Everyday, it appears that local, state, or even federal authorities are engaging in raids and shutting down Internet cafés. Why?
Well, there is nothing inherently illegal about a normal Internet café. They are just locations that provide access to the Internet for a fee. They oftentimes sell coffee, soft drinks, and snacks – hence the moniker, “Internet café.”
However, many Internet cafés that have popped up in the past five years – more than often in suburban strip malls, gas stations, and empty office spaces in blighted areas – are offering something more than coffee and access to the Web and email. Rather, the time they sell time on their kiosks have the look, sound, and feel of slot machines and video poker machines. And many of these Internet cafés are providing their patrons cash payouts for seemingly “winning”. So, for all intents and purposes, the Internet cafés are offering a gambling hall without appropriate approval or licensing And more than $10 billion in revenue a year is the incentive to stay in business for these storefronts, numbering in the thousands.
The guise for the Internet cafés (a/k/a sweepstakes parlors) is that the patrons are not actually “gambling”. Rather, they are part of a limited-time sweepstakes promotion. Customers purchase time on a computer or in some cases, long-distance phone time, and are given free entries into a “sweepstakes.” Sometimes they are provided a debit card with magnetic strip to access their account. The number of entries provided depends upon the amount of time purchased or amount spent by the consumer (i.e. 100 entries for every hour of Internet time; 100 entries for every $1.00 spent, etc.) The consumer then goes online and plays a game that looks like slots or poker to see if they “won” the sweepstakes. Prizes can range from as little as $1.00 or 100 more credits, or several thousands of dollars. Some in the gaming industry say this is no different from playing McDonald’s Monopoly game, which is a sweepstakes.
The California Bureau of Gambling Control disagrees. In December 2012, they issued an advisory to law enforcement regarding Internet cafés. It determined that computers that offer the sweepstakes generally described above are illegal “slot machine[s] or device[s]” prohibited by Penal Code section 330b, subdivision (d). As such, the Bureau let all California law enforcement agencies know that it will assist in any way it can toward prosecution or pursuing civil or administrative actions in connection with Internet café gambling operations. Most other states agree – Ohio, Florida and Mississippi passed laws in 2013 banning Internet sweepstakes cafes, and a similar ban is pending this year in Connecticut.
However, the Internet cafés have proven to be quite resilient. They are very easy to set-up. And they rely on word-of-mouth marketing amongst their typical clientele. And these individuals are usually ones skirting the law as it is, so are not interested in drawing the attention of law enforcement. So, as soon as the authorities shut down an illegal Internet café, a new one pops-up. They will change their name, trying to evade local bans by calling themselves something other than an Internet or sweepstakes cafés. They are becoming the new speakeasy – some advertise themselves as basic office service venues while others promote arcade games or “skill” games. Or, the underlying software “pre-reveals” the prize to be won.
So, until legal, regulated, and online gambling gains a foothold, one should expect Internet cafés to remain viable and prevalent. At the same time, one should also expect the government to continue to attempt to eradicate. This could be because the government – state or municipal – bans all gambling. Or, it could be because the government would much rather see those consumers go to legal gambling operations – where they get a cut of the action. The 22 states that have legal commercial casinos collected $8.6 billion in state and local tax revenue in 2012.
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