A crackdown on Internet sweepstakes cafes in Cuyahoga County led this week to indictments against 10 individuals and seven businesses, revealing a disturbing pattern of racketeering, illegal gambling and money laundering. The danger is, if the state does not act quickly, the scheme likely will be repeated across the state.
As matters stand, sweepstakes cafes are regulated at the local level, if at all. That has led to a confusing patchwork of regulations, allowing the operations to proliferate, to around 300. Although the legislature, as part of a recently passed gambling bill, imposed a moratorium on new sweepstakes cafes, legislators are still working on a bill to bring statewide regulations to what Ohio Attorney General Mike DeWine aptly describes as “a huge problem.”
How big? Over a period of four years, some $48 million allegedly was siphoned from 18 sweepstakes cafes in Cuyahoga County, the money flowing to a New Jersey-based company called VS2 Worldwide Communications, which supplied the equipment. The indictment named four Akron-area men who helped move gambling machines into Cuyahoga County, convincing operators that the devices, which resemble electronic slot machines, are legal in the state.
In sweepstakes cafes, patrons buy phone cards or Internet time to play sweepstakes games. While cafe owners compare their games to the games at fast-food outlets, Cuyahoga County Prosecutor Bill Mason ordered all 50 sweepstakes cafes in the county to close, accusing them of running illegal gambling operations. Operators, some of whom had local permits, and patrons are not being charged.
Mason’s office worked with multiple agencies on the crackdown, among them the Ohio Attorney General’s Office, the Secret Service and the U.S. Marshal Service. That it took such an effort to deal with sweepstakes cafes in one county should provide a signal to the legislature to make regulations a high priority.
DeWine correctly emphasized that the cafes are a consumer rip-off. Setting statewide rules for them is a must; otherwise, operators will simply move from location to location, taking advantage of the confusion.
The legislature is wisely considering putting sweepstakes cafes under the Ohio Casino Control Commission. Operators should be required to post the odds and buy equipment from state-approved vendors, protecting consumers. The legislature should also limit the number of cafes and place restrictions on payouts. As the crackdown in Cuyahoga shows, there is no time to lose.