In 2013, sweepstakes parlors were banned in Florida, Ohio and several California municipalities. In December 2013, following a report on them by the Sarasota Herald-Tribune, the two locations were issued subpoenas by police requesting access to their financial records. Rather than comply, the two locations voluntarily shuttered instead. In October 2013, two Florida sweepstakes parlors reopened as charity bingo parlors (which are legal under state law), but also offering electronic pull-tabs (“instant bingo”). In Alabama, one operator’s sweepstakes model was found to be in violation of state gambling laws; the court agreed with District Attorney Barber that the system used fit the description of a slot machine, that chance occurred at the point of sale, and that consideration was not negated even though it was possible to obtain free chances. Sweepstakes parlor operators have contended that the prizes are predetermined, and therefore the system does not meet the criterion of chance.
Multiple U.S. states have enacted laws designed to ban or restrict the operations of sweepstakes parlors. They began to appear in the Southern United States some time around 2005, and quickly proliferated. In addition, in states where a compact exists under the Indian Gaming Regulatory Act, if sweepstakes parlors are not made illegal they may continue to conflict with the compact. Sweepstakes Gaming” Company Guilty of Running Illegal Gambling Operation”. In January 2015, as a cautionary measure, Disney Parks removed redemption and claw machines from the arcades of its Florida resorts: representatives of the company have supported attempts to clarify the wording of the sweepstakes parlor ban to reduce its potential effects on arcades. Freskos, Brian (January 1, 2013). “Software tweak could keep sweepstakes parlors operating”. Poirier, Ray (January 7, 2013). “Casino Insider”. A sweepstakes parlor sells a service or product, usually internet access or telephone cards. A sweepstakes parlor (or sweepstakes café) is an establishment that gives away chances to win prizes with the purchase of a product or service, typically internet access or telephone cards. In one example of a sweepstakes parlor that sells phone cards, the operator gives away 100 chances for every dollar spent on a phone card.
The software necessary to operate a sweepstakes parlor may be obtained from one of a number of companies; in return for providing the software, a percentage of the profits is typically paid. Purchased entries are redeemed using computers at the establishment, which contain specialized software that presents whether a participant has won a prize. The sweepstakes industry however, attempted to work around these restrictions by restyling their games; in North Carolina, sweepstakes software providers implemented “pre-reveal” mechanisms, which attempted to comply with the prohibition of “entertaining displays” by revealing the player’s prize in plain text before the game is played. In North Carolina, the industry argued that a statute prohibiting sweepstakes from using an “entertaining display” violated their First Amendment rights, but the North Carolina Supreme Court disagreed and upheld the ban. North Carolina Supreme Court (December 14, 2012). “No. 170A11-2: Sandhill Amusements Inc., etc. v. State of North Carolina, etc”.
Cases pertaining to the parlors reached the state supreme courts of both Alabama and North Carolina. Sweepstakes parlors have attracted scrutiny from law enforcement, and local and state legislators. Although the law does contain specific distinctions meant to exclude arcade redemption games from its scope, the law attracted concern from the arcade industry, who felt that it could be interpreted to ban their operation-especially at facilities that use card-based systems for credits rather than tokens. Operators and the companies that provide the systems used maintain that they operate in accordance with laws governing promotions and sweepstakes, but critics of sweepstakes parlors have argued that these establishments are designed to exploit technicalities to skirt gambling laws, and that their patrons are more interested in using the facilities for gambling than actually using the services that they had purchased. There are also installation companies that provide assistance in setting up cafes. There is controversy associated with the operation of such businesses and whether or not they violate anti-gambling laws. Computer terminals are set up inside the parlors, where patrons can see if they have won a prize by playing a casino-style game, similar to a video slot machine. They have also held that chances are given even without purchase, and therefore the criterion of consideration is not met.