Court of Appeals deals another blow to sweepstakes

Photo by Pete Labrozzi (Flickr)

The Campbell Law Observer has twice discussed sweepstakes in the past, discussing the history of the sweepstakes in the state and detailing the North Carolina Supreme Court’s decision in Hest Technologies.  The North Carolina General Assembly and law enforcement officials have been battling the owners and operators of sweepstakes games in the state for almost ten years.  In an attempt to silence sweepstakes game forever, the General Assembly enacted N.C. Gen. Stat. § 14-306.4 in 2010.  The law prohibited anyone in the state from using entertaining displays to conduct sweepstakes style games.  Further, the law contained an additional clause, which stated the intent behind the law was to not only prohibit those current sweepstakes style games but also to stop individuals from attempting to bypass the law with different and newer technology.

The North Carolina Supreme Court in the case of Hest Technologies, Inc. v. State ex. rel. Perdue ruled that N.C. Gen. Stat. § 14-306.4 was constitutional, and provided law enforcement officials with the impetus to begin shutting down sweepstakes operations throughout the state beginning on January, 3, 2013.  Even after this decision, however, there continued to be some confusion among law enforcement and the judiciary about exactly how to proceed.  Sweepstakes owners have fought back, and some even succeeded in keeping their businesses open.

The North Carolina Court of Appeals ruled that the new pre-reveal versions of the sweepstakes still ran afoul of N.C. Gen. Stat. § 14-306.4.

Several sweepstakes operators had criminal charges against them dropped or were found not guilty at trial because of a recent tweak in the operation of sweepstakes games.  The change revolves around when customers find out whether they have won.  In previous sweepstakes games, winners found out whether they had won only after playing the game.  However, the newer versions show customers whether they have won before they play the game.  This change to pre-revealing raised the question of whether this new version of sweepstakes games was actually legal.

The North Carolina Court of Appeals ruled earlier this month in the case of State v. Spruill that the new pre-reveal versions of the sweepstakes still ran afoul of N.C. Gen. Stat. § 14-306.4.  The appellants in the case were sweepstakes owners who used the new pre-reveal format.  On appeal, the defendants argued that under the plain meaning of N.C. Gen. Stat. § 14-306.4 the fact the customers now knew whether they had won before playing the game made the games legal.  The law states that it is illegal to “conduct a sweepstakes through the use of an entertaining display, including…the reveal of a prize.”  The Court disagreed with the appellants, finding that regardless of when customers find out whether they won, it is still a game of chance, an entertaining display is still involved, and prizes are still revealed.  Therefore, the pre-reveal sweepstakes games are illegal under the statute as well.

There is too much money involved in sweepstakes games for the operators to go down without a fight.

The Court of Appeals’ decision should provide law enforcement across the state the authority they need to shut down the remaining sweepstakes operators.  Some District Attorneys were under the impression that the pre-reveal style of sweepstakes games were in fact legal.  This decision makes clear, however, that the pre-reveal style is just as illegal as earlier forms of the sweepstakes, and paves the way for a uniform crackdown on sweepstakes operators across the state.  Attorney General Roy Cooper has said he does not believe that this will be the last of the sweepstakes in North Carolina.  He believes sweepstakes operators will continue to adapt and attempt to find gray areas where they can continue to operate.  The book is not yet closed on the sweepstakes, however, as there is too much money involved for the operators to go down without a fight.