Appeals Court blocks ruling that favored Robeson video sweepstakes operator | Eastern North Carolina Now

A unanimous state Court of Appeals panel has granted state law enforcement officials' request to block a lower court ruling favoring a video sweepstakes operator in a Robeson County case.

ENCNow
    Publisher's Note: This post appears here courtesy of the Carolina Journal. The author of this post is CJ Staff.

    A unanimous state Court of Appeals panel issued an order Monday blocking a lower court ruling in a Robeson County video sweepstakes case. The lower court had granted an injunction in June favoring a sweepstakes operator.

    An appellate panel split, 2-1, in issuing a similar order in a Forsyth County case in August.

    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 for a "writ of supersedeas" in the Robeson County dispute. The writ would block Superior Court Judge Michael Stone's June 23 ruling favoring plaintiff No Limit Games.

    Without explanation, the unnamed appellate panel granted the state law enforcement officials' request on Monday. The trial judge's injunction "is hereby stayed pending disposition of defendants' appeal or until further order of this Court."

    No Limit Games filed suit in May against the three state law enforcement officials, along with Robeson County, its sheriff, and the town of Pembroke. The company 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, Gavin Reardon and Amiel Rossabi. "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."

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    "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 cite a state Supreme Court ruling in 2022 and the state Appeals Court's Aug. 1 ruling in a Hickory case as evidence against the sweepstakes operators.

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    "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."
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