Archive for the ‘Sweepstakes Legal’ Category

Sweepstakes DANGERS!

Tuesday, July 23rd, 2013

One of the most controversial business models in recent history is that of the sweepstakes Internet cafe. Lots of people want to know more about the risks and rewards of starting an Internet cafe with sweepstakes software. With this in mind, SweepsCoach has put together a comprehensive list in an attempt to outline the top SIX DANGERS of opening a SWEEPSTAKES INTERNET CAFE.

Writers and reporters love the topic because it can be emotionally charged. The story of the Internet cafe with sweepstakes that can appear to be gambling–but often are NOT gambling–tends to rile people up. Some readers are excited about a new business idea that can generate a tremendous amount of profit. Others cry “foul”, claiming that because the sweepstakes promotions are designed to imitate slot machines that the whole thing is a crime. The story creates strong opinions and controversy–which is exactly what writers and reporters are hoping for.

Whether you’re simply curious about the viability of this business model, extremely interested in getting into the industry, or think the entire concept should be banned, you may find it interesting to learn the TOP SIX biggest DANGERS faced by those who open Internet cafes. This article will identify those risks, explain them in detail, and outline the best ways to eliminate them so that you can have a successful venture. Now that the stage is set let’s move on to our list:

  1. >>INTRODUCTION: TOP 6 SWEEPSTAKES DANGERS > YOU ARE HERE <
  2. RAIDED and closed by law enforcement
  3. Forced OUT OF BUSINESS due to low revenue
  4. Taken advantage of with BOGUS STARTUP COSTS
  5. Overwhelmed by TECHNICAL PROBLEMS, complex systems, & no support
  6. SWINDLED by smooth-talking sweepstakes salesmen
  7. Robbed by employees due to POOR REPORTING and control
  8. CONCLUSION: Thriving in a dangerous world

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Enough of the introduction, let’s get to the good stuff!


Sweepstakes Certification

Friday, November 16th, 2012

There’s a lot of talk about sweepstakes software being “certified”. What, exactly, does it mean to have “legally certified sweepstakes games“? This article will cover what sweepstakes certification is, where it comes from, who does it, and why it is important. It’s time to look under the hood and find out what’s at the core of sweepstakes certification.

First of all, let’s discuss why it is important to only use certified sweepstakes games. Cities, counties, and states are becoming more educated about sweepstakes Internet cafes and how they work. To be clear, this is a GOOD THING; we want this. The more that local jurisdictions understand about sweepstakes games, internet cafes, and the way the whole thing works the better it will be for all of us in the industry. As local authorities grow to understand our industry it helps legitimize what we do. And as authorities become more intelligent about how sweepstakes internet cafes work they ask more intelligent questions.

In some jurisdictions authorities are still screaming “this looks like gambling!”, but in many others they are learning that even though it may look like gambling, it’s NOT. They have also learned that it’s extremely difficult to determine if the sweepstakes games comply with every nuance of sweepstakes laws. They have learned that the only way to be certain is to have the sweepstakes software evaluated by someone much more technically competent than they are. So now the question that law enforcement asks in Florida, in North Carolina, in Ohio, in California, in Texas… (the list grows continually) is “are your sweepstakes games certified?” In some states, such as Florida, the government has actually hired “Sweepstakes Compliance Officers”; government agents who have the sole responsibility of driving around and checking up on sweepstakes Internet cafes to ensure that they are running legally compliant sweepstakes games. We expect this trend to continue as the sweepstakes industry grows throughout the US, and we encourage it. Of all the reasons that sweepstakes games should be certified, this is perhaps the most important. And it’s not just ARE they certified, but WHO certified the games (more on that later).

What does it mean to have certified sweepstakes games? What is the certification process like and who does that? There are, in the United States, a few companies specifically designed to test and analyze software. These testing labs usually analyze several different kinds of game-related software (including casino-style games). The certification companies usually consist of 20+ employees, many of whom are software developers, engineers, and mathematicians. These highly trained, highly technical people are trained to dig into software code and determine what makes it tick. These technicians then create a document (usually an enormous document, hundreds of pages long) that explains more information and details than you would ever want to know about the sweepstakes games.

The certification process is very time consuming, very expensive, and very thorough. If the system is not 100% compliant with sweepstakes rules, these technicians will figure it out. More than one new sweepstakes company has developed a bunch of games and rushed to get them certified only to realize that their system isn’t a legally compliant sweepstakes. Now they have to redesign their games–which is easier said than done. Several sweepstakes developers simply don’t have the know how to jump through all the hoops and design their games so that they are legally compliant. Naturally, such companies will try to either minimize the importance of certification or simply hope you don’t ask about it.

Finally, a few clever (and sketchy) companies have realized that there is good money to be made by someone willing to certify that sweepstakes software is legitimate–even if it really isn’t. As I’m sure you can imagine, it’s not that hard to find someone who will say “for $20,000 I’ll write a report that says your games are sweepstakes!” Law enforcement has caught on to this as well, so it’s important that we discuss it. In the sweepstakes industry, there are three significant certification labs–often referred to by industry pundits as “the big three”. These are the only thee certification reports accepted by compliance officers in Florida. The three companies are Eclipse Labs (run by Nick Farley), Gaming Laboratories International (usually called “GLI”), and BMM Compliance (based in Las Vegas). In many jurisdictions law enforcement has learned to ask two questions: 1) are you using legally certified sweepstakes games?, and 2) which company certified them? If your sweepstakes aren’t certified by the right company they are immediately viewed as illegal.

Sweepstakes SCAMS

Friday, February 17th, 2012

The phrase “buying a pig in a poke” is a common English expression meaning that something is sold or bought without the buyer knowing its true nature or value, especially when buying without inspecting the item beforehand. (Wikipedia)

The expression is a perfect description of the experience many newcomers face upon entering the complex world of sweepstakes promotions. Hundreds of would-be entrepreneurs enter the market bright-eyed and bushy-tailed, with a wallet full of cash and delusions of grandeur. Like Dorothy in Oz, these unfortunate, trusting souls are quickly “educated” by a university of fast-talking used-car salesmen peddling hope.

In this article we will point out the FOUR most common traps to which newcomers in the Sweepstakes industry fall prey. We will explain in simple terms how to recognize these pitfalls, how to avoid them, and how to dramatically increase your odds of launching a successful business.

Let’s get started.

Here’s a quick “cheat sheet” – with more details below.

1. Understand the basic definition of a sweepstakes promotion.
2. Sweepstakes entries have no cash value until revealed.
3. Sweepstakes must offer a free method of entry and a way to instantly revel entries.
4. Trust your instincts!

1. A sweepstakes requires NO CONSIDERATION. This is a kindergarten-level, basic sweepstakes definition. The fact that we even have to mention this is a sad testament to the scams we have seen on the market. Simply put, one CANNOT purchase a sweepstakes entry. Purchasing a sweepstakes entry is, in fact, a contradiction in terms. The common name for the kind of sweepstakes that allow you to “purchase entries” is GAMBLING!

Just as McDonalds sells hamburgers and gives away a FREE sweepstakes entry with the purchase, ALL sweepstakes must sell a legitimate PRODUCT (not sweepstakes entries), and then GIVE the sweepstakes entry away for FREE.

Some systems that claim to be sweepstakes machines accept money and then award sweepstakes entries–but no product. A few common names for these systems include: Poker Machines, Eight-Liners, Cherry Masters, and Pot of Gold machines. In nearly every jurisdiction these systems have been ruled to be illegal gambling (even if they are misrepresented as a “Sweepstakes”).

Recently one of our distributors called and explained that he tried out a competing “sweepstakes” (note the quotes) company. Upon giving the cashier $10, he was handed a receipt. At the bottom of the receipt the following was printed: YOU HAVE PURCHASED $10 IN SWEEPSTAKES ENTRIES. Wow!! It is inconceivable that a company that manufactures a “sweepstakes” product could possibly be so ignorant as to actually PRINT this on the receipt.

Another major sweepstakes parlor software company sent out an announcement to all of its operators today (I received a copy of it). This was discussing the way their jackpot works. It reads “A cost of 2 cents per spin is added for the Community Jackpot. For example, if a player is playing at the 25 cents level it will cost them 27 cents per spin…” WHAT!? It costs them 25 cents per spin!? Wow!! Once again, we have a clear and blatant misunderstanding of the difference between sweepstakes and GAMBLING. If you PAY for a spin, it’s a SLOT MACHINE.

We predict that anyone who has anything to do with such software, from developers to distributors, to business owners and operators will soon find themselves facing heavy prosecution for illegal gambling. And they will lose.

2. Sweepstakes entries HAVE NO VALUE until they are revealed.

When you purchase a cheeseburger at McDonalds you are given a free sweepstakes entry. Common sense dictates that it would be ludicrous to ask to redeem that entry without first revealing whether or not it is a winner. What is the legal value of a sweepstakes entry that has not been revealed? ZERO. Legally that entry MUST NOT have a value and CANNOT, therefore, be redeemed or purchased back by the company that gave it away for free.

How does this translate into an electronic promotional sweepstakes “revealer” game? When you receive entries for purchasing a product, those entries must be designated ENTRIES. These unrevealed entries CANNOT legally be “redeemed” or “cashed out” for money. Any system that allows this is breaking the law–it is GAMBLING.

Once these entries have been revealed, they will have a value. This value must be displayed in a SEPARATE location, which is usually labeled “WINNINGS”. Thus, any legitimate electronic sweepstakes promotion MUST display TWO SEPARATE FIELDS–one for ENTRIES and one for WINNINGS. If only one field is displayed from within the live game, it is unmistakably GAMBLING.

(Note: our DEMO games grant unlimited free entries and have no winnings. Thus, the demo only has a FREE GAME column. Our LIVE games have both required columns–ENTRIES and WINNINGS as shown in the image above.)

3. Sweepstakes must have a FREE method of entry and should have a way to INSTANTLY REVEAL the results. Notice on the McDonalds Monopoly game the “NO PURCHASE NECESSARY” disclaimer. This is not a joke–omitting this rule can completely invalidate the sweepstakes and make it illegal. Ideally, this method should be easy to understand and easy to use. Mailing in an entry form is probably okay–but is not the best solution.

Our Totem units accept coupons, which can be handed out by the business owner. These coupons are exactly the same size as US currency and, for all intents and purposes, act like a $1 bill. This free coupon (no purchase necessary) gives the customer 1 free “credit” (or 100 sweepstakes entries). These coupons can also be used in conjunction with other product sales. For example, a bar owner may run a promotion “buy a burger and fries and get 3 free coupons for sweepstakes”.

Another test of a true sweepstakes is the ability to instantly reveal all sweepstakes entries. Upon playing the live game, you should find an option to reveal all sweepstakes entries instantly without using the entertaining reveal option. Slot machines make you spin the wheels. Sweepstakes give you the option to reveal your entries immediately.

4. At last, we will close with perhaps the most important rule to avoid being swindled by the bottom-feeders in the industry. TRUST YOUR INSTINCTS!

If it feels fishy–it probably is! Use common sense. Pay attention. Don’t be afraid to call a few different companies or to do additional homework. A sweepstakes company that believes in its product will only make money if YOU make money. It will not demand that you buy expensive hardware from the company or “proprietary” technology up front. It will not propose “flat monthly fees”, which require you to pay on an ongoing basis whether or not you make any money. Flat fees in the sweepstakes industry are a sure sign of a scam. (They may sound good on paper–until you don’t make much money and end up paying an exorbitant bill while keeping very little money for yourself)

Don’t take legal advice from anyone who is not an attorney. Many salesmen who have no clue about law (much less sweepstakes law) will happily preach to you about why it’s legal in your city–all in an effort to persuade you to write them a check. These are probably the same “experts” who print “you have purchased $10 in sweepstakes entries” at the bottom of their receipt!

Any legitimate company will answer its phones, return calls promptly, has a professional recording or answering service if nobody is in the office, has a website that displays its games and its pricing, and won’t send you email messages from aol, gmail, hotmail, or other “free” email accounts, but from the actual business (such as “sweepscoach.com”). On a related note, examine the URL of the company. Does it appear that the company is trying to misrepresent itself? Many are. Be careful. Is it a free, “make your own website” hosting site–this screams of unprofessionalism. Don’t fall for it.

NEVER pay cash for sweepstakes equipment. NEVER pay with Western Union (this is as much of a “red flag” as an email from someone in Nigeria claiming they need your help to get money into the US)

If there are no pictures of the games on the site–the company isn’t legitimate; real sweepstakes companies have real games. If you can’t play the games on the company site, the games are not web-based (regardless of any excuses or song and dance given to you by the salesmen). If the demo of the games displays the brand of a company other than the one contacting you, the salesman is a “middle man” (especially if the salesman has an email address that’s not the same as the brand displayed on the games). Wisdom dictates that you contact the legitimate company to verify that the person selling you the system is an authorized distributor of their games.

Most of these warnings, one would think, are common sense. But you would be surprised at how many people get duped. This industry is just a hop-skip-and a jump away from gambling. Unfortunately, it sometimes attracts a few unsavory characters. Don’t let them fool you.

In conclusion; be alert! Take the time to learn about the business. Pay attention. Shop around. Understand the industry before you make a purchase. We hate getting calls from people who have been taken advantage of by sleazy salesmen and, unfortunately, it happens far too often. And whatever you do… don’t buy “a pig in a poke”!

What are you Selling?

Sunday, September 12th, 2010

When people are getting started in the business of using sweepstakes promotions they frequently misunderstand one of the most critical principles of this business. What are you selling? If your answer is “Sweepstakes Entries”, you are wrong–dangerously wrong. Do not pass go, do not collect $200.

This common misunderstanding goes against the very definition of sweepstakes. A sweepstakes is used as a marketing tool to promote a product. No true sweepstakes will allow a customer to buy sweepstakes entries. If it does allow this, the sweepstakes sponsor can expect serious legal trouble sooner or later because it is not really a sweepstakes; it is GAMBLING.

The sweepstakes sponsor sells something else, a PRODUCT, and uses sweepstakes to encourage sales of that product. Let’s look at Coca-Cola. When you buy a bottle of Coke and find a number on the bottom of the cap, you can enter that number into an online sweepstakes form to determine whether or not you have won. The product, in this case, is Coke. Coca-Cola did NOT sell you a sweepstakes entry for $1.25. They sold you about 1 cent worth of carbonated water, sugar, and flavoring and 19 cents worth of packaging and shipping for $1.25 (this is a bottle of Coke). In order to encourage you to buy their product instead of a competing product they used a sweepstakes promotion. This marketing tool is designed to entice customers to buy the product, but the product is never, EVER, the sweepstakes entry.

So let’s ask that question again. What are you selling?

Our Internet kiosks, as the name implies, sell Internet access and the use of a touch-screen computer terminal. Thus, when a customer buys $10 worth of Internet time he will receive a number of free entries into the promotional sweepstakes. In the case of the sweepstakes promotion running on our Internet kiosks, the PRODUCT (Internet access) is being sold and the SWEEPSTAKES ENTRIES are being given out for free. The difference is subtle but critical.

It is fundamentally important that you as a sweepstakes sponsor and all of your employees understand this. More than one Internet cafe has landed in hot water because an undertrained or lazy employee told a customer (who happened to be an undercover law enforcement officer) that they were selling sweepstakes entries instead of selling some other product and then getting the sweepstakes entries for free. Don’t make this mistake and don’t let your employees make it.

The line between PRODUCT and PROMOTION blurs when we’re selling an intangible product such as Internet access time. In every case the product must be kept separate from the promotion. Specifically, if you sell Internet time and then give away sweepstakes entries to people who purchase that Internet time, using the Internet time cannot consume the sweepstakes entries. Alternatively, using the sweepstakes entries should not get rid of the time you have purchased to access the Internet. The Product and the Sweepstakes Promotion must always be kept separate.

For clarification and simplification, let’s bring this back to a model that uses a tangible product. When you buy a Quarter Pounder with Cheese at McDonald’s and get a Monopoly sweepstakes game token, eating the burger will not make your Monopoly sweepstakes game piece disappear. And revealing (or redeeming) that game piece will not make your hamburger disappear. Furthermore, if your Monopoly sweepstakes entry (which you have not yet revealed) is a $1 million grand prize, the value of that prize will not (and should not) decrease as you eat your burger. The same rules apply to any product that is promoted by a sweepstakes, whether it be cheeseburgers, Internet time, or anything else.

Sweepstakes are a fantastic marketing tool. As you begin to promote your products with sweepstakes, you must understand exactly what you’re selling. Sweepstakes Promotion is a marketing tool used to help increase sales of that product. You are selling a PRODUCT, which will NEVER be “sweepstakes entries”. Good luck with your product sales, good luck with your sweepstakes promotions, and feel free to contact us if you have any questions.

North Carolina Sweepstakes Internet Cafes Dealt a Heavy Blow

Friday, July 9th, 2010

The last few weeks have been tense for sweepstakes business proponents in North Carolina.  As some lawmakers rallied to ban sweepstakes gaming, those involved in the industry fought to defend their right to play the games and entertainment they love.  It is estimated that several hundred thousand people play sweepstakes games with some degree of regularity across the state, and at least ten thousand are employed in the industry.

Although it was believed that the primary purpose of this session of Congress was to balance the budget, a few representatives evidently had a bone to pick with sweepstakes gaming.  They made no secret of their intent to abolish this industry from the state.

At first the North Carolina Senate postponed discussing the bill several times due to its controversial nature.  However, when the bill (House Bill 80) finally made it to the table it was quickly and overwhelmingly approved.  Here’s an article that was written about the situation shortly after the Senate approved it: Gaming Bill not a Sure Bet

What, exactly, does the bill do?  Essentially it aims to prevent all electronic sweepstakes gaming.  For specifics on the bill, feel free to read the actual document here: North Carolina House Bill 80

After making its way through the Senate, the bill was again delayed in the House of Representatives.  Here it was postponed more than once as Congress pushed the discussion back.  It seemed nobody wanted to talk about it.  Apparently Congress realized that this was a delicate and politically charged topic.

Finally, yesterday (July 7), the bill was brought up again in the House.  Discussions were heated as both sides of the debate were heard.  On the “Pro” side (getting rid of sweepstakes) it was argued that sweepstakes games can become an addiction.  Horror stories were told of the poor and unfortunate who had become so addicted to the games that they spent all their rent money or grocery money, leaving their children hungry.  One proponent of the bill, with tears in his eyes, related a story involved a “church-going” woman who supposedly, as a result of her involvement in sweepstakes gaming, got so far in debt that she bought a gun and robbed a bank to “feed her addiction”.

I’m sure I’m not the only one who was rolling my eyes at this point in the debate.  Another congressman quickly interjected that it shouldn’t be the government’s role to regulate morals.  Just because someone can become addicted to something doesn’t mean we should outlaw it.  The vast majority of people who visit sweepstakes Internet cafes do so as a casual form of entertainment.  They view sweepstakes gaming as a social activity similar to going to the movies or a sporting event.  They plan to spend $20 or $30 in an evening and this is how they choose to spend it.

Unfortunately, since some people can become addicted to the activity, others feel a moral obligation to “protect us from ourselves”.  Are we three years old?  Perhaps the next law passed will involve keeping small objects away from us because we might put them in our mouths and choke on them.

Then there’s the issue of the the state-run lottery.  This topic was also brought up and discussed.  How are sweepstakes any different from a lottery–except that the government is running one of them?  Of course, sweepstakes machines compete with the lottery.  Hmm…  I smell hypocrisy.

Is it possible that some can become addicted to *any* highly entertaining activity?  YES.  Some people watch too much football.  Some people play too much Xbox (can’t the gov’t make THAT illegal and help me get my kids out from in front of the TV?)  Some people drink too much.  Some people read too many trashy novels.  Some are even addicted to working out.  And some people play sweepstakes games.  Which are morally okay and which are not?  Just ask the North Carolina government.  They’ll tell you.

But what are they going to tell Trina and Karen, two hard-working, entrepreneurial North Carolina women who have battled their city for months to get a permit to launch their new sweepstakes Internet cafe?  They’ve invested an incredible amount of time and money into their new business, and on Wednesday, the SAME DAY that the state passed the ban, they FINALLY got the approval from their city to open…   After careful consideration they’ve decided to continue as planned with their business to see if they can recoup their investment in the six months before the law takes affect. What does the government have to say to them? I’ll say this: good luck Trina and Karen.

And what about Najam, an ambitious NC man who just spent tens of thousands of dollars to get his sweepstakes business open?  He’s been working on this project for months, and finally, yesterday (the day after the ban was passed), his business was open to the public.  He has about six months to recoup his investment before the law takes effect.  What will they tell HIM?  What about his employees?

Consider the fact that many sweepstakes business owners have already paid thousands (or tens of thousands) of dollars to local government for special use permits.  Cities and counties have been collecting “special taxes” on sweepstakes businesses.  One of our clients called yesterday asking “I already paid a $20,000 yearly tax to my city for the right to run this business.  So do I get to stay in business for a year or will the ban shut me down in December?”  Good question.  Ask your congressman.

In spite of the new legislation, North Carolina sweepstakes business owners say “we’re not done yet”.  This is, by all accounts, a Pandora’s box.  There will undoubtedly be backlash as people fight to get this changed and seek loopholes.  However, there can be no argument about this fact; the North Carolina government doesn’t want sweepstakes cafes in their state.

Sweepstakes Games Dodge a Bullet Today in North Carolina

Tuesday, June 15th, 2010

Those “in the know” in the sweepstakes internet cafe business have been carefully watching the current General Assembly in North Carolina.  The session has been meeting to discuss a number of issues, but somewhere on the list was the proliferation of sweepstakes machines across the state.

It is unclear whether the concern is about sweepstakes internet cafes attracting “undesirables” (like a casino), or simply that the state needs to have its fingers more deeply thrust into these business owners’ wallets.  In any case, rumors ran wild as the politicians had a sweepstakes gaming discussion on the agenda.  Some pundits believed the sweepstakes games would be completely shut down, others thought they might be taxed, and many believed that at the end of the day nothing would change.

Just to be clear, this certainly isn’t the first time that Internet sweepstakes software has been in the crosshairs of state and local authorities.  About two years ago a very similar incident took place in North Carolina.  For a short while sweepstakes machines were out of luck, until a loophole was found and they were back in business.  The state of Virginia has gone back and forth on the issue, and sweepstakes gaming in Florida has been checkered with controversy.

Let’s get real, folks.  It LOOKS like gambling.  People that don’t fully understand how the technology works (Hello “bad boys, cops of North Carolina”) are likely to embark on a crusade to save the world from the evils of what appears to be gambling.  From across the state they can be heard chanting  ”If it looks like a duck…”  Well, the truth is that it is NOT a duck.  But it takes someone more qualified than your average police officer to know the difference.  Heck, *I* can’t even tell the difference half the time and I’ve been in this business for years.  So I’m not trying to throw the local law enforcement under the bus.

The good news is that at the end of the day today the North Carolina state legislature has tabled the discussion on sweepstakes.  This is a BIG WIN for advocates of the sweepstakes gaming industry.  Does this mean that there’s no way the government can cause any trouble with sweepstakes in this session?  Unfortunately not.  But it DOES mean that it’s much, much less likely.

Furthermore, even if the worst case scenario happens (which most of us feel is extremely unlikely) and the state tries to close down sweepstakes games instead of imposing a small tax, it would still take at least six months to execute.  Of course, during this time the decision would be challenged and we could anticipate even more delays before any real action is taken.  The hundreds and hundreds of business owners across the state wouldn’t go down without a fight.  And in the meantime, with good software in the right location these businesses can easily recoup the entire initial investment in 3-4 months.  Contact us for details on that–it’s what we do best.

A hearty “high five” to all those advocates of sweepstakes gaming in North Carolina.  It looks like we’re still in the game!

Sweepstakes Explained

Tuesday, May 25th, 2010

Sweep-stakes [sweep-steyks] – noun.

“A sweepstakes is a legal contest or game where anything of value is distributed by lot or chance.” (from USLegal.com)

It is a self-funded promotion that offers a chance for participants to win. Winning sweepstakes entries are selected from a finite pool of entries. A Sweepstakes Internet Cafe is a business that uses sweepstakes promotions to market a product (frequently Internet time). Customers enter the Internet Cafe, purchase Internet access time, and are given free sweepstakes entries. The customers then surf the Internet and/or use computer terminals to reveal, in a very entertaining way, whether or not the free entries they received are winning entries.

Sweepstakes entries must be given away for free upon the purchase of a product (which can include goods, services, or intangible products). Thus, sweepstakes promotions are used to increase sales of that product.

Generally sweepstakes laws require a free, alternative method of entry into the sweepstakes as well. The McDonald’s Monopoly Game, for example, requires participants to mail in a self-addressed envelope to obtain a free entry.

It is critical to understand that the method used to reveal the sweepstakes entries and the way in which the results are displayed to the participant DOES NOT MATTER as long as it does not affect the results. McDonalds uses a Monopoly game wherein participants collect game pieces over time and stick them to a game board. Coca-Cola prints a number on the bottom of its bottle caps that participants must enter into a website on the Internet from their computer to participate in a simulated “Wheel of Fortune” game.

The results of the sweepstakes can be delivered or conveyed in ANY way. It doesn’t matter if the results are revealed by using a board game simulation (McDonalds), a computer website simulating a casino (Coca-Cola), a singing telegram, or a carrier pigeon! The method of displaying results does NOT affect the legality of the sweepstakes.

Some of the games used to reveal sweepstakes entry results on our sweepstakes platform resemble slot machines or have keno or poker themes. Consequently, participants may feel like they are actually playing casino games. Although sweepstakes games can resemble gambling (just like Coke’s simulated roulette), those that follow sweepstakes rules properly are legitimate, perfectly legal, and are definitively NOT gambling.

Finite Games

Tuesday, May 25th, 2010

A question that frequently arises is “what, exactly, is a finite system” or “what’s the difference between a finite system and games of chance?”

A true sweepstakes system is “fixed” or “finite”. When we say FIXED we don’t mean that it’s RIGGED. We mean that before the contest or sweepstakes even starts, we know with a 100% certainty what the outcome will be. We know exactly how many entries there will be, how many winners there will be, and how much each will win. We do NOT know WHO will win. This also applies to computer sweepstakes games in our sweepstakes internet cafe businesses.

Let’s use the McDonald’s Monopoly game as an example. These aren’t the exact numbers, but to illustrate the point we can say that McDonald’s knows that by the end of the contest there will only be a fixed, or finite, number of grand prize winners. If the maximum prize is a million dollars and in order to win this prize participants need to get the Park Place piece and the Boardwalk piece of the Monopoly game, McDonalds may only print 4 Boardwalk pieces. McDonald’s knows that there can NEVER be more than 4 grand prize winners.

This is because the McDonald’s Monopoly game is a FIXED or a FINITE sweepstakes system.

Here’s another example. Let’s play a game. I have a can with 7 marbles in it. Six of the marbles are white and one of them is red. Seven different people each pay $1 to pick one marble. The person that picks the red marble wins $5. In this case we don’t know who will win (that part is random), but we DO know that only ONE person will win and we know exactly how much that person will win ($5). We also know that I will end up keeping $2 every time. This is a FINITE system.

Compare this to a Vegas-style or RANDOM system. In this example 7 people roll a standard six-sided die. Everyone has to pay $1 to play. If any of them roll a SIX, I’ll give them $5. Statistically speaking, one of the seven people should roll a six in each round. However; it is possible, but not likely, that all seven people could roll a six and I’d have to pay out $35. If I played this game a million times, eventually the average payout would be about $5 per round. But since it’s NOT a “finite system” we never know for sure how much I’m going to be paying out every round.

Sweepstakes software that is truly based on a finite system does not involve random number generators (like a Vegas style game). The only luck involved is WHO will win each of the prizes in the computer sweepstakes. The exact total payout for each sweepstakes pool is predetermined and “revealed” by the computer sweepstakes machines.

The number of wins and the amount paid out is completely figured out in advance by the sweepstakes software–hence the term “finite” gaming.

Where Can I Legally Open a Sweepstakes Internet Cafe?

Tuesday, May 18th, 2010

We get this question all the time. “Can I start a sweepstakes business in Arkansas?” or “I’m interested in starting an Internet sweepstakes cafe in North Carolina” or “What about Cleveland?” or “I live in New York and was visiting my sister in Florida. I saw Internet sweepstakes machines there and want to start a business like that where I live.” Is it legal?

We would never presume to know every law about each city, county, and state (or COUNTRY!). No kidding, we get international calls fairly regularly, especially people interested in sweepstakes gaming in Central and South America. Furthermore, we are not a law firm and cannot legally give… well… legal advice!

We have retained a few of the very best sweepstakes attorneys in the nation who help guide us through our sweepstakes platform design and give general direction on a national level. But most of the legal information we have about specific jurisdictions is gathered from people who are “in the trenches”. We talk to LOTS of people about the sweepstakes business every day. Some of them are running their own sweepstakes cafes, some of them are doing research trying to open a new sweepstakes internet cafe, some work with sweepstakes software companies, and some are distributing internet kiosks. From these people we get a picture of what’s going on in the legal world of sweepstakes. But I want to repeat–we don’t profess to know everything about the law in your city!

Anyone considering entering the business of opening an Internet cafe with sweepstakes promotions should do a little homework to determine whether or not the business model is accepted in their city, county, or state. How is this done? Start with the local government offices. City offices or County offices will frequently be able to tell you if there will be any legal issues with your new sweepstakes business.

When you go to obtain a business license, TELL THEM what you’re doing! Many people try to “sneak” their way into business, telling the city or the county that they’re a “business center”. Is this technically correct? Yes. Should you be required to explain your marketing plans to local law enforcement or to the city / county? Not really. When McDonald’s applies for a business license I’m sure they don’t tell the city that they’re part of a burger restaurant chain that will be using sweepstakes promotions. They just say they’re a burger joint. But in the interest of being CAUTIOUS, it makes sense to put it all out on the table. If there are going to be any issues with sweepstakes law or problems with what your sweepstakes business is doing, you want to find that out BEFORE you spend a bunch of money opening the business. When the stakes are high, don’t gamble with your investment! BE UPFRONT and FORTHCOMING.

The same people who try to “sneak something by” on the city or on local law enforcement are often shocked that a few months later the local authorities start harassing them because their “business center” appears to be a casino. This is one scenario where asking permission is MUCH better than asking forgiveness.

That said, there are a handful of states where computer sweepstakes businesses are absolutely going crazy right now. These include North Carolina, Florida, Texas, Ohio, and a few others. Some areas of Virginia have sweepstakes, some don’t. Arizona, Georgia, Arkansas, Louisiana, Oaklahoma, Mississippi, Kentucky, Michigan, Alabama, California… All have some level of Internet sweepstakes cafes. You’d be surprised where they’re popping up. I was visiting family in Idaho a few months back and saw one there. Some states require smaller setups (no more than 5-6 terminals) inside of another business. This is a PERFECT scenario for our proprietary Internet kiosks (sweepstakes Totems). Some states are MOSTLY good but have a few counties that are having troubles understanding the sweepstakes business concept. Ultimately ANY STATE that allows sweepstakes gaming should also allow sweepstakes Internet cafes. Can you play the McDonalds Monopoly game in your state? If the answer is YES, then you should also be able to open a sweepstakes Internet cafe in your state.

To my knowledge, the only state that has proactively passed a law to try to specifically eliminate sweepstakes Internet cafes is Utah. But that ruling is being challenged right now and will likely be overturned. Even if it isn’t overturned, clever sweepstakes software companies are busy creating sweepstakes machines that jump right around that law by offering sweepstakes games in less controversial formats–avoiding slots, keno, and card games. Should the method that is used to reveal the sweepstakes entries create a legal challenge? Absolutely not! But does it? Unfortunately, sometimes the answer is yes. However; unless a state is willing to take on McDonalds, Coca-Cola, Time Warner, and dozens of other extremely large companies with very deep pockets, it’s not going to be able to completely prohibit sweepstakes as a viable way of marketing and promoting products to customers.

Ultimately it’s up to YOU to make sure that you’ve done homework in your area. Talk to the city or county offices. Talk to the local law enforcement. Be straightforward and candid with them. Remember, honesty is the best policy. If you have any questions about what to tell them, ask us and we can help. That’s what we’re here for. Good luck with your business, good luck with your sweepstakes promotions, and stay out of trouble!