State attorneys had asked the appellate court to stay the ruling of Guilford County Superior Court Judge John Craig. He determined in November that part of the new law banning video sweepstakes machines was too broad and violated free-speech rights.
The decision means games that don't resemble video poker can keep operating.
The General Assembly approved the law in July. Supporters of the measure hoped it would quash illegal gambling parlors that had used loopholes to get around a ban on traditional video poker machines.
The appellate court also declined to fast-track the case, which could have resolved the issue more quickly.
The sweepstakes industry wants state officials to regulate and tax the businesses, but the new Republican leadership in the General Assembly isn't playing along.
"The reason we outlawed it was because it's a huge scam on the poor and because it harms the economy of the areas, especially small towns, where these facilities are located," House Majority Leader Paul Stam said.
Stam, R-Wake, said he expects that courts will eventually uphold the state law.
Although Gov. Bev Perdue signed the law, she said in a recent interview that she does not philosophically oppose gambling and indicated she would not rule out the possibility of supporting an effort to legalize Internet sweepstakes.
“I don’t know where I am on it, but if you do it, it’s got to be regulated,” she said. “It’s got to be controlled. It’s got to have oversight.”
Industry supporters say that if it were regulated and taxed, sweepstakes would generate at least $500 million for the state.
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