April 22nd, 2011

The Casino Next Door

Business Week

Inside a one-story building on the edge of a strip mall in Central Florida, Joy Baker calculates the sum total of her morning bets. It’s almost noon, and she’s down $5. Not bad. Her husband, Tony, sits a few feet away. “This is the most fun we’ve had in 20 years,” says Joy, who is 78 and retired. “At our age, we can’t hike. You can’t pay him to go to the movies. This gives us a reason to get up in the morning.”

Tony concurs. “We enjoy this,” he says. “We will be very bitter if the politicians take this away from us. I will take it personally.”

It’s a Wednesday morning in mid-March, and the Bakers are sitting inside Jacks, a new type of neighborhood business that is flourishing in shopping malls throughout Florida—and across America. Jacks bills itself as a “Business Center and Internet Cafe,” but it looks more like a pop-up casino.

Jacks is about the size of a neighborhood deli. There is a bar next door and a convenience store around the corner. Inside, jumbo playing cards decorate the walls. The room is filled with about 30 desktop computers. Here and there, men and women sit in office chairs and tap at the computers. They are playing “sweepstakes” games that mimic the look and feel of traditional slot machines. Rows of symbols—cherries, lucky sevens, four-leaf clovers—tumble with every click of the mouse.

John Pate, a 50-year-old wearing a Harley-Davidson T-shirt, says he is wagering the equivalent of 60 cents a spin. “This place is pretty laid-back,” says Pate. “You can come here and get your mind off everything. You’re not going to win the mortgage. You’re not going to lose the mortgage. It’s pretty harmless.”

Local law enforcement disagrees. Jacks is located in the town of Casselberry, in the heart of Seminole County, a former celery-growing region that is now a suburb of nearby Orlando. For the past couple of years, the vice squad of the local sheriff’s department has been investigating Jacks and seven other similar businesses around the county for potentially violating state prohibitions on gambling. The cafe owners contend that what they are offering is not technically gambling but rather a form of “sweepstakes” promotions, which are currently legal under Florida state law. In January, after consulting with the sheriff’s department, the five members of the local Board of County Commissioners passed an ordinance designed to shut down the mini-casinos.

The legal fight did not end there. As the commissioners soon learned, along with local officials throughout the U.S., getting rid of Internet sweepstakes cafes is not easy. Shortly after passing the ordinance, the commissioners were hit with multiple civil lawsuits filed in federal court. An attorney representing a chain of sweepstakes cafes headquartered in St. Augustine filed a 49-page complaint alleging, among other things, that the ordinance unfairly restricted the cafes’ First Amendment rights to free speech. A lawyer working for a sweepstakes software company in New Jersey filed a 20-page complaint alleging that the commissioners had violated the commerce clause of the U.S. Constitution.

More than two months later, Seminole County awaits a court ruling. In the meantime, the sweepstakes cafes remain open.

The fight over the legality of the pop-up casinos in Seminole County is part of a broader battle that has been fought for six years in counties across the nation from North Carolina to Texas to Massachusetts. Along the way, cops have raided numerous sweepstakes cafes, confiscated computers, and seized safes full of cash. In September, cops in Virginia Beach, Va., raided a dozen game rooms and confiscated more than 400 computers. In March, police in West Valley City, Utah, shut down two sweepstakes cafes, detained 67 people, and seized 80 computers. Lawmakers in North Carolina passed legislation last year outlawing the business model. In February, Virginia did the same. In April, the Massachusetts Attorney General submitted emergency regulations to shut down the businesses.

And yet the sweepstakes cafes keep spreading.

Read more: http://www.businessweek.com/magazine/content/11_18/b4226076180073.htm


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