'Sweepstakes' game rooms raise legal, tax questions

Lillie Chappell was up about $50, then down about the same, and was into her third hour playing a video game — pressing a button on the computer screen and watching tumbling four-leaf clovers, bars, horseshoes, numeral sevens. Compared with slot machines she'd played at Delaware Park, she said this was "pretty much the same."

Chappell, a retiree from Catonsville, wasn't playing at a casino but in a game room at Patapsco Bingo in Baltimore — one of several that have opened in the area in the past year offering cash winnings on computer games.


While state-sanctioned slots casinos are planned in Anne Arundel County, Baltimore and Rocky Gap after zoning and other disputes that caused delays, at least three "sweepstakes" game rooms have opened without fanfare in the city, along with one in Baltimore County. Patapsco Bingo — the largest of the four with 111 machines — is not far from the Russell Street site of the planned city casino.

The operators say they're running Internet cafes that offer a legal sweepstakes and that customers are paying to view the results of a predetermined game on the computer screens.


But similar operations have run into legal trouble and outright bans in other states. Some Maryland authorities have questioned the legality of the operations, and Baltimore-area officials are looking into the game rooms, asking whether the sweepstakes games are legal and if operators are subject to local taxes and fees they're not paying.

The owner of Patapsco Bingo is Joseph Brzuchalski, according to state records. At the game room recently, a man who identified himself as the owner and would give his name only as "Joseph" or "Bingo Joe" said legal questions have been resolved with the city and by Gateway Gaming, a South Carolina company that produces and licenses the games.

He pointed to the city "amusement device" license posted on a wall outside the game room, showing he paid $4,995: $45 per machine for three months through Dec. 31. It is the same license that is issued for arcade games and pinball machines.

"We're not trying to hide anything," he said. "We're just trying to stay in business."

Gateway Gaming could not be reached for comment.

He installed the leased computer terminals in the fall in the game room, separated by a glass wall from the bingo operation that has been running for 27 years in a plaza on Annapolis Road just west of Cherry Hill. He said he can draw about 400 bingo players on a good night, but maybe one-tenth of that to the sweepstakes game room.

"We're trying to get the word out" about the new game room, he said. "That's why you see a few signs outside."

Indeed, the outside of the building shouts for attention, with signs advertising bingo and the new games: "Internet Sweepstakes/WIN CASH/12 to 12 daily." Other signs show computer terminals with a game image on the screen.

The displays are more modest at two locations for Hot Spot Sweepstakes — one at Loch Raven Plaza on Goucher Boulevard in Towson, another that opened this month in a shopping strip on Reisterstown Road in the city. A simple banner over each door says "Sweepstakes," and the business name is printed on the glass door.

All the signs say "sweepstakes," and that's what the operators say they offer. They say they're not charging for gambling or the sweepstakes and are only selling time on the Internet, which customers can use as they see fit. Customers who pay for Internet time — the going rate is a dollar for 10 minutes — receive "points" to use in the sweepstakes that can be redeemed for cash.

For instance, for $5, the player gets 50 minutes and 500 points, which can then be used to play the game. The player can choose a number of points he or she wants to use for each play of the video game, much like choosing a quarter or dollar slot machine. The more points per play, the more points the player can winand redeem for cash.

Signs posted on the wall at Patapsco Bingo and Hot Spot locations explain how to send for sweepstakes tickets available by mail for free — similar to other "no purchase necessary" contests — and describe the odds of winning.


Terry Land, who owns the two Hot Spot locations and another game room in Jacksonville, Fla., and Tom Welch, who manages the Lucky PCs game room in Baltimore's red-light district, said customers commonly use the Internet at the rooms to pay bills, look for jobs, log onto Facebook or check email.

"I have a couple customers that just use it for the Internet; they don't even use it for the games," said Welch, whose room with 25 terminals off "The Block" on East Baltimore Street opened in November 2010, apparently the first in this area.

Customers observed at both Patapsco Bingo on a weekday afternoon and the Hot Spot in Towson on a Friday and a Saturday evening were not browsing the web, but playing the games. Licensed through a private server, the games are not freely available on the web.

"With names such as "Bustin' Vegas," "Four Leaf Luck," "Lucky Duck Loot" and "Cha-Ching Dynasty," the games turn the computer screen into what looks like a slot machine: rows of spinning icons, prize point counters at the bottom.

One difference is that the button on the screen that spins the icons doesn't say "Play," but rather "Reveal." Game operators say the machines are merely revealing a predetermined outcome, much like a scratch-off ticket, or a "Monopoly" game card given out gratis with your burger at McDonald's.

"There's no chance involved, it's all a predetermined set of prizes," said Land, who said he splits his time between Florida, South Carolina and Maryland. "It's just like McDonald's or Reader's Digest" sweepstakes.

Baltimore City Councilman Robert W. Curran says he has asked the city's attorneys and Finance Department to look into whether game room operators owe the city taxes as "simulated slot machines" — like those found in many bars, veterans halls and carryoutswhich are taxed differently from standard video games.

And in Baltimore County, where one Towson game room with 70 machines opened in October, both the county attorney and the Police Department are "taking a comprehensive look at these devices" and what county laws might apply, said Elise Armacost, a police spokeswoman.

"Are these slot machines? I think that's the question," said County Attorney Michael E. Field.

Maryland Assistant Attorney General Kathryn M. Rowe, who said her office has not investigated the game rooms nor has she visited one, said their operators are "clearly trying to fall into" the sweepstakes category.

Rowe, who has written several letters advising legislators on gambling law, said the legal standard for a sweepstakes is that the game ticket is given away with "something you would buy anyway," such as the McDonald's hamburger, or groceries at the supermarket. Once it becomes clear that the object of the purchase is the game ticket, the game crosses a legal line, she said.

"If it ever gets to the point where people are going into McDonald's and throwing away the hamburger and keeping the ticket, they'll be violating the law," Rowe said.


The question of what the customer is paying for also matters because that's part of the definition of a slot machine under state law. The law defines a slot machine as a device that is played for money, where the outcome is not known to the player and where the player can win money or something that can be redeemed for cash.

If patrons were to visit a site primarily to gamble rather than use the Internet, then "it sounds to me like it would violate the gambling law," Rowe said.

Jeff Kelly, director of the field enforcement division for the Maryland comptroller, also said the game rooms could be stretching state law.

"If you go to a gaming site and can get paid off for that, then there's a gaming device there," said Kelly, who acknowledged that he had not seen the rooms. He noted that state law makes it a misdemeanor to lease or own a place for gambling.

The games have been most prevalent in the South, particularly in Florida, and have run into problems in several states.

Virginia and Massachusetts have banned the games. North Carolina's ban was partly rolled back by a judge, and the law is being challenged in an appeals court. Several cities in Ohio imposed new fees this fall to restrict the games, and the state Legislature is debating statewide curbs. A game room in Rochester, N.Y., that was under investigation by the state attorney general closed. This week, game room operators in Hillsborough County, Fla., challenged that jurisdiction's ban on the games.

This month, Fayetteville, N.C. seized furniture, computers and other property from two sweepstakes businesses, saying each owed more than $200,000 in licensing fees.

In Baltimore, Curran wonders whether the game rooms might owe the city taxes under a law adopted last year in an attempt to recover money lost because of underreported game machine receipts. The law replaced a 10-percent tax on the gross take from "amusement device" licenses with a flat rate for "simulated slot machines."

The councilman said he doesn't want to shut the rooms down, he just wants the money for the city.

As it is, Welch, who manages Lucky PCs downtown, does not believe the game room is paying the $180 annual "amusement device" fee per machine that Patapsco Bingo pays. Land said he's paid no license fees in the city or the county.

"We're not considered an amusement device," said Land. "We sell Internet time."

Recommended on Baltimore Sun