Internet Sweepstakes Growing in South Carolina

By Paul Gable

A recent ruling by the North Carolina Supreme Court outlawing internet sweepstakes games has led to a strong push by the internet sweepstakes industry into South Carolina.

There is no state law that specifically addresses the issue of internet sweepstakes gaming parlors or machines. Bills have been pre-filed in both the S.C. House and Senate to close the loophole in the law during the legislative session beginning next week.

Throughout the state, judges interpreting the current state laws prohibiting gambling, have come down on both sides of the issue. In some areas internet sweepstakes games have been declared legal, in others not.

In Horry County, of course, they have been declared both. But, internet sweepstakes cafes are currently operating throughout the county both within city limits and in the unincorporated areas of the county.

Within the city limits of Myrtle Beach, internet sweepstakes parlors are legal – at least no city judge has declared the machines illegal so far. The city freely admits it is in the business of selling business licenses, not determining whether internet sweepstakes games are illegal gambling.

In the unincorporated areas of Horry County, the situation is murkier. County magistrates have declared sweepstakes game computers illegal and the county does not issue business licenses for sweepstakes parlors.

We have seen copies of county business license applications and permits where the business name includes “Phone Co.” Both documents include a statement that specifically says “no sweepstakes and/or internet gaming permitted at any time.”

However, if you go to the business location, prominent “sweepstakes” signs advertise what is really going on inside.

To further confuse the issue, the older, illegal video poker machines, in refurbished cabinets, can be found in some restaurants, bars, clubs and convenience stores throughout Horry County. They are not legal, but they certainly are operating.

The monetary reward from the machines obviously outweighs the fines and penalties if these places are ultimately raided.

The owner of the Sun Cruz Casino boat that operates out of Little River recently complained of the disparity of enforcement on his operation versus internet sweepstakes parlors.

The county wanted to tax the gambling receipts of gambling boats based within the county. The boats did not wish to open their books to the county and fought hard to avoid doing so. A $7 fee per passenger was a compromise position agreed to by both the boats and county officials.

Sun Cruz has a contract with Horry County to pay a fee of $7 per passenger for every passenger boarding the boat. The company stopped paying the fee to the county several years ago and the county sued in November 2011 to enforce the contract and collect the back fees. The case is still pending but the boat is back to paying the fees to avoid having its operations shutdown.

Effective enforcement may be the issue. It was obvious when Sun Cruz stopped paying the fees and the county sued to enforce the contract. It is not as obvious when businesses apply for business licenses stating one purpose, but actually operate another.

Until the General Assembly clearly defines the issue, disparities in enforcement will continue and internet sweepstakes will continue to be legal, at least where a judge friendly to the industry can be found.