North Carolina Lawyers Weekly
Even if skill helps players to win plaintiffs’ sweepstakes games, since the games are conducted through an “entertaining display,” the games violate G.S. § 14-306.4.
We reverse the trial court’s permanent injunction prohibiting the state from enforcing our gambling and sweepstakes laws against plaintiff Gift Surplus, LLC.
In a prior decision in this case, our Supreme Court held that plaintiffs’ games violated our gambling and sweepstakes laws. Thereafter, plaintiff Gift Surplus made adjustments to its sweepstakes games.
One such adjustment is a “double nudge” feature that allows players to nudge the game reels as many as two times in order to move them into alignment and win a prize. Other additions included a “winner every time” feature that made 100 percent of spins winnable, albeit only for a prize of several cents on 75 percent of spins, and a “final ticket” feature that allowed prizes lost through incorrect nudging to be won back in later turns. Finally, Gift Surplus removed a “governor” feature that had prevented players from winning large prizes in quick succession.
On remand, the trial court found that Gift Surplus’ sweepstakes no longer violated § 14-3064, and the court thus enjoined the state from enforcing the criminal law prohibiting electronic sweepstakes against Gift Surplus.
In relevant part, § 14-306.4 states, “It shall be unlawful for any person to operate, or place into operation, an electronic machine or device to … conduct a sweepstakes through the use of an entertaining display, including the entry process or the reveal of a prize.” There is no dispute that Gift Surplus’s game is a sweepstakes. At issue is whether Gift Surplus’s sweepstakes are conducted through “an entertaining display” in violation of § 14-306.4.
We need not decide whether these sweepstakes are chance or skill-based in order to hold that they violate § 14-306.4.
Section 14-306.4(a)(3) sets out a non-exhaustive list of specific games that fit the definition of “electronic display.” Gift Surplus mischaracterizes this statutory scheme in arguing a sweepstakes game “falls within the ‘entertaining display’ prohibition only when the ‘video game is not dependent on skill or dexterity while revealing a prize as the result of an entry into a sweepstakes.’” Regardless of whether it is dependent on skill or dexterity, a sweepstakes falls within the entertaining display prohibition simply if it is “visual information, capable of being seen by a sweepstakes entrant, that takes the form of actual game play, or simulated game play.” G.S. § 14-306.4(a)(3).
The sweepstakes in question are run through standalone kiosks that display a video game resembling a reel-spinning slot machine. These kiosks undisputedly display visual information capable of being seen by a sweepstakes entrant.
Gift Surplus’s sweepstakes are thus run through the use of an “entertaining display.” As such, regardless of whether skill or chance predominates over the games at issue, Gift Surplus’s kiosks violate § 14-306.4.
Reversed and vacated.
Concurrence
(Collins, J.) To the extent our Supreme Court’s adoption of Judge Ervin’s dissent in Sandhill Amusements, Inc. v. Miller, 368 N.C. 91, 773 S.E.2d 55 (2015), signals the court’s determination that a sweepstakes game falls within § 14-306.4’s “entertaining display” prohibition only when the video game is not dependent on skill or dexterity, I agree with Judge Bryant’s concurring opinion in this case that “the games at issue do not amount to games whose outcomes are determined by skill and dexterity, but rather, chance.”
But even with Gift Surplus’ new features in its version 1.22, the sweepstakes continues to be a game of chance. First, as in version 1.03 (at issue in the prior appeal), the set of symbols appearing to the player in the first instance is not determined by the player’s skill or dexterity, but rather is “purely chance-based.” Chance, rather than skill or dexterity, thus wholly determines whether a significant prize can be won. The addition of token prizes for what are effectively losing spins does not change the analysis, as their availability, like the availability of significant prizes, is wholly determined by chance.
Second, the elimination of the “governor” feature merely amplifies the speed by which chance may provide significant prizes to the player, and thus also fails to change the analysis.
Third, the addition of the “final ticket” feature actually diminishes the impact skill plays in version 1.22, by forgiving the player’s failure to exercise whatever skill is required to claim the prizes chance makes potentially available.
Finally, the addition of a second nudge does not meaningfully distinguish version 1.22 from version 1.03. Even assuming for purposes of argument that this “nudging” process does involve skill or dexterity, the de minimis amount of skill and dexterity involved in executing two nudges fails to transform a game of chance into one wherein skill and dexterity predominate.
Accordingly, plaintiffs’ kiosks operate sweepstakes through an entertaining display in violation of § 14- 306.4, and the permanent injunction prohibiting law enforcement officers from enforcing violations of the law against Gift Surplus should be vacated.
Concurrence
(Bryant, J.) Where the exercise of skill and dexterity is the dominant character of a game which determines the final outcome, the game does not satisfy the statutory definition of a sweepstakes, though an element of chance may be present. The games at issue do not amount to games whose outcomes are determined by skill and dexterity, but rather, chance. As a result, the games are sweepstakes in violation of § 14-306.4.
Gift Surplus, LLC v. State ex rel. Cooper (Lawyers Weekly No. 011-268-19, 20 pp.) (Hunter Murphy, J.) (Allegra Collins, J., concurring) (Wanda Bryant, J., concurring in the result) Appealed from Onslow County Superior Court (Ebern Watson, J.) Elizabeth Brooks Scherer, Kip David Nelson, Troy Shelton, George Hyler and Michael Grace for plaintiffs; Matthew Sawchak, John Doggett and Kenzie Rakes for defendants. N.C. App.
