A new bill aimed at online “sweepstakes” games has poker machine operators worried
Published: May 9, 2012
A General Assembly bill aimed at shutting down internet-based “sweepstakes” games has Baltimore City’s simulated slot (aka “poker”) machine operators—and at least one city councilman—concerned that it could damage that business as well.
“Someone did a shotgun, and they hit a lot of targets,” said Larry Bershtein, president of the Maryland Amusement and Music Operators Association (MAMOA), after the Maryland Lottery Commission’s most recent meeting on April 26. He was talking about Senate Bill 864, which passed the General Assembly last month and is awaiting Gov. Martin O’Malley’s signature.
Among other matters, the bill would empower the Lottery Commission to define the term “slot machine” for the purposes of regulation. It was passed with the intention of outlawing a new kind of internet-based simulated slot machine called a “sweepstakes,” found in locations thinly disguised as internet cafés where people pay 10 cents per minute to surf the web.
As the General Assembly deadlocked over expanding legal gambling in Maryland, two kinds of gray-market slots purveyors are now at odds, with the traditional operators of old-style non-networked “poker machines” represented by MAMOA worried about the effect—intended or not—the new law may have on their much-maligned and recently heavily taxed business.
The decision could affect Baltimore City’s budget as well, according to City Councilmember Robert Curran (D-3rd District), who last year revamped and increased the city tax on the MAMOA members’ so-called “simulated slots,” which are already illegal under state law when their owners provide a payout to winners. (They’re legal as long as no one pays out, wink wink.) Curran says the sweepstakes operators should have to pay the same tax—which can reach $2,250 per machine, per year—or shut down. “I want my $2,200 per machine,” he says.
Curran says he wouldn’t mind if the lottery commission put the internet guys out of business but he hopes they leave the MAMOA members’ machines alone. The worst outcome, in Curran’s view, would be if the state lottery declared all the simulated slots to be equally illegal. “If the lottery folks extrapolate that the simulated slots are also illegal, that’s a $2 million hole in our budget,” Curran says. “More importantly, the 1,600 machines that are still out there. . . cover a lot of overhead expenses” for the businesses that house them.
“We want to work with you,” lobbyist Kevin O’Keeffe told state lottery commissioners at the April 26 meeting. He told the commissioners that the video games found in convenience stores, bars, and bowling alleys are “very important to the financial viability of a lot of businesses.”
Of particular concern was a provision of the bill regulating “skills-based” games. A skills-based game is by legal definition not a game of chance, O’Keeffe said. And MAMOA members have been ready for more than a year to introduce a game called Prize Farm that pays silver dollars to the skilled. “We could have just put this game out and gone with, ‘It’s easier to get forgiveness than permission,’” he said. “But we didn’t.” O’Keeffe says he wants his group to be a “resource” to the state lottery if and when they begin to define just what is, and what is not, a slot machine in Maryland.
Just before the MAMOA representatives introduced themselves, the commissioners asked State Lottery Director Stephen Martino about the bill. “Is that the poker machines in Baltimore City?” Commissioner George Wagner asked.
“Could be,” Martino replied. “Could be anything” not in the Eastern Shore counties, which are exempt.
Wagner asked if the poker machines, should they fall under the new law, would hence be regulated statewide by the lottery commission. Martino said he doesn’t know yet, but it would be “an unusual outcome” if the machines continued to be allowed (and locally taxed) only in Baltimore City. “We did not ask for this responsibility,” Martino added.
Other than Martino’s public statements, the Lottery Commission would not comment on the bill, as it had not yet been signed into law as of May 3. A gubernatorial spokesman said the governor is studying the bill, along with hundreds of others, to decide whether he’ll sign it.
The bill’s original purpose was to keep bingo halls based in Anne Arundel and Calvert counties legal, but was amended several times and passed with a provision making the Lottery Commission responsible for determining what a slot machine is. The amendment is a response to so-called “sweepstakes” parlors—which seek to skirt state anti-gambling laws by offering “predetermined” prizes ancillary to customers’ purchases of “internet time” at 10 cents per minute. They began cropping up in Baltimore City and County last year.
The games have spread in other states, most notably Florida, and set off debates and efforts to curb them by state and local officials across the country. Virginia and Massachusetts have reportedly banned them. Other states are cracking down. E-mails and calls to game vendors were not returned, but the web site of one vendor, sweepstopia.com, offers to set you up in the sweepstakes business for “less than $300” per machine. Says the home page: let us guide you through the process of starting and managing an internet café!
The first sweepstakes parlor in the city was apparently Lucky PCs on Custom House Avenue, just off the Block. It flew under the regulatory radar for about a year before Liquor Board inspectors visited in February and found it shuttered, according to Chief Liquor Inspector Sam Daniels. City police shut down a second parlor called Hot Spot Sweepstakes II on Reisterstown Road on March 20 because of improper zoning, said Baltimore Police Spokesman Anthony Guglielmi. The owner of that outlet, Terry Land, also owns a second location at 1322 Goucher Blvd., in Towson. A woman who picked up the phone there in late April said he is “never here” but she would relay a message from a reporter. Land did not respond. According to a Dec. 24, 2011 story in The Baltimore Sun, Land said his operation “is just like a McDonald’s or Reader’s Digest” sweepstakes.
The largest local sweepstakes parlor is at Patapsco Bingo, a long-established commercial bingo parlor that expanded into sweepstakes last fall and paid a $45-per-machine city amusement tax on each of its 111 sweepstakes terminals, according to a Sun story. Calls to Patapsco Bingo Resident Agent Joseph Brzuchalski were not returned.
WIN BIG reads a banner in front of Patapsco Bingo, where 111 sweepstakes-equipped computers are housed in a side room on low desks reminiscent of a call center. A few dozen people are playing on a recent Thursday afternoon, amid the sounds of bells and sirens as various machines pay off. A new customer is greeted by a friendly doorman, shown to a window where a clerk offers $10 free internet time (apparently to satisfy the “no-purchase necessary” rules of legal sweepstakes) and suggests an additional $10 purchase of internet time—since the sweepstakes “points” are awarded according to the 10-cents-per-minute internet purchases. The customer shells out $10 and gets a receipt with 2,000 points, and a young man shows him to a machine. “There’s a keyboard on the shelf there in case you want to get on the internet for some reason,” he says.
On the screen are a selection of what look like slot machine games. Choose one and press the button that says “reveal” (not “spin” or “play,” because the prize is supposedly predetermined). For a minimum bet of 32 points, or a maximum of 302, the fruits and bars spin and stop, and points are awarded or subtracted according to how many the player wagers.
In the end the player is left with 475 points. He seeks to redeem them for nearly half his money back, but when he offers a quarter to the clerk to receive an even five dollars, he is told it’s impossible: The house rounds down to the nearest dollar. The clerk hands over four singles and bids the player farewell.
> Email Edward Ericson Jr.