Video Poker 2.0? South Carolina sees spread of new computer gaming machines
Seated in front of a colorfully lit desktop computer playing “Shamrock,” hair stylist Constance Washington says her dream is to hit it big.
But like most pay-to-play games, things haven't gone so well. Of the 1,000 hours she has spent inside a recently opened arcade on McMillan Avenue in North Charleston, hitting a touch screen over and over, Washington estimates that she is down about $300.
“I'm a gambler,” she admits. “I'm not going to lie to you.”
Twelve years after video-poker machines were outlawed by the S.C. Supreme Court, computerized gaming in public settings is back in South Carolina.
This time it's being marketed as “sweepstakes” rooms, where the money players take home isn't from “winnings,” but rather from credits that are “collected” and “redeemed.”
Conservative state lawmakers say the games are no more than “video poker 2.0,” but so far have been unable to do anything about their creep into convenience stores and Internet cafes, popping up from the mountains to the coast.
One count estimates that there are as many as 1,000 machines in play.
“They want to be on every street corner,” said Senate Judiciary Committee Chairman Larry Martin, R-Pickens, a sweepstakes opponent.
“I just think that's bad policy for all the unintended societal consequences that would come with that. People are induced into playing something where the odds are not in consumers' favor.”
State Rep. Phyllis Henderson, R-Greer, introduced a bill this year aimed at cleaning up state law and making it clear that sweepstakes machines are illegal.
It passed the House but was stopped by a legislative bottleneck in the Senate. Martin, who introduced a similar bill in the Senate, plans to reintroduce legislation next year to ban the machines.
Some South Carolina communities have responded to the new sweepstakes on their own. At least five municipalities have enacted temporary moratoriums on the parlors or arcades, including the city of Charleston.
Goose Creek went a step further, outright banning any business offering “simulated” gambling. “It's just one attempt to get around the video poker laws,” City Administrator Dennis Harmon said of sweepstakes rooms.
What pushed Goose Creek leaders toward a total ban? “Obviously, we thought it was critical to be proactive,” Harmon said, “and not wait upon the General Assembly.”
At the same time, other jurisdictions have tried to make money off the rise of the machines. The elected leaders from the Midlands town of Irmo approved a measure last month that requires sweepstakes operators to pay a $500-a-year fee per machine.
For more than a decade, South Carolina was addicted to video poker. The stand-alone games featured dollar-in credits, and players could win or lose hundreds a day playing on a screen where wins and losses were controlled by computer chips.
At its height, the $2.8 billion-a-year industry had about 36,000 video poker machines in 7,000 locations around the state, including arcades, gas stations and convenience stores.
That all changed when the state's highest court issued a 5-0 decision that essentially outlawed the games as of July 1, 2000. In its ruling, the court declared a statewide referendum held on legalizing the games to be unconstitutional, saying the General Assembly could not delegate its authority to make laws directly to the voters.
Part of the law addressed in the court decision said the industry would be out of business by July 1 if it ever failed to get the voters' endorsement. Since that time, various groups have attempted to bring back video play in some fashion, mostly without success.
The sweepstakes rooms fuel the latest incarnation, with strip malls a favorite start-up location. The sites work by people coming in to buy time on desktop computers.
Users can surf through search engines like MSN or Yahoo, but visits to several sweepstakes spots around the Lowcountry showed them having screens automatically set to poker, slot or keno-type games with titles such as “Bucks and Bucks” or “Crazy Casino.”
Supporters say a big difference in some of these games is that as a “sweepstakes,” the odds of winning any game are pre-determined, and that the outcome is set no matter what the players do.
Washington, the hair stylist, played a game where she tried to get four-leaf clovers to line up. Not all her visits end with her losing. After a couple hours of play one day last week, she was up $4.44.
Pro and con
Just like the battle over video poker in the 1990s, the current debate is drawing out influential leaders on both sides of the argument.
Bob Coble, the longtime former mayor of Columbia, lobbied against both bills offered in the Statehouse this year, representing Pace-O-Matic, a Georgia sweepstakes machine manufacturer.
Coble and sweepstakes supporters argue that an exemption in state law that accompanied the 2000 Supreme Court ruling clearly allows convenience-store operators with a beer and wine permit to have the machines.
“It doesn't make any sense to me that the convenience-store operator can sell you a lottery ticket but not allow a sweepstakes to be played in the store,” he said. South Carolina started its education lottery in 2002.
Opponents of the machines, including the S.C. Attorney General's Office and State Law Enforcement Division, disagree on the exemption, saying it doesn't apply. The agencies, with the help of local law enforcement, are throwing resources at a crackdown on the machines.
SLED Chief Mark Keel said his agency's push began in March after agents received training and counsel from experts on the machines. Since then, agents have seized about 230 units, he said.
Keel said the agency sees the Internet cafes and stand-alone machines as the same thing: “It's all video poker, video gambling.”
Keel said that some of the machines are the very same ones that were sitting in storage after the video poker ban, but with a new front and new name.
The Attorney General's Office just hired a fourth attorney to handle cases on sweepstakes machines because their legality must be decided by judges on a case-by-case basis.
“There's a giant profit in this industry, and the people that own these machines will do anything to make money,” Deputy Attorney General Bryan Stirling said.
Sen. Brad Hutto, D-Orangeburg, a sweepstakes machine supporter, said the state made a mistake by not attempting to capture the revenue through regulation and taxation of video poker. He contends that the state should embrace that approach now.
“The sweepstakes is a private variation of the lottery,” he said. “There is no skill involved in this.”
Hutto dismissed concerns that the machines are exploitative.
“It's up to the individual to exercise their own decision-making authority to decide whether they want to participate or not,” he said.
Too late to stop it?
Debate about whether sweepstakes machines are gambling, immoral or something that needs to be addressed urgently will likely heat up, especially heading into 2013, when a newly elected crop of state legislators returns to Columbia.
Meanwhile, the city of Charleston will soon consider extending its six-month moratorium on sweepstakes cafes from temporary to permanent. North Charleston hasn't made a move against them either way. Last month Berkeley County Council voted down a temporary moratorium on simulated gambling devices.
College of Charleston economics professor Doug Walker said the return of the gaming sites to certain parts of the state probably is a reflection of where video poker took hold 20 years ago.
He sees the state fighting a losing battle in trying to regulate access to Internet gaming, saying the technology is spreading too fast and access expanding so greatly that opponents will always be several steps behind.
Just as one game gets introduced, designers already are working on the next one, he said. “The technology works a little bit quicker than government does.”
Reach Schuyler Kropf at 937-5551 and Stephen Largen at 864-641-8172.