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Carolina Beach No Longer Issuing Sweepstakes Parlor Permits

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CAROLINA BEACH - The Carolina Beach Town Council was informed December 18, the Town will no longer issue permits for Internet Sweepstakes Parlors or machines and will not issue refunds for license fees. This follows a decision of the North Carolina Supreme Court on Friday December 14, upholding a state law banning such electronic machines deeming it gambling. There are a number of businesses in Carolina Beach that operate as standalone Internet sweepstakes parlors while other existing businesses such as restaurants offer a small number of machines for play.
During the Council's December 18, meeting Town Finance Director Dawn Johnson said, "That is an on going process and the police department is definitely involved with determining the dates for not allowing the businesses anymore. We will keep you updated on what we find out. A pending date now is January 3rd, but we are waiting to hear from the Attorney General."
She said, "As it stands now we are not to issue any refunds for anything and we are not to issue any new sweepstakes licenses."
Councilman Steve Shuttleworth said it's not a Town issue, but, "It was the North Carolina Supreme Courts opinion the ban on Internet sweepstakes is upheld and therefore are not an allowable use. We have several of those in Carolina Beach so it’s going to impact some private business owners unfortunately in a negative way."
According to an opinion issued by the NC Supreme Court, "After careful constitutional analysis, we conclude that" North Carolina General Statute 14-306.4 "as enacted in 2010 does not violate the First Amendment because it regulates conduct, not protected speech."
The opinion states, "In an effort to curtail the use of a perceived loophole in the State’s gambling laws, the General Assembly passed N.C.G.S. § 14-306.4, which bans the operation of electronic machines that conduct sweepstakes through the use of an “entertaining display.”... Claiming an unconstitutional restriction on their freedom of speech, plaintiffs challenged the new law. The Court of Appeals declared the statute an overbroad restriction on protected speech and struck it down as unconstitutional.  We conclude that this legislation regulates conduct and not protected speech and now reverse" the Court of Appeals opinion.
In 2006 the General Assembly banned video poker and all other forms of electronic gambling. Since that time companies have developed systems that appear to sidestep traditional gambling restrictions by combining legal sweepstakes with video games that simulate a gambling environment, thus purportedly removing the “bet” or consideration element of gambling.
Since the ban on video poker in 2006, the manufacture’s have found ways to reprogram the machines in an effort to capitalize on perceived loopholes in state law. Several times they have been granted injunctions by courts protecting them from law enforcement. They claimed the state could not legally regulate what appears on the screens because it was protected by the U.S. Constitution as free speech.
The Supreme Court decision states that sweepstakes operators, "market and sell prepaid products, primarily long-distance telephone and/or high-speed Internet service.”  As a promotion, plaintiffs have developed electronic sweepstakes systems. Sweepstakes participants obtain entries from a predetermined, finite pool of entries - some of which are associated with a prize value and some of which are not - either after a qualifying purchase of plaintiffs products or at no charge upon request. Participants receive a magnetic stripe card which allows them to access a gamestation terminal and stores the information related to their individual sweepstakes entries. At the terminal “the program reveals the content of the sweepstakes entry using different displays that simulate various game themes.”  These simulated games do not determine, and cannot modify, the sweepstakes outcome or any prize that might be associated with a sweepstakes entry. Any prize amount won through the sweepstakes may be claimed in cash at the counter of the establishment or may be used at the game terminal to purchase more of the product in one-dollar increments, thereby enabling the customer to immediately receive more sweepstakes entries." The Court of Appeals majority concluded that both the announcement of the sweepstakes result and the video games are protected speech and that the definition of “entertaining display” in the statute is virtually unlimited.  The State Supreme Court reversed that decision saying the state law regulates putting the machines into operation which is conduct and not free speech.
Carolina Beach Police Chief Kurt Bartley said area law enforcement is communicating with the District Attorney's office and will likely begin enforcement the first week of January eliminating such operations.