A Waynesville sweepstakes operator was charged with a criminal misdemeanor last weekend when she refused to shut down her machines, considered a form of illegal gambling under state law.

Carol Anthony sat at in the back corner of a sweepstakes parlor in Maggie Valley one afternoon last week, getting her last fix of video gaming in before the next day’s ban took away what she claimed was her sole source of fun.

The North Carolina Supreme Court ruled last week that state lawmakers indeed have the power to ban video gambling in its various forms, including the latest reincarnation known as video sweepstakes.

The mayor of Sylva, Maurice Moody, was first to receive a violation notice for an allegedly illegal sweepstakes establishment in one of his rental properties along U.S. Highway 441. And Jackson County Commission Chairman Jack Debman may be next.

The Maggie Valley Board of Aldermen will vote this week whether to relax restrictions on sweepstakes machines for businesses that plan to make their money mostly from the controversial mechanisms.

If the ordinance passes as is, sweepstake-specific businesses can have one machine per every 50 square feet. Video sweepstakes parlors will be required to be at least 1,500 feet away from each other and any established religious institution, school, daycare, library, museum and public park, and the gaming-specific business must also be housed in a building that is a minimum of 2,500 square feet.

Maggie Valley town leaders plan to relax the town’s strict limits on video sweepstakes machines despite the town planning board’s recommendation to maintain the status quo.

Business in Dillsboro has continued to slow during the past few years, to the point that even the cash cow of video sweepstakes parlors pulled out after a brief run.

A couple of businesses have closed this year, including the Dillsboro Smokehouse Bar-B-Que — continuing a slow but steady exodus of shops in the three years since the tourist railroad once based in Dillsboro moved its operations to Bryson City.

Maggie Valley’s planning board voted by a narrow margin last week to keep strict regulations on video sweepstakes machines in place even if it means giving up money the town could reap by taxing the machines.

A huge former antique mall in Macon County will soon become the largest private gambling operation outside of Cherokee when Jokers Wild, a sweepstakes parlor featuring 65 video machines, opens next month.

And, there’s plenty of floor space left to double the number video terminals in the huge, rambling building, located just across the highway from the busy tourist hub Smoky Mountain Hosts.

Heading down the highway toward the Georgia state line, another operation with 30 of these Internet gambling machines will soon be rolled out. In all, there are about a dozen sweepstakes cafés — really, some of these are more like small casinos — operating in Macon County along the stretch of highway leading from Georgia.

Despite criticism that the sweepstakes cafes are simply out-and-out old-style gambling parlors, their popularity is undeniable.

“We’re adults; it’s our choice whether to play or not,” said Joe Donahue, a north Georgia resident who was at Deuces Wild on U.S. 441 one day last week with his wife. “It’s my money.”

By the looks of it, a lot of people feel the same way Donahue feels. This was early on a workday, and several customers were already inside playing. U.S. 441 regulars said that at night, the parking lots of these sweepstakes cafés are packed with cars. Many are reportedly coming in to play from Georgia, explaining the concentration of the sweepstakes parlor on the highway corridor just inside the North Carolina state line.

Legal machinations

More than 1,000 sweepstakes cafes are estimated to be operating statewide despite a ban by the General Assembly on video gambling. When sweepstakes machines appeared in the wake of the ban — looking for all the world like a reincarnation of the outlawed video gambling machines, despite owners’ claims to the contrary — operators of the machines and the General Assembly became locked in a game of cat and mouse, leading to a new state law that broadened the ban and, ultimately, lengthy legal challenges.

Continuing uncertainty about whether the state actually can prohibit these sweepstakes cafes, the state attorney general has recommended that law enforcement not shut them down for now.

A few weeks ago, a North Carolina Court of Appeals ruling, with one of three judges dissenting, found that the current state law prohibiting sweepstakes cafés is unconstitutional. This means these bigger sweepstakes cafes — maybe better termed sweepstakes cafeterias — could be just the beginning of what Macon County and other Western North Carolina communities can expect.

The N.C. attorney general’s office says it will appeal to the state Supreme Court.  

Sweepstakes cafés sell “time” to customers to gamble online or by cell phone. Customers, in return for whatever amount of money they care to risk, log on to their machine of choice and play for the allotted time purchased.

Sweepstakes café owners and managers argue that letting customers “find” cash and prizes via computers is simply buying and selling Internet or phone time — not real gambling, in other words.

Georgia launched a crackdown last year on certain “illegal” Internet cafes.

Under Georgia law, violators found to be operating illegally are typically charged with commercial gambling or for violating Georgia’s RICO Act for racketeering.

Some operators may have turned their sights to North Carolina.

Based on information gathered in the sweepstakes cafés and from names of permits on file with the Macon County Building Department, many of the gambling businesses in Macon County are, in fact, owned by Georgia residents.

Charge ‘em while you got ‘em

Towns across Western North Carolina have imposed steep business license fees on the sweepstakes parlors, hoping to make a little money off the lucrative enterprises operating within their borders.

Franklin recently increased its fees. Franklin charges $2,600 per Internet café establishment and $1,000 per machine. This is an increase from a flat $2,600 fee per business charged previously.

Town Planner Mike Grubermann said establishment owners are making enough money off the machines that even the new fees “are just a drop in the bucket.”

Grubermann said sweepstakes cafes in Macon County have become a major business enterprise.

“It seems like everybody has got to have sweepstakes machines now,” said Grubermann, adding that a dog grooming business in town recently added some “so that people can play while getting their dogs groomed.”

Unlike the town of Franklin, Macon County has no way to cash-in on these sweepstakes parlors, which mark almost the sole form of economic development taking place these days in WNC.

Maggie Valley and Canton currently both demand $2,500 for the first four machines and charge $750 for each subsequent machine. Maggie collects $8,250 a year, while Canton makes nearly $32,000 each year. Waynesville is looking to charge the same amounts.

Waynesville Manager Lee Galloway said the town’s attorney is preparing the necessary ordinance and that he wasn’t certain when the town’s aldermen would consider the law change. Galloway said a new ordinance might not take effect before July 1.

A sweepstakes poker café has opened on South Main in Waynesville with about 40 machines, but Galloway said at most, operations are still the three-or-four machine businesses located in service stations or similar establishments.

Not too long ago, however, two people came into Waynesville’s police department asking for permits to start operations with as many as 40 to 60 machines.

David Connell, who owns the building that has been rented outside Franklin for Jokers Wild, said he’s excited to finally have a renter onboard for the huge, former barn.

“It’s been sitting a year and a half empty. No one else could afford to rent it,” said Connell, adding that the owner of the future sweepstakes café expects to open sometime in April.

Jack Morgan, head of building inspections for Macon County, said the business owner would have to make the building handicap accessible and meet certain other requirements.

If you can’t beat ‘em, then you can at least benefit from ‘em.

Waynesville officials are considering joining the growing ranks of towns that impose fees on businesses that operate sweepstakes machines, a recent reincarnation of the previously outlawed video gambling.

“This board has always taken the position that one, these things are illegal; and two, we are not going to tax something that is illegal,” said Waynesville Town Manager Lee Galloway during a long-range town planning meeting last week.

The controversial machines have been through an “Are they? Are they not?” legal battle during the past few years as state legislators continue to try to outlaw sweepstakes machines and as proponents of the contraptions continue to find loopholes in the law.

“We’ve been back and forth on this a number of times,” Galloway said.

However, with no end in sight, Waynesville has decided to jump on the bandwagon. If they are going to exist anyway, why not benefit from them?

“There are folks out there that are going to find their way around (the law no matter what),” Galloway said.

At the same meeting, town leaders were grappling with where they would find money to build a skateboard park. During their talks about the sweepstakes machines, they realized they could kill two birds with one stone.

Aldermen decided to move forward with fees on sweepstakes machines to fund the skate park and other recreation initiatives.

“I think the idea of funding recreational activities would be appropriate,” said Alderman LeRoy Robinson.

The discussion led board members to another question: How much can the town charge?

Maggie Valley and Canton currently tax the sweepstakes machines in their respective towns. Both demand $2,500 for the first four machines and charge $750 for each subsequent machine. Maggie collects $8,250 a year, while Canton makes in nearly $32,000 each year. The town of Franklin makes $10,000 a year.

Galloway said that Waynesville will likely charge similar amounts. But, it could see higher benefits given the town’s larger size and potentially larger establishments.

A sweepstakes poker café opened on South Main in June 2010, and recently, two people have come into the police department asking for permits to start operations with as many as 40 to 60 machines — meaning that the new fee could be a boon for the town.

“According to Canton and Maggie Valley, they are standing in line to register machines,” said Bill Hollingsed, Waynesville’s chief of police.

No machine owners would be exempt from the new tax; no one will be grandfathered in. Waynesville will issue decals, which people can display on their sweepstakes machines, indicating that the device has undergone the proper inspection.

“They (machine owners) will not argue with that,” said Mayor Gavin Brown.

Future up in the air

While the fees could be a boon, it’s unclear just how long- or short-lived the fees could be. The sweepstakes machines could be outlawed, this time for good, once an appeal works its way through the state courts.

The General Assembly first banned video gambling in 2007. It didn’t take long before so-called “sweepstakes” cropped up as an alternative. Lawmakers viewed the sweepstakes as a reincarnation of video gambling under a different name, designed to circumvent the previous ban. So, the General Assembly went back to the drawing board and passed another ban in 2010 aimed at putting sweepstakes cafés out of business as well. But, lawsuits challenging the ban have allowed the games to continue.

“They found one judge in Greensboro, I think, who found one part of the law and said ‘Well, no, maybe this is not illegal,’” Galloway said.

The ambiguity, meanwhile, has left local law enforcement officers caught in the middle and confused about whether sweepstakes machines operating in their counties are illegal or not.

“The video poker law is unenforceable,” Hollingsed said. “It puts us in a bad position.”

Any gambling machine connected to the Internet is caught in limbo, and law enforcement officials cannot fine or arrest their owners without fear of being held in contempt themselves.

“It is very frustrating for us, I assure you,” Hollingsed said.

The only machines that are definitely illegal are stand-alone devices, including the Lucky Seven and Pot O’ Gold, which are not connected to the Internet.

“Those machines are clearly still illegal,” Hollingsed said.