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Bay Area Sweepstakes Cafes Fight Closures With Lawsuits

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KPIX 5's Christin Ayers is shown a sweepstakes game at an internet cafe. A customer buys internet time to use and in exchange they are rewarded with a chance to win cash. (CBS)

KPIX 5′s Christin Ayers is shown a sweepstakes game at an internet cafe. A customer buys internet time to use and in exchange they are rewarded with a chance to win cash. (CBS)

Christin-Ayers_BIO-HEAD Christin Ayers
Christin Ayers is a general assignment reporter for KPIX 5 Eyewitness...
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OAKLAND (KPIX 5) — They have been popping up in strip malls all over the Bay Area: Internet cafes that look a lot like mini casinos. While local authorities are trying to shut them down, a gray area of the law is proving hard to tackle.

With spinning reels and dollar signs, it looks like Las Vegas. But it’s East Oakland, inside a place called Get Connected. Neighboring businesses didn’t want to talk to KPIX 5 on camera, because they said they are scared of repercussions.

Oakland’s city attorney may be running scared as well. She never returned our calls about this place. That might be because just down the Nimitz Freeway, the City of Hayward was sued earlier this year for trying to shut down a similar so-called internet cafe.

John Weston is the attorney for the owner of both Get Connected in Oakland and I-Biz in Hayward. “I’m absolutely satisfied as an attorney that the software program and the business does not in any way violate any California gaming or gambling law, period,” he told KPIX 5.

Weston claims there is a big difference between this and gambling. He had an employee show us how it works. A customer buys internet time to use in any way they want and in exchange they are rewarded with a chance to win cash in a sweepstakes contest.

“There is almost no company that you can think of that doesn’t do that today. Hotel chains are doing it on a regular basis, fast food places, McDonald’s, Subway,” he said.

But an industry group that represents Las Vegas casinos disagrees. “When McDonalds or Burger King do a sweepstakes, they do that to draw us in so we will buy more Big Macs. Here at these internet sweepstakes cafes it’s all about gambling,” said Geoff Freeman, president and CEO of the American Gaming Association.

“We are looking at thousands of locations and nearly $10 billion in revenue are the estimates we have seen,” he said.

Freeman said the cafes are linked to a network of software developers who lease the games to cafe operators. “They haven’t been licensed, no background check has been done,” he said.

Authorities nationwide are taking notice. Last month, a Florida attorney working with a chain of internet cafes was convicted on illegal gambling and racketeering charges. More than 50 others involved in the operation have also been indicted and Florida has now banned the cafes.

Here in the Bay Area, San Francisco sued a cafe called Netstop last week. Hayward has been trying to shut I-Biz down for a year. The case is now in U.S. District Court.

“The slot machine under California law, and certainly the traditional one, you have to put a nickel in or a quarter in or even a credit card in order to play it. And of course if you look around here you will find no slots of any kind,” said Weston.

KPIX 5 asked Weston if those are just technicalities, simply ways of getting around this being illegal gambling. His response: “That is a fair question. But in California things are illegal because the legislature or the relevant governing body has passed a law that defines what the illegal conduct is.”

Weston said an advisory from California’s Attorney General that calls the cafes “illegal” is not binding, because it also states “not intended to be used for legal advice.”

Besides, Weston said, a place can’t be shut down for offering legitimate services. “Lots of people don’t have computers at home, they don’t have internet access. These businesses, amongst other things, provide access to Wi-Fi and computer stuff,” he said.

Oakland did not return KPIX 5′s calls about the cafe on International Boulevard. City councilman Noel Gallo told us he’s frustrated, and plans to introduce an ordinance to shut it down.

(Copyright 2013 by CBS San Francisco. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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