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Popular Internet sweepstakes rooms flourish in a legal 'gray zone'


Stephanie Clark sits in a dark strip mall at a computer screen with five reels spinning leprechauns and penguins. The reels stop and her computer dings — a $24 prize. Her husband sits across from her, having no such luck. They are here often, in a dim room with 50 computers and a handful of people they know by name. At Calypso Sun Cyber Cafe on State Road 60 in Valrico, Clark and other customers spin Vegas-style slots with a click of a mouse, and pick numbers on a screen lotto-style. Are they gambling?

Internet sweepstakes store owners say no. Customers buy Internet time — $6 an hour at Calypso — bundled with casino-style sweepstakes. Critics say the social costs such as addiction and crime play out like gambling, but without the benefits of fees or taxes because the cafes are largely unregulated.

It's also big business. A small storefront cafe can pull in more than $20,000 a week. One gaming industry attorney estimates that, statewide, the cafes rake in as much money as Tampa's Hard Rock casino.

Meanwhile, as many as 1,000 locations like Calypso have sprouted across Florida in the past four years, according to some industry estimates. About 20 sites opened in Hillsborough County in the past year after sheriffs displaced them from Pinellas and Polk counties. They are thriving in Spring Hill and Brooksville.

As the industry booms, Florida and other state and local governments are debating whether to ban or further regulate sweepstakes rooms that operate in what some attorneys call a legal "gray zone."

Clark, 59, typically wins more than her husband, Larry Wasik, who limits himself to spending $100 per visit. He says he breaks even at casinos and sweepstakes cafes, and both venues give him the same thrill.

"It's a tremendous feeling when you hit a jackpot," he said.

Clark doesn't know her overall winnings or losses. But after several hours that day at Calypso Sun, she left with $521.

• • •

Here's how it works: Customers pay for Internet time loaded on a card and get "free" sweepstakes entries. Swiping the card at a computer lets customers check e-mail, do homework, surf the Internet — or play mostly slot-style computer games.

Sweepstakes entries can be revealed with a couple of mouse clicks or, as most customers do, by playing the games.

At 56th Street Sweeps in Temple Terrace, peanuts and sandwich fixings were spread across two counters. Patrons helped themselves as the news played on a television and cartoon characters and fruits spun on screens.

Cafes are typically quiet and smoke-free, and serve free snacks and meals, along with chances to win other freebies. At Internet Cafe on Hillsborough Avenue one recent night, two dozen people played games with names like Bustin' Vegas, Robbin' Some Cash and Lucky Duck Loot. Across the street at C&W Sweepstakes, an attendant boasted of having 90 machines — the most in the county.

Patty Stange, 57, a Sweetbay deli worker, visits Calypso twice a week. She started playing slots at the Hard Rock after her husband died last year. But Calypso is convenient, she said. She won't spend more than $10 a day.

"It's a way to socialize — not a place to get in trouble," she said. "Everyone's friendly."

At Calypso, $1 buys 10 minutes of computer time along with 100 sweepstakes entries. Assistant manager Brooke Nicolodi often gets the same question from new customers: How is this legal?

It's like McDonald's peel-off sweepstakes, she tells them. Winnings are predetermined, and the games are simply a way to reveal them. Customers don't always see it that way: They claim to know when a computer is "hot" and that some games pay out more than others.

Under state rules, no purchase is required, so owners typically give 100 sweepstakes entries a day per person — if asked. Calypso Sun has no set payout percentage, Nicolodi said. It takes in $20,000 to $30,000 a week and typically pays out 80 to 85 percent of that in prizes, she said.

Prizes are usually small: Calypso has two $1,000 jackpots and a $3,000 grand prize. Winnings of $600 or more come with an IRS tax form to file. Or, Nicolodi said, a winner can come back on multiple days to pick up cash in smaller amounts.

Sweepstakes businesses operate under Florida's gambling law exemptions, passed in the 1970s to regulate sweepstakes offered by businesses and nonprofit groups. If a payment was required for the chance to win a prize, lottery laws would apply. Internet cafe owners and employees regularly tell customers just that: They're not paying for sweepstakes entries.

Some cafes operate as nonprofits, donating a portion of the proceeds to charity. Allied Veterans of the World has 35 Florida cafes, and says it donated $6 million to aid mostly veterans.

There has yet to be a Florida case finding that sweepstakes cafes are illegal, said Kelly Mathis, a Jacksonville attorney who represents Allied Veterans. But some sites have been raided by sheriffs, including an Allied Veterans cafe in Pinellas County about four years ago. Rather than take the matter to court, Allied Veterans moved elsewhere, Mathis said.

Law enforcement agencies have different strategies for dealing with cafes. In the Tampa Bay area, authorities have shut down several and seized equipment in recent years. In late 2010, the Pinellas Sheriff's Office sent letters warning cafe owners to shut down in 30 days or face a gambling investigation. The Polk County sheriff consistently roots them out, a spokesman said. Yet Tampa police allowed two cafes to open recently.

Some authorities say they're waiting for the Legislature to clarify sweepstakes laws.

Attorney General Pam Bondi supports such legislation after seeing the cafes proliferate in Hillsborough County. As a prosecutor in Tampa, she tried to go after one.

"We just didn't have the tools to do it," she said.

• • •

Florida is the fourth-largest gambling state in the nation and would be third if sweepstakes cafes were included, said Marc Dunbar, a Tallahassee attorney who represents casinos, pari-mutuels and gaming suppliers. He estimates that the sweepstakes cafes' statewide take likely equals that of Florida's largest grossing gambling venue, Tampa's Hard Rock casino.

And while Florida reaps billions from the lottery, state-sanctioned slot machines and pari-mutuels, it gets very little from sweepstakes cafes. Dunbar, who doesn't represent cafe owners, believes they are illegal under state gambling laws. The businesses, he noted, operate primarily with cash and virtually no accountability to a state agency.

Legalities aside, some say the cafes come with the same social costs as gambling, including crime and addiction. Several cafes around the state have been robbed in the past year, including a heist of several thousand dollars in Orange City.

• • •

The Florida Council on Compulsive Gambling started getting calls from people seeking help with sweepstakes-related problems in 2009. It logged 115 sweepstakes players among the hotline's 2,700 callers in an 18-month period.

The results were disturbing, said Brian Kongsvik, who compiled the data. Sweepstakes customers, the council found, were typically older, less affluent women. Twenty-nine percent were unemployed or disabled, and 80 percent admitted having problems paying bills.

About 40 percent said they had committed crimes to pay for the games, including larceny, embezzlement, dealing drugs and prostitution.

For sweepstakes players, the effect is the same as sitting in front of a slot machine, said the council's director Pat Fowler: "They say they have a gambling problem."

Times researcher John Martin and staff writer Janet Zink contributed to this report. Elisabeth Parker can be reached at [email protected] or (813) 226-3431.

Current legislation

Bills that would ban sweepstakes rooms in Florida have "no chance" of passing this year, said state Sen. Nancy Detert, chairwoman of the Committee on Commerce and Tourism.

State Rep. Scott Plakon, R-Longwood, sponsored a similar House bill to ban the cafes, and said he will file another next year.

Detert, R-Venice, plans to take on sweepstakes laws next year but prefers to regulate rather than ban them because she said older people in her district like the games. "This is the new bingo," she said.

Drafting a bill to regulate the cafes will be complex, she said, because regulating them could jeopardize the $400 million exclusive gaming compact that the state has with the Seminole Indian Tribe.

A Senate bill currently working its way to the budget committee would add no new regulations to sweepstakes cafes, but would move oversight for games with prizes of more than $5,000 from the Department of Agriculture and Consumer Services to the Department of Gaming Control.

Popular Internet sweepstakes rooms flourish in a legal 'gray zone' 04/17/11 [Last modified: Tuesday, November 8, 2011 1:22pm]
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