Video gambling industry undeterred by steep fees for “sweepstakes” machines

The North Carolina Court of Appeals recently upheld a state law that bans video gambling everywhere but the casino in Cherokee.

The video gambling industry challenged the ban, claiming it was unfair to outlaw the machines statewide while allowing them at Harrah’s Cherokee Casino. The court, however, ruled that the exemption is a policy decision and does not violate federal law.

Meanwhile, video sweepstakes machines are quickly proliferating around the state as the industry capitalizes on an apparent loophole in the law. Video sweepstakes are largely a reincarnation of video gambling under a different name and are the subject of a separate lawsuit that is still pending.

Towns are enacting a steep business license fee for the machines as a stopgap measure. But it doesn’t appear to be a deterrent.

Since Franklin instituted a $2,600 annual fee in December, eight vendors have paid the fee to open their doors.

Franklin Town Manager Sam Greenwood said business owners probably realized the venture was lucrative enough to justify paying the hefty fee.

Greenwood suspects that the new policy could push cyber sweepstakes outside of Franklin and into county territory. No county policy has been put in place to regulate the machines.

The Town of Canton held a public hearing on Tuesday, Jan. 12, on its own ordinance on sweepstakes machines. The proposed amendment calls for a $2,500 privilege license fee for the first four machines, with $700 for each additional machine. It also includes a zoning ordinance limiting machines to four business districts. In addition, the measure calls for income from sweepstakes terminals to not exceed 15 percent of the total gross income of the business.

Canton Town Manager Al Matthews estimates that about eight establishments in Canton currently operate sweepstakes machines.

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