(COLUMBUS, Ohio)—Ohio Attorney General Mike DeWine today reiterated his call for the Ohio General Assembly to adopt regulations on internet cafes and sweepstakes parlors. DeWine expressed his concerns as research and information from the internet café affidavits filed with his office have made it increasingly clear that the business model for most sweepstakes parlors is designed to take advantage of loopholes in Ohio law.
“It’s easy to understand why the number of internet cafes have exploded at an alarming rate and why the General Assembly should act to regulate them,” said Attorney General DeWine. “These internet cafes are basically gaming parlors selling products like phone cards that are rarely used by the buyer, and it is unclear whether these locations are remitting state and local taxes to the proper authorities. They get people to buy these products by tying them to games that look like slot machines, but the owners call them sweepstakes because Ohio has no sweepstakes law.”
Prepaid phone cards and internet time are the two products most commonly sold at internet cafes as a prerequisite to playing sweepstakes games. According to the Ohio Department of Taxation, operators selling prepaid phone cards and internet time must have a vendor’s license and are required to remit sales taxes and other applicable taxes to state and local governments. It is unclear whether all internet cafes who filed affidavits have obtained vendor’s licenses and are remitting sales taxes.
DeWine has called for the following regulations on internet cafes and sweepstakes parlors:
- Define “sweepstakes” in Ohio law. Establishing a standard definition of sweepstakes and sweepstakes terminals will ensure operators are not running games restricted to casinos and video lottery terminal (VLT) facilities.
- Establish a state-mandated payout. Like VLTs and slot machines, consumers should have an understanding of what the minimum payout will be. For example, minimum payout for slot machines is 85%.
- Require certification of software and equipment. All software and equipment must be examined by a laboratory to certify the machine is a sweepstakes terminal and operating as required by the state, including the mandated payout.
- Establish a Central Computer System that monitors ALL sweepstakes machines in the state. A state-controlled system should be established similar to the system the Ohio Lottery Commission has in place for VLTs. Paid for by the software and equipment providers, these systems would ensure software is not altered and operates as it is described.
- Transparency of ownership. There should be licensing, including felony background checks and suitability reviews, for storefront owners, employees, and companies providing software and equipment to operate “sweepstakes.”
- Transparency and accountability in finances. The industry should be subject to mandatory record keeping by and reporting to state regulators, who would have audit and subpoena power to conduct investigations.
- Taxes and license fees. Similar to casino taxes, games played at sweepstakes parlors should be taxed by the state, with some funds directed to local governments and to combatting problem gambling. Operators should pay license fees to cover the cost of state regulation.
- Regulatory authority and statutory penalties. The state should designate an existing state agency as a regulator of weepstakes parlors and internet cafes. Civil and criminal penalties should be established for noncompliance, including making it a felony for operating an internet café without a license.
According to affidavits filed with the Ohio Attorney General’s Office, there are at least 782 internet cafes or sweepstakes parlors in existence in Ohio. Ten additional affidavits had been received since DeWine last released numbers.
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Documents
Summary list of sweepstakes parlors/internet cafes by county (Excel)
Detail list of sweepstakes parlors/internet cafes in Ohio (Excel)
Media Contacts
Dan Tierney: 614-466-3840
Mark Moretti: 614-466-3840