Texas,
Massachusetts, Utah, Florida, Ohio,
Georgia, and Virginia, but some
found that they were unable to easily
prosecute these businesses under
existing anti-gambling or other laws.
As a result, a number of cities and
states have introduced legislation to
increase regulation of, and in some
cases to ban, Internet cafés. The
legislation was meant only to target
“Internet sweepstakes cafés” that allow
patrons access to the Internet and
those that purport to sell goods and
services but that use sales as a pretext
to allow people to play illegal online
slots, sweepstakes, and other games.
However, in many instances it is
THE BOTTOM LINE
It is important to recognize that
much of the new legislation targeting
Internet cafés is extremely broad and
therefore could encompass activities
beyond what they were meant to
address. Anyone conducting “games
for game’s sake,” including penny
auctions, reverse auctions, and the
like, and possibly other promotions
involving a purchase and a chance
to win a prize, may be inadvertently
running afoul of these laws.
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Attorney Advertising
ADVERTISING, MARKETING & PROMOTIONS>> ALERT
JUNE 2012
drafted so broadly as to encompass
almost any promotional lottery. For
example, Georgia recently amended
the statutory definition of “lottery” to
include the “payment for merchandise
or services and the option to participate
in . . ., even if others can participate
or play for free, a no skill game . . .
whereby the player is able to win
a cash or noncash prize, other
consideration, other evidence of
winnings.” Although the fate of these
laws may be uncertain – North Carolina’s
ban on Internet sweepstakes cafés
was held to be unconstitutional, but
the North Carolina Attorney General’s
Office is appealing the decision to the
state’s highest court – there are frequent
legislative developments in this area
(the Georgia law only took effect in May).
FOR MORE INFORMATION
Joseph J. Lewczak Partner 212.468.4909 [email protected]
or the D&G attorney with whom you have regular contact.
Davis & Gilbert LLPT: 212.468.48001740 Broadway, New York, NY 10019www.dglaw.com
© 2012 Davis & Gilbert LLP