Aug 28, 2023

Video gambling companies keep losing NC courts, but the legislature could make some machines legal

North Carolina’s legislature has passed several laws since 2000 to limit video gaming machines. The industry continue to reinvent the games to find loopholes. (Photo: Joe Killian)

As North Carolina legislators consider expanding casino gambling beyond those owned by American Indian tribes, the latest chapter in the years-long court battles over electronic sweepstakes in the state ended this week with a loss for gaming companies operating in Catawba County.

The legislature has passed several laws since 2000 to limit — and then ban — video poker and electronic sweepstakes. In response, gaming companies tinkered with rules and software in efforts to get around the prohibitions.

That’s where “fish tables” come in. In these games, players shoot images of fish swimming across video screens. Businesses that make money from fish game players say that these are games of skill, not chance.

Law enforcement in Catawba County has been fighting businesses featuring fish tables for years. The latest state Appeals Court decision centers on a game called Ocean Fish King. The object of the game is to use a joystick to shoot fish moving around a video screen. One shot is equal to placing a wager.

Two companies, Fun Arcade and Barracuda Ventures, were appealing a trial court decision in favor of chiefs of police in Hickory and Conover.

An expert hired by the police chiefs determined that the video screen was so crowded with fish, that it was hard to miss hitting one. However, there was no pattern to destroying the fish. For example, five shots could destroy a certain-size fish at one point in the game, and one shot to destroy it later in the game. Players cannot rely on knowledge or strategy to improve; thus it was a game of chance. The game had a measurement called the “return to player calculation,” where 97%-99% of the players’ money was returned to them in cash.

An expert the companies hired said Ocean Fish King is a game of skill because it depends on player dexterity. Players could memorize the game’s patterns, and novice players could improve over time, the expert said.

The Appeals Court judges concluded that the Ocean Fish King is mostly a game of chance, and that the businesses violated the law against operating sweepstakes machines and similar games. They based their ruling, in part on a 2022 state Supreme Court decision against sweepstakes-related companies.

Last year, the state Supreme Court decided that games that look like video slot machines were games of chance and violated the law against video sweepstakes.

The 2022 case involved Gift Surplus, an online retailer that promotes video sweepstakes, and Sandhill Amusements, which puts kiosks into convenience stores and retail establishments where, according to the Supreme Court opinion, mostly low-income customers shop.

These companies have fought in court to claim that their operations are legal for at least a decade. The Supreme Court’s 2022 opinion notes that it was the third time the companies had made it to the state’s highest court “seeking to avoid liability under North Carolina’s ban on video sweepstakes.”

In their journeys through the courts, the companies modified the game in an attempt to convince courts that it was legal.

The Supreme Court decided that modifications to the game, including one where players had to push a button to “nudge” two video symbols into place instead of one, still did not make it a game of skill.

In a federal court case brought by Gift Surplus and No Limit Games, a video sweepstakes software developer, U.S. District Court Judge Catherine Eagles concluded last year that the law does not violate the First Amendment and is not unconstitutionally vague.

Rep. Harry Warren, a Rowan County Republican, has tried for years to legalize video gambling, saying that regulating the activity will help stamp out illegal operations. Under House bill 512, a portion of the revenue from permitted machines would go to state HBCUs and the University of North Carolina at Pembroke, and toward community college loans.

The games would go to approved locations, Warren told a House committee in May.

“We’re not targeting low-income neighborhoods,” he said. “We can actually avoid that from happening. We can take responsibility for where these machines are at.”

Though Warren’s repeated attempts to legalize video gambling have not yet worked, there may be a chance this year.

Republicans have expanded legal gambling this legislative session and may allow more.

Republicans voted overwhelmingly this year to allow online sports betting. They are now considering new legislation to allow casinos in Nash, Anson and Rockingham counties, and possibly one run by the Lumbee tribe, WRAL has reported. House Speaker Tim Moore told WRAL that there was support in the Republican House caucus for video lottery terminals.

Though Republicans have moved toward expanded gambling, conservative Christian groups remain ardently opposed.

John Rustin, head of the NC Family Policy Council, told House members last spring that the video sweepstakes are “professionally designed to keep people playing as long as possible,” NC Newsline reported.

by Lynn Bonner, NC Newsline August 3, 2023

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Investigative Reporter Lynn Bonner covers the state legislature and politics, as well as elections, the state budget, public and mental health, safety net programs and issues of racial equality.