By Carolina Journal Staff
- The North Carolina Court of Appeals split, 2-1, in ruling against a video sweepstakes operator challenging local and state law enforcement bans against its machines operating in Robeson County.
- The court’s majority ruled that plaintiff No Limit Games’ machines were comparable to those North Carolina courts have determined to be illegal in previous sweepstakes disputes.
- Judge Jefferson Griffin dissented. He would have upheld a trial judge’s decision to grant a preliminary injunction favoring No Limit Games.
The North Carolina Court of Appeals has ruled, 2-1, against a video sweepstakes operator challenging local and state law enforcement bans against its machines operating in Robeson County.
The decision Tuesday reversed a trial judge, who issued a preliminary injunction last year favoring the sweepstakes business. The Appeals Court already had issued a September 2023 order blocking the lower court ruling.
Judge Toby Hampson’s majority opinion in No Limit Games v. Sheriff of Robeson County compared the current case to previous sweepstakes disputes in North Carolina’s courts.
“In this case, the game appears to be identical in many respects to those held by our Supreme Court in Gift Surplus and other cases to be illegal under Section 14-306.4: a player enters the game, their prize is determined by chance, and they must perform a dexterity task to receive the prize,” Hampson wrote. “Although dexterity and skill may be involved in a portion of the game, ‘when chance determines the relative winnings for which a player is able to play, chance can override or thwart the exercise of skill.’”
“Plaintiff argues that certain specific attributes of its game distinguish it from those previously held illegal under Section 14-306.4. We disagree,” Hampson added.
“Plaintiff’s game is exactly the type of electronic sweepstakes the legislature intended to prohibit by enacting Section 14-306.4: ‘[c]ompanies have developed electronic machines and devices to gamble through pretextual sweepstakes relationships with Internet service, telephone cards, and office supplies, among other products … such electronic sweepstakes systems utilizing video poker machines and other similar simulated game play create the same encouragement of vice and dissipation as other forms of gambling … by encouraging repeated play, even when allegedly used as a marketing technique,’” Hampson wrote.
“None of Plaintiff’s attempts to distinguish its game from the similar games previously held by our courts to be illegal change the fact that chance is core to the game and always determines the amount a player can win,” he added. “Thus, chance predominates skill or dexterity in determining the outcome of Plaintiff’s game.”
Judge April Wood joined Hampson’s decision. Judge Jefferson Griffin dissented.
“We acknowledge the legislature intended to cast a wide net in regulating electronic sweepstakes,” Griffin wrote. “However, where, as here, a plaintiff is able to design a system which ultimately elevates skill over the chance inherent in a sweepstakes, I would hold they have complied with the law. To this end, I would also affirm the trial court’s conclusion of law asserting the balance of equities tilts in Plaintiff’s favor — thus warranting an injunction to prevent harm to Plaintiff and its business.”
The secretary of the state Department of Public Safety and the directors of the State Bureau of Investigation and Alcohol Law Enforcement Branch asked in August 2023 for a “writ of supersedeas” in the Robeson County dispute. The writ blocked Superior Court Judge Michael Stone’s June 2023 ruling favoring plaintiff No Limit Games.
The company filed suit in May 2023 against the three state law enforcement officials, along with Robeson County, its sheriff, and the town of Pembroke. No Limit Games sought an injunction blocking prosecution of anyone possessing its sweepstakes kiosks. Stone granted the requested injunction.
The company defended its games in a document filed at the Appeals Court.
“No Limit’s video sweepstakes are lawful because — unlike all other games that have ever been analyzed by our Courts — no game play is involved in a participant’s entry into the sweepstakes,” wrote the company’s Greensboro-based attorneys. “With regard to winning cash prizes, game play is only used to reveal the prize and, in those games, skill predominates. Accordingly, No Limit’s video sweepstakes is legal because it does not use any video game of chance in either the entry or reveal of a sweepstakes.”
“Video sweepstakes are legal as long as they do not use video games of chance in either the entry or reveal of a sweepstakes prize,” No Limit’s lawyers wrote. “This case requires the courts to determine whether No Limit’s video kiosks use video games of chance in either of those two phases of the … sweepstakes. The relevant test is whether, ‘viewed in its entirety,’ the results of video games ‘in terms of whether the player wins or loses and the relative amount of the player’s winnings or losses varies primarily with the vagaries of chance or the extent of the player’s skill and dexterity.’”
“This analysis must be done on a game-by-game basis,” the brief continued. “Petitioners have not done this game-specific analysis but have, instead, relied on their erroneous position that all video sweepstakes are inherently illegal.”
State officials offered contrasting legal arguments in an earlier court filing.
“Since 2010, North Carolina has expressly banned the operation of video sweepstakes machines,” wrote lawyers from the NC Department of Justice. “This ban was enacted in response to the attempt of certain gambling interests to circumvent the State’s ban on video poker and similar games through sweepstakes that used those games as marketing tools for purportedly legitimate products. To address this problem, the General Assembly banned sweepstakes that are conducted through all video games of chance, such as video poker and all similar games.”
“Despite this legislative action, sweepstakes operators have repeatedly tried to evade this ban and have regularly sought to enjoin law enforcement officials from enforcing the ban for more than a decade,” the petition continued. “As a result, over the course of many cases, our Supreme Court has repeatedly heard arguments from sweepstakes operators that have claimed that their games were legal under the statute. In each instance, however, that Court has unanimously ruled against them.”
State Justice Department lawyers cited a state Supreme Court ruling in 2022 and the state Appeals Court’s August 2023 ruling in a Hickory case as evidence against the sweepstakes operators.
“Flaunting this clear precedent, the superior court in this case issued a preliminary injunction blocking enforcement of the law against another purported e-commerce retailer that … operates ‘nudging’ games: plaintiff No Limit Games, LLC,” according to the motion. “The court did so even though the report that No Limit offered below to show how its sweepstakes games work … demonstrated that chance can control ‘the relative winnings for which a player is able to play’ on each turn of its games. The superior court’s decision to grant an injunction in these circumstances was unmistakable error.”
