A piece of legislation known as House Bill 7 has been passed by both houses of the Ohio State Legislature and has been signed by Governor John Kasich, effectively banning the “sweepstakes cafes” that have taken root in the state. While the bill doesn’t entirely ban anything that these cafes do, it does limit payouts to a maximum of $10, which should effectively destroy the business model they rely on.
Unregulated Gambling Storefronts
At the time the bill passed, local media said that more than 600 storefronts were operating sweepstakes machines in Ohio. The unregulated gambling venues weren’t strictly illegal, but they were also clearly operating in ways meant to skirt anti-gambling laws.
Ohio may be the latest state to be dealing with the sweepstakes issue, but they’re far from the first. Several other states either have such cafes operating or have previously passed laws banning them.
Here’s how these venues work. Storefronts offer products such as Internet time or prepaid long-distance phone cards in order to provide the framework of legitimate transactions. However, it’s clear that very few people purchase these types of products anymore, so the real attraction is the “sweepstakes entries” that customers receive every time they purchase a product.
Customers then take those entries to a computer terminal to determine whether or not they’ve won a prize. Depending on the location, players may either find out through a simulated slot machine or scratch-off game, or they may simply be told that they’ve won or lost. Either way, the results of each “entry” are predetermined, so there’s no skill involved in playing these games.
Given the fact that these cafes are both a way of getting around existing laws (although in some jurisdictions, they’ve been deemed illegal based on existing anti-gambling statutes) and that they do not report to state regulators or have to provide any guarantees of fairness in their games, most states have been quick to try and ban such establishments. In some states, this has meant a reinterpretation of existing laws, while others have resorted to either total or (in Ohio’s case) effective bans of these so-called cafes.
Defenders of the sweepstakes cafes have said that states should look to regulate these businesses just like other forms of gambling, rather than ban them. However, many legislators and law enforcement officials say that this would be impractical at best and nearly impossible at worst, as most of the transactions that take place at these venues are made in cash.