WRAL Investigates

Study: Sweepstakes cafés could net N.C. millions

Posted May 12, 2010 6:26 p.m. EDT
Updated May 12, 2010 6:59 p.m. EDT

— As state lawmakers are weighing their options for closing a budget deficit of nearly $800 million, some are exploring taxing the wave of gaming parlors that have opened statewide in recent months.

The so-called sweepstakes cafés, which are sprouting up in strip shopping centers across North Carolina, sell players blocks of time to play games of chance on computers or cell phones. The odds are long, but players who win can get a cash payout.

Although opponents have compared the computer terminals in the sweepstakes cafés to video poker, recent court rulings have determined the businesses are legal.

Sen. David Hoyle, D-Gaston, said Wednesday that the state should consider regulating and taxing the gaming parlors.

"If it's a revenue source of any significant consequence, maybe it's something we have to look at," Hoyle said.

The gaming industry wants state regulation and revenue sharing, but private business owners have said they don't want the lottery to run their operations.

Hoyle asked Tom Shaheen, director of the North Carolina Education Lottery, to analyze the impact of having the state regulate "video lottery terminals" in the sweepstakes cafés. WRAL Investigates obtained Shaheen's report, in which he estimates North Carolina could net $350 million the first year and $576 million by the fourth year.

In West Virginia, which has regulated such video terminals for years, they account for 88 percent of the state's nearly $1.5 billion in annual lottery proceeds. In that state, though, the video games are allowed only at race tracks and places with liquor licenses.

"To pay some of those games, you probably need to be drunk to do it, because you're not going to win," Hoyle said.

Sweepstakes café opponents in the General Assembly said they have enough votes to ban the businesses this legislative session.

"We need to make a statement once and for all, not provide anymore loopholes for folks to get around and simply stop it," said Rep. Ray Rapp, D-Madison.

Meanwhile, some communities are so riled up over what they consider legalized gambling that they've taken various steps to regulate it.

Apex and Holly Springs leaders recently approved zoning rules to classify sweepstakes cafés as "adult businesses," similar to strip clubs. The rules restrict the businesses to industrial zones and limit their hours of operation.

"We decided that wasn't appropriate for Apex," Mayor Keith Weatherly said. "We restricted them as much as we can. We can't outlaw them. We can't forbid them to be in Apex, but we tightened up as much as we could."