In the midst of its midnight sprint to hastily pass dozens of laws before the 2014 legislative deadline, the Connecticut General Assembly inexplicably turned away millions in potential tax revenue from the multibillion-dollar Internet sweepstakes cafe industry.
Buried in the 300-page implementer bill was a provision to ban Internet sweepstakes cafes.
Internet sweepstakes cafes, also known as convenience casinos, sell cards pre-loaded with sweepstakes entries for cash prizes. The customers can ask the cashier if their cards are winners or swipe the card at a computer terminal to view the results in a game display similar to the animations of video poker or slot machines.
Unlike slot machines in casinos, however, the computer terminals in sweepstakes cafes do not use a random number generator. Much like a McDonald's Monopoly game piece, or a scratch-off lottery ticket, the odds of winning are predetermined. Therefore, even if the customer chooses to view the sweepstakes results through a video poker game, his or her actions in playing the hand dealt have no impact on the outcome — it is merely an illusion of gambling.
Illusion or not, by 2011, Bloomberg Businessweek estimated that there were approximately 5,000 sweepstakes cafes in the United States raking in $10 billion to $15 billion annually.
Yet when presented with this royal opportunity to make the state's budget flush with additional revenue from taxes on these sweepstakes cafes, the legislature folded the best hand at the table.
In doing so, Connecticut might have also unintentionally outlawed many other legitimate forms of business promotions. As states such as Florida and Ohio have recently learned, drafting overly broad statutes to ban sweepstakes cafes places businesses like Dave & Buster's, a chain restaurant with a bar and arcade, and sweepstakes like My Coke Rewards in legal limbo.
The bill passed in the legislature defines the now-illegal "simulated gambling devices" as "any mechanically, electrically or electronically operated machine, network, system or device that is intended to be used by an entrant to a sweepstakes or a promotional drawing [and] displays a simulated gambling display on a screen or mechanism."
The next time you drink a Coca-Cola product, go to the My Coke Rewards website and click on the "Instant Win" category. Enter the code from the bottle cap and then three slot machine reels will spin on your computer screen. Like a casino slot machine, the right alignment of symbols will lead to a prize.
Unfortunately, in those few seconds of harmless fun, your personal computer became an unlawful simulated gambling device in Connecticut.
In this scenario, that old Dell qualifies as an electronic machine that displayed simulated gambling (the slot reels) on a screen. Furthermore, the three elements of gambling — consideration, chance and prize are all present in this seemingly innocuous sweepstake. You paid consideration for the bottle of Coke and received the chance at winning a prize.
Although it is unlikely the sheriff is going to start breaking down citizens' doors to seize their laptops, the legality of legitimate sweepstakes with electronic components are now stuck in a grey zone of criminality thanks to Connecticut's incoherent gaming policies.
Sen. Joan Hartley, D-Waterbury, the leading opponent of sweepstakes cafes, claimed this law was enacted to protect vulnerable populations like senior citizens and low-income minorities from the evils of gambling.
However, Sen. Hartley and the rest of the legislators who voted to outlaw sweepstakes cafes apparently have no problem with those same senior citizens and minorities purchasing lottery tickets or dropping paychecks at the Mohegan Sun or Foxwoods.
States certainly do not have to support gambling. But if Connecticut is going to cozy up to the casino industry and promote its own lottery, then why turn away the much-needed revenue from the Internet sweepstakes cafe industry?
Until the state's legislators review the overly broad language outlawing sweepstakes cafes, businesses should be wary of operating any sweepstakes in Connecticut. At the same time, taxpayers should contact their elected officials and demand an answer as to why a cash-strapped state is turning away additional tax revenue from a perfectly legitimate form of business promotion.
Steven J. Silver is a lawyer in Philadelphia with a special interest in gaming law. He tweets at @SilverGamingLaw and can be reached at email@example.com.