Internet Cafes Storefront Casinos in Florida

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1 Internet Cafes Storefront Casinos in Florida Marc Dunbar Pennington, Moore, Wilkinson, Bell & Dunbar, P.A. 850/

2 What is an Internet Café? Storefront commercial business sale of Internet or telephone time Operates a promotional sweepstakes in conjunction with its sales Consumer receives electronic entries into a sweepstakes corresponding to the amount of time purchased Consumer can also request a free entry into the sweepstakes Consumer typically can either request a reveal at the point of sale or use a kiosk to display if the ticket is a winner Consumer has ability to select from an array of display formats on the kiosk which typically resemble displays on video slot machines

3 Industry overview Estimates of more than 1,000 locations throughout Florida and roughly $1 billion in sales Publicly opposed by Governor, every elected member of the state cabinet and Florida Sheriffs Association Little statewide oversight of any kind Primarily left to the responsibility of local governments Disparate regulatory scheme across Florida depending on the locality in which they are located Scrutiny increasing due to high profile robberies and shootings involving these businesses

4 Is it gambling? A lottery includes 3 basic elements: Prize, Chance, Consideration Internet café lottery analysis: Prize Sweepstakes award Chance Inherent in any game involving a random draw (sweepstakes) Consideration??? Internet café operators and technology designers will admit to the presence of a Prize awarded by Chance, but will dispute the involvement of consideration because Entry is incidental to sale Entry is allowed without purchase Compliance with applicable sweepstakes laws

5 Evolution of Sweepstakes Gambling Legislative legalization of lotteries is prohibited by the Florida Constitution (Art. X, Sec. 7) Lotteries. - Lotteries, other than the types of pari-mutuel pools authorized by law as of the effective date of this constitution, are hereby prohibited in this state. Lee v. City of Miami, 163 So. 486 (Fla. 1935) The Constitution of Florida is a limitation of power, and, while the Legislature cannot legalize any gambling device that would in effect amount to a lottery This for the reason of the wide distinction or contrast between the vice of lotteries, which infests the whole community, and the mischief or nuisance of gaming, which is generally confined to a few persons and places Hardison v. Coleman, 164 So. 520 (Fla. 1935) In [Lee], the court places its interpretation upon the word lotteries, as used in the Constitution, and limits the meaning of the word as there used to such gambling devices or methods which because of their wide or extensive operation a whole community or country comes within its contaminating influence; a scheme having the elements of advertising or sale to any individual of tickets and public distribution and division of prizes according to the numbers upon a ticket previously sold which entitled the owner to participate in a drawing or distribution of prizes to be made at a date in the future.

6 Evolution of Sweepstakes Gambling Lottery prohibited; exceptions (1) It is unlawful for any person in this state to: (a) Set up, promote, or conduct any lottery for money or for anything of value; (b) Dispose of any money or other property of any kind whatsoever by means of any lottery; (c) Conduct any lottery drawing for the distribution of a prize or prizes by lot or chance, or advertise any such lottery scheme or device in any newspaper or by circulars, posters, pamphlets, radio, telegraph, telephone, or otherwise; (d) Aid or assist in the setting up, promoting, or conducting of any lottery or lottery drawing, whether by writing, printing, or in any other manner whatsoever, or be interested in or connected in any way with any lottery or lottery drawing; (e) Attempt to operate, conduct, or advertise any lottery scheme or device; Plays at games of chance by lot Whoever sets up, promotes or plays at any game of chance by lot or with dice, cards, numbers, hazards or any other gambling device whatever for, or for the disposal of money or other thing of value or under the pretext of a sale, gift or delivery thereof, or for any right, share or interest therein, shall be guilty of a misdemeanor of the second degree, punishable as provided in s or s Game of chance for something of value or under pretext of a sale

7 Evolution of Sweepstakes Gambling Little River Theatre Co. v. Hodge, 185 So. 855 (Fla. 1939) Theatre conducted a Bank Night promotion in which patrons were entered into a drawing for their paid attendance to the show The general public was also allowed to enter the drawing provided they stayed close enough to claim the prize in a timely fashion after the winner s name was called Review of Bank Night promotion against anti-lottery statutes Interpreted s as prohibiting the described promotion Increased attendance to the theatre deemed consideration by the court in its lottery analysis We are not unmindful of the far reaching effect of this opinion on the theatre business in Florida. It is the duty of this Court to construe and interpret statutes according to established rules. The wisdom or folly of legislation, and the responsibility therefor, rests with the Legislature under our system of government.

8 Evolution of Sweepstakes Gambling Game promotion in connection with sale of consumer products or services. Game promotion means, but is not limited to, a contest, game of chance, or gift enterprise, conducted within or throughout the state and other states in connection with the sale of consumer products or services, and in which the elements of chance and prize are present. Operator means any [person or entity] who promotes, operates, or conducts a game promotion, except any charitable nonprofit organization. Prohibited acts Game promotions with predetermined winners, franchisees, geographic regions or game duration Arbitrarily reject any entry Fail to award prizes offered Circulate deceptive promotional materials Require an entry fee, payment, or proof of purchase as a condition of entering a game promotion.

9 Internet Cafés and Slot machines? Machines or devices which come within provisions of law defined.-- (1) Any machine or device is a slot machine or device within the provisions of this chapter if it is one that is adapted for use in such a way that, as a result of the insertion of any piece of money, coin, or other object, such machine or device is caused to operate or may be operated and if the user, by reason of any element of chance or of any other outcome of such operation unpredictable by him or her, may: (a) Receive or become entitled to receive any piece of money, credit, allowance, or thing of value, or any check, slug, token, or memorandum, whether of value or otherwise, which may be exchanged for any money, credit, allowance, or thing of value or which may be given in trade; or (b) Secure additional chances or rights to use such machine, apparatus, or device, even though it may, in addition to any element of chance or unpredictable outcome of such operation, also sell, deliver, or present some merchandise, indication of weight, entertainment, or other thing of value.

10 Internet Cafés and Slot machines? Machines or devices which come within provisions of law defined.-- (1) Any device is a slot machine that, as a result of the insertion of any object, such device is caused to operate by reason of any element of chance or of any other outcome of such operation unpredictable by him or her, may become entitled to receive any thing of value ; or (b) Secure additional chances or rights to use such machine even though it may present some merchandise, indication of weight, entertainment, or other thing of value.

11 Internet Cafés and Slot machines? Look for a machine that does the following: 1. Requires the insertion of any object to play 2. Utilizes any element of chance or unpredictable outcome 3. To award either: Something of value or Additional chances to use the machine Incidental sale does not create a safe harbor

12 Internet Cafés and Slot machines? AGO (Sweepstakes readers) Game operates by awarding sweepstakes entries when purchasing long distance phone time or by completing a free entry form and submitting it based on the rules of entry. For each dollar spent on the services, the purchaser receives free sweepstakes points which can be redeemed to play the sweepstakes games. The sweepstakes games are displayed on an interactive computer terminal. Each terminal communicates with a server, which causes the terminal's screen to display whether the participant has won any "win credits" which can be redeemed for cash or prizes. [W]hether the participant wins is determined by the server by randomly selecting the next ticket from a predetermined pool of tickets. If the game contains an element of chance inherent in the machine which determines the outcome of the game, it may be characterized as a slot machine Baker v. Jefferson County Racing Assoc., 960 So.2d 599 (Ala.2007) State v. Crisante, Case No CF-B-X (Fla. 5th Cir.)

13 Internet Cafés and Slot machines? AGO (Pull Tab Vending Machine) Instant Bingo a form of bingo using tickets by which a player wins by opening and removing the cover from the ticket to reveal prize winners Sec (1)(f) It appears that the principal function of the device is gambling, that is, the user inserts money and the machine operates to provide the user with an instant bingo game ticket that, by reason of chance, may entitle the recipient to a money prize. The incidental receipt of merchandise, in this case, the instant game ticket, will not provide justification or authorization for the ownership, sale, or possession of a machine or device described in section , Florida Statutes. The purchase of a card from a vending machine that may, purely by chance, entitle the recipient to a prize would appear to satisfy all three elements of a lottery as prohibited by the statute.

14 Local Government gap filling role Florida's gambling laws, contained in Chapter 849, Florida Statutes, are criminal in nature and therefore, must be enforced by local law enforcement agencies and prosecuted by the State Attorney's Office in the appropriate judicial circuit. (AGO ) Jordan Chapel Freewill Baptist Church v. Dade County, 334 So.2d 661 F.Y.I. Adventures, Inc. v. City of Ocala, 698 So.2d 583 if an area of law is not preempted by the state law, then a [local government] can pass ordinances concurrently on subjects regulated by state statute

15 Local Government gap filling role Hillsborough County - Prohibitory Simulated gambling device defined and possession prohibited Any device that, upon connection with an object, is available to play a computer simulation of any game, and which may deliver a payoff Also defined Device, Object, Play, Simulation, Game, Payoff, and upon connection with Excludes pinball machines, mechanical grab machines, shooting games or other similar games Possession of a machine is an individual offense subject to code enforcement actions

16 Local Government gap filling role Duval County - Regulatory Regulates operators of electronic equipment Operator any person in whose name a commercial game promotion occurs using electronic equipment Electronic Equipment any device used to conduct or reveal the results of a sweepstakes conducted in conjunction with the sale of a consumer product or service or game promotions that display results by simulating a game ordinarily played on a slot machine Background checks into operators ($500 application fee) $2000 annual permit fee, $50 annual license fee per machine Restrictions on alcohol, minors, number of machines, zoning, prize award listings, alternative methods of entry Possession of a unlicensed machines is an individual offense subject to code enforcement actions

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