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Issue Date: Vol. 50, No. 12, December 2010, Posted On: 11/30/2010

NC Sweepstakes Status Grows Murkier

Marcus Webb
sweepstakes video game, North Carolina sweepstakes, Judge Paul Ridgeway, Judge John Craig III, video game, gambling machine, online sweepstakes game, Hest Technologies, Internet International Technologies, online gambling, Richard Frye, Sandhills Amusement

CHARLOTTE, NC -- Operators in North Carolina can now point to two conflicting rulings from two different Superior Court judges, issued a week apart, that leave the status of sweepstakes videogames very unclear.

On Nov. 29, Wake County Superior Court Judge Paul Ridgeway ruled that the First Amendment of the U.S. Constitution does not protect sweepstakes videogames.

But Ridgeway’s ruling comes one week to the day after a contradictory ruling by a different Superior Court judge in another county. Both verdicts have equal status as statewide precedents.

On Nov. 22, Greensboro Judge John Craig III found that sweepstakes videogames deserve at least some First Amendment protection in a case that pitted Hest Technologies and Internet International Technologies against the State of North Carolina. [see story]

However, Craig’s Nov. 22 ruling also said sweepstakes videogames may not emulate casino-type game presentations as part of their award reveal. On the other hand, arcade-style gameplay is acceptable in connection with sweepstakes award reveals, the judge ruled.

Industry response to the conflicting rulings has also been mixed. One plaintiff in the case that resulted in the Nov. 29 ruling, Richard Frye of Sandhills Amusement, said he is likely to appeal. In the earlier case, attorneys for Hest and IIT told local newspapers that they did not know if plaintiffs would appeal the Nov. 22 ruling or not. Hest Technologies has issued a statement calling the verdict in its case a victory.

A new law that bans sweepstakes videogames is due to take effect on Dec. 1. But following the contradictory rulings of Nov. 22 and Nov. 29, observers are now uncertain exactly what parts of the law will remain in effect.

According to certain estimates, some 1,000 locations across North Carolina host nearly 3,000 sweepstakes videogames. Nearly all include casino-style gameplay in the reveal phase, according to attorneys familiar with the market.

Yet companies such as Hest have said their products include systems that offer arcade-game reveals of sweepstakes results that are compatible with Craig’s ruling. Hest also said it would introduce videogame sweepstakes products by Jan. 1 that are likewise compatible with state law.

In a similar vein, the Internet Sweepstakes Network announced several months ago that it was developing software that can be used to continue sweepstakes operations, legally.

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