Appeals court: NC cannot ban Internet sweepstakes games

Business owners maintain that allowing people to click on video-style games to uncover potential prizes is a marketing tactic to encourage them to buy Internet or phone time.

A Guilford County judge struck down part of the law in November 2010 as a violation of the First Amendment, but appellate Judges Ann Marie Calabria and Linda McGee said the entire law must be invalidated because it was written too broadly.

"Banning the dissemination of sweepstakes results through entertaining displays cannot be characterized as merely a regulation of conduct. Instead, that portion of (the law) which forbids 'the reveal of a prize' by means of an entertaining display directly regulates protected speech under the First Amendment," the appellate judges wrote.

Judge Robert C. Hunter disagreed with the ruling, saying that the law regulates conduct and not speech.

"(The law) does not ban video games nor prohibit plaintiffs from allowing a customer to play their video games," Hunter wrote. "Rather, the statute prohibits plaintiffs, or any person, from conducting or promoting a sweepstakes through the use of a video game. Plaintiffs are free to allow anyone to play their video games so long as the video games are not used to conduct or promote sweepstakes."

The Internet sweepstakes ban took effect in December 2010 and followed an earlier state ban on traditional video poker machines.

Police and sheriff's deputies statewide have been enforcing only parts of the law that were upheld by trial judges and closed down only casino-style games and those "not dependent on the skill or dexterity of the player." Sweepstakes outlets and retailers have continued to operate by replacing slots and Pot-o-Gold with cartoon-style games.

The Internet Based Sweepstake Organization, which represents game operators, applauded the court ruling and renewed their call that North Carolina regulate and tax the machines instead of trying to outlaw them.

"The Internet Based Sweepstake Organization continues to advocate for state oversight and regulation of the video sweepstakes industry. We believe that having state oversight will provide a regulated market with enforcement measures to protect consumers and operators,” the group said in a statement.