The Stanly News and Press (Albemarle, NC)

November 25, 2013

Albemarle OKs agreements with gaming shops

By Shannon Beamon, Staff Writer

Monday, November 25, 2013 — In order to avoid liability issues, the city of Albemarle approved settlement agreements with five electronic gaming license holders.

The license holders operated Internet sweepstakes cafes, a form of video gaming business that is now banned in North Carolina.

However, while the North Carolina Supreme Court recently upheld the ban, the city could face legal action over fees charged prior to that ruling.

While the law banning sweepstakes cafes was tied up in court, the city of Albemarle and many other local governments, charged such businesses an operating fee, Assistant City Manager Michael Ferris said.

“In some places it was rather high,” he said.

Over the past year, some of the cafe operators have taken their respective governments to court over the fees.

“[Albemarle] isn’t facing any legal action, and I’m not even sure it would, but we wanted to avoid any potential litigation,” Ferris said.

To prevent similar legal battles, Albemarle City Council said it would be willing to refund any fees charged to sweepstakes cafes while the law was tied up in court, if sweepstakes cafe owners agreed not to pursue any legal action against the city.

“The city council proposed a settlement agreement that essentially says, if agreed to, that each party will hold the other harmless,” Ferris said.

So far, six of the 10 sweepstakes cafe operators in Albemarle have signed the settlements. Five were ready for approval at the last city council meeting.

“One has not responded ...  one came back undeliverable ... one is in the hands of the corporations attorney so he can look over it ... and one person expressed some concern about signing it,” Ferris said.

The city approved the five prepared settlements for amounts between more than $1,600 to a little more than $9,000, totalling more than $23,000.

If more of the settlements are signed, they will be brought before the council at that time.

“This is the council’s way of putting the issue to rest once and for all,” Ferris said.

The legal struggle between the sweepstakes cafes and the state has been a lengthy one and local governments have been caught up in the thick of it.  

In 2006 the General Assembly passed its first piece of legislation banning video gaming machines. However, the terms used to define the law were too narrow to cover the complexity of the sweepstakes cafe system, officials say.

Cafe operators argued successfully that since customers did not pay to play the games, but instead received sweepstakes entries when they paid for Internet or phone services, it was not a form of “gaming” as defined by state law.

In 2008, the law was reworded, but the terms were  still too narrow and minor modification to the gaming machines were able to circumvent that law as well.

In 2010, the current version of the law was passed. However, by then the N.C. Court of Appeals ruled that the terms were too broad, therefore violating freedom of speech.

The Supreme Court ruled against the free speech argument and upheld the current law, but in some places the cafes continue to operate.

Ferris said that was not the case in Albemarle. Each of the 10 sweepstakes cafes shut down in January as they were told to do.

“I’m sure they weren’t happy about it, but they knew it could happen,” he said.

He anticipates that modified electronic gaming machines will be released at some point to circumvent the new law, but any new machines will have to go through the district attorney’s office.

“[The district attorney will] have the final say on whether or not they’re allowed under state law,” he said.

By placing that decision in the district attorney’s hands rather than local governments, the state hopes to avoid conflicting policies.

To submit story ideas, contact Shannon Beamon at (704) 982-2121 ext. 24 or at shannon@stanlynews