Henderson: The Internet sweepstakes two-step

Feb. 13, 2013 @ 12:51 PM

The libertarian bumper sticker — “Don’t steal from the government; it hates competition” — takes on added meaning every time North Carolina officials try to shut down Internet sweepstakes operations.

Sweepstakes opponents — including supporters of the N.C. Education Lottery’s would-be gambling monopoly — thought they had the upper hand in December, when the N.C. Supreme Court upheld a state ban on Internet sweepstakes machines, saying they were not protected by the First Amendment to the U.S. Constitution. The justices said the General Assembly’s ban regulated conduct rather than speech, so the First Amendment did not apply.

Even so, several hundred Internet cafés continue operating in the state — among them, the infamous venue formerly known as the Randy Parton Theatre — as vendors modify their software to make the devices operate more like an arcade game than a slot machine. Every time lawmakers or the courts have tried to outlaw the sweepstakes parlors, the vendors have developed a variation of the games that are not covered by the law. And the dance continues.

It shouldn’t.

I lived in Las Vegas for four years, and I came to appreciate that gambling is not merely a harmless form of entertainment. In excess, it undermines essential foundations of a self-governing civil society — industry, thrift, patience, the concept that “working hard and playing by the rules” leads to financial, social and spiritual benefits, among others. Gambling can prey on the poor, who can come to believe that it’s better to dream of an easy payday than gain the dignity from earning a paycheck at an honest job.

The gambling moguls do pretty well for themselves, too. Steve Wynn and Sheldon Adelson did not build billion-dollar casinos because their patrons came home winners. And don’t get me started on the bank of slot machines that greets you every time you walk into a Walgreens or Kroger/Ralphs supermarket in Nevada.

But I’m not here to preach against gambling, or to call for an end to the sweepstakes business. Plenty of other risky forms of entertainment are legal, too — including many extreme sports and physical contests — and should remain that way. Adults should be treated as responsible individuals.

That said, the state’s campaign against video sweepstakes operators is sheer hypocrisy. North Carolina does not merely operate a lottery, it pimps for it regularly, enlisting onetime celebrities like Ric Flair to pitch individual games and — more shamefully — public school teachers and administrators to promote the allegedly wonderful programs made possible only by the sale of those lottery tickets.

State lawmakers are considering legislation that would bring tax revenues from sweepstakes operators to Raleigh. Good. The previous session of the General Assembly expanded the gambling options at the Harrah’s Cherokee casino, citing its “economic development” potential, though lawmakers should have captured more revenues from the expansion.

Local jurisdictions also appreciate the revenues they’re receiving from the sweepstakes parlors. The former Randy Parton Theatre was a $20 million white elephant before Roanoke Rapids leased the city-owned facility to HSV Entertainment, an Arkansas-based company that operates sweepstakes terminals and books live entertainment there.

The lease includes an option to purchase, which will become more likely if the sweepstakes parlor remains open and profitable. Meantime, the city is collecting tax revenues from each sweepstakes terminal in the theater.

If a government-run lottery is to continue, state policymakers must come to grips with the existence of legal private gambling, and determine ways to regulate it and get tax money from it. Otherwise, the government looks like little more than a mobster determined to strong-arm competitors out of his territory.

Rick Henderson (@deregulator) is managing editor of Carolina Journal.