Changes to Sweepstakes Parlor Laws on Hold

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Raleigh city officials are waiting on some North Carolina Supreme Court rulings before going forward with making any changes to the law that governs sweepstakes parlors.

The courts will determine if the online gaming centers, which have been compared to mini-casinos, are protected by the First Amendment, a decision which would make regulating them more difficult.

The issue was discussed during Tuesday’s Law and Public Safety Committee meeting.

Today, sweepstakes parlors are classified as “Retail Sales – Convenience” in the city code and can be located in Neighborhood Business, Shopping Center, Business, Thoroughfare, Industrial-1 and Industrial-2 zoning districts.

There are 30 licensed parlors in Raleigh. They skirt gambling laws because the slot machines in the parlors have predetermined winners and take chance out of the equation—a key component of the legal definition of gambling.

Councilors, particularly District C Councilor Eugene Weeks, are looking to further restrict where the parlors can be located or discourage them altogether, especially after some new centers have been cropping up in southeast Raleigh.

Compared to other businesses, sweepstakes parlors already have high license fees. Owners must pay $3,500 for the first computer and $1,000 for each subsequent computer. The fees top out at $20,000.

For example, according to the city’s business license tax schedule, firearms dealers pay $50 and check cashing agencies pay $100. All fees top out at $20,000.

The city could increase the business license fees, but would have to provide sound reasoning about why the fees are being implemented.

The city could also more-heavily restrict where parlors are able to locate.

Places like strip clubs must be 2,000 feet away from a similar establishment and 2,000 feet from any church, school, daycare center or residential use and locate in commercial zoning districts.

Councilors could approve a text change that would include sweepstakes on the list of businesses that shouldn’t be in close proximity to residential areas or each other.

But, like the increased fees, the city would must provide sound reasoning and evidence for changing the law.

Assistant City Manager Daniel Howe said that unlike for strip clubs, there aren’t any studies on the negative impacts of sweepstakes parlors. Most of the evidence is anecdotal.

“People will sue us over this issue,” he said.

The city has to be able to support its decision.

Committee members asked that city staff put together some research on the distance requirements and the licensing fees so that the Council can move forward on any decisions more quickly.

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