Video games for sweepstakes argued before NC court

GARY D. ROBERTSON - Associated Press

RALEIGH, N.C. (AP) — The state is seeking to preserve a law that attempts to rid North Carolina of sweepstakes that use video-style games to reveal winnings but that companies say infringes on free speech rights and should be thrown out.

A three-judge court of appeals panel heard oral arguments Tuesday on the validity of the 2010 video sweepstakes law — the latest effort by lawmakers to get rid of what they call a form of video gambling. The Legislature banned traditional video poker machines starting in 2007.

Consumers who visit sweepstakes parlors, convenience stores or business centers buy Internet or phone time that gives them the opportunity to uncover potential cash and prizes with mouse clicks on a computer screen. The state says that is just another form of video gambling. However, amusement machine companies and two firms that market long-distance phone and Internet services with the sweepstakes gimmick say the current law crosses the line by banning "entertaining displays" that people watch to learn if they've won.

The cases came to the appeals court after a Guilford County judge, hearing the case involving the two firms, struck down a portion of the law he found to be overbroad. A Wake County judge hearing the amusement machine companies' litigation, however, upheld the entire law.

Equipped with a U.S. Supreme Court decision in June that struck down California's ban on sales and rentals of ultraviolent video games to children, lawyers for the business interests said North Carolina's entire video sweepstakes law is unconstitutional.

"I don't know how you can say video games are banned in some circumstances at some times and not ban them at other times," said Smithfield attorney Kelly Daughtry, who is representing Sandhill Amusements and other companies in one of the two cases. In that ruling, the Supreme Court found that video games "are speech itself" and can't be outlawed, she said.

John Maddrey, the state's acting solicitor general who represented the state during two hours of oral arguments, said the law doesn't interfere with constitutionally protected speech. The state wants the panel to uphold the law, most of which took effect last Dec. 1.

"The statute regulates sweepstakes systems. This is not a referendum on video games," Maddrey said in the second case involving Hest Technologies and International Internet Technologies software. He added that the 2010 law "was reacting to what was happening in the real world with these machines."

The General Assembly can bar the video games when they're defined as part of sweepstakes systems and part of the state's broader goal to regulate gambling, Maddrey told the court. North Carolina has regulated gambling for more than 200 years, according to the 2010 law, whose supporters said was needed because the sweepstakes machines encouraged repeated play by citizens like other forms of gambling.

Adam Charnes, speaking for Hest and ITT before the judges, said there's nothing to indicate that the state has a long history of regulating speech about gambling, which this law attempts to do. The law itself is trying to limit what's being shown on the video screens, and that's wrong, he said.

The state offered no evidence that the sweepstakes run by Internet cafes, which Charnes called "legitimate, lawful businesses supplying legitimate services to customers that need them" are a pretext for gambling. How a person plays the games doesn't change the outcome of the sweepstakes, which are predetermined.

The panel — Judges Linda McGee, Ann Marie Calabria and Robert C. Hunter — asked questions but didn't say when it would rule. The court's opinions are released a few weeks to several months after oral arguments. It's possible one or both cases could ultimately reach the state Supreme Court.

As the law took effect last December, state attorneys told police and sheriff's deputies to enforce only parts of the law that were upheld by both trial judges — and closing down casino-style games and those "not dependent on the skill or dexterity of the player." Other sweepstakes outlets or retailers continued to operate in the days following by replacing slots and Pot-o-Gold with cartoon-style games.