State pushes ‘sweepstakes’ cafes bill

4/30/2013

COLUMBUS — The Ohio Senate plans to rush a new moratorium on the opening and expansion of so-called Internet “sweepstakes” cafes to the floor this week as part of a renewed effort to put them out of business.

Current restrictions on cafes that Attorney General Mike DeWine and others argue are illegal gambling operations are set to expire at the end of June.

The extension of the moratorium through June 20, 2014, is designed to give the Senate time to consider House Bill 7, which passed the House by a vote of 66-29 in March.

Senate President Keith Faber (R., Celina) wants to bring that bill to a floor vote in May.

House Bill 7 would prohibit cash payouts and cap the value of non-cash prizes at $10 from machines that critics argue look and act like slot machines. The bill’s supporters bank that these restrictions would remove the profit motive from the games.

Last year the Senate refused to consider the measure and left the bill to die with the close of the legislative session. It had been expected to continue its position favoring regulation of the cafes over a ban, but leadership suddenly took a much tougher stance last week when eyebrows were raised over a GOP fund-raiser with cafe lobbyists soon after a Senate committee appeared to again sidetrack the attempted crackdown.

Mr. Faber called on members to return the campaign contributions, but he attributed the chamber’s tougher position on new information from Mr. DeWine and others on suspected criminal activity associated with the cafes.

Mr. DeWine declined to say what he told Mr. Faber, but he said more problems have been found the further investigations proceeded.

“What we’re seeing is not a pretty picture,” he said. “We have no way to follow the money. We do know there’s a lot more of these slot machines in the Internet cafes than in all of the casinos put together. … Whatever you think of [casinos] — I was against them — we regulate them.

“[The cafes] are not regulated … ,” he said. “That money is going out of state, and in some cases out of the country. It’s a dangerous situation to have that much money and cash floating around without any kind of regulation.”

Roughly 800 cafes registered with the state under the moratorium set to expire in June.

Forty-nine of the registered cafes are in Lucas County.

The cafes contend the sweepstakes are promotional tools for the phone and Internet time cards they sell. Customers can use those cards to make phone calls or surf the Internet. They can also use them to play the electronic machines that the cafes say are preprogrammed with prizes and, therefore, not games of chance.

“Obviously, there is no need for elimination legislation when the attorney general can enforce current statutes to shut down rogue operators, who have erroneously claimed to be conducting sweepstakes as we have seen over the past few days,” said Sam Ferruccio, counsel to Pong Marketing, which uses sweepstakes to promote sales of prepaid phone cards.

“Unfortunately, House Bill 7 would ban the good operators with the bad, killing jobs and revenue for local and state government,” he said.

Mr. DeWine has cited an 8th District Court of Appeals ruling out of Cleveland as grounds to go after the cafes statewide, but that ruling appears to conflict with another out of the Toledo-based 6th District in 2010.

By refusing to hear an appeal from the Toledo prosecutor, the decision had the effect of upholding a Toledo Municipal Court ruling that found that machines at the Players Club on Main Street, owned by Robert Dabish, were indeed a sweepstakes promotion and not illegal gambling.

Mr. DeWine said he does not see a conflict. He noted the 6th District decided a narrow question without getting to the question of gambling.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.