Municipal – Sweepstakes – Entertaining Display

Plaintiff’s video sweepstakes game is exactly the type of electronic sweepstakes the legislature intended to prohibit by enacting Section 14-306.4.

We reversed the order of the trial court granting Plaintiff’s Motion for Preliminary Injunction and remanded to the trial court for further proceedings.

Defendants Secretary of the North Carolina Department of Public Safety, Director of the North Carolina State Bureau of Investigation, and Director of the Alcohol Law Enforcement Branch of the North Carolina Department of Public Safety appealed from an Order on Motion for Preliminary Injunction entered in favor of Plaintiff No Limit Games, LLC enjoining the Defendants, Sheriff of Robeson County, Town of Pembroke, and County of Robeson from forcing or compelling removal of Plaintiff’s video sweepstakes kiosks from businesses or facilities and from prosecuting persons in possession of Plaintiff’s video sweepstakes kiosks.

Plaintiff operates, uses, and sells promotional video sweepstakes. These video sweepstakes utilize computer kiosks, generally placed in retail establishments owned by third parties. In 2023, Plaintiff filed alleged Defendants had threatened enforcement action against Plaintiff’s business. Plaintiff sought a Declaratory Judgment declaring its video sweepstakes is not a prohibited gambling, lottery, or gaming product. Plaintiff also sought preliminary and permanent injunctive relief enjoining Defendants from removing Plaintiff’s kiosks or prosecuting any person in possession of them.

The trial court concluded Plaintiff had established a likelihood of success on the merits of its claim, that it would suffer irreparable harm if Defendants were permitted to take enforcement action against it, and that the equities favored a preliminary injunction. The trial court concluded Plaintiff’s video sweepstakes did not violate N.C. Gen. Stat. § 14-306.4. The trial court granted Plaintiff a preliminary injunction prohibiting Defendants from forcing the removal of Plaintiff’s kiosks from retail or other facilities, issuing warnings to facilities for using Plaintiff’s systems, attempting to coerce any establishment into removing Plaintiff’s kiosks, or prosecuting any person in possession of the kiosks. The issues on appeal were: (I) whether Plaintiff has standing to seek declaratory and injunctive relief; and (II) whether the trial court erred in granting a Preliminary Injunction in favor of Plaintiff on the basis Plaintiff’s video sweepstakes game was predominantly a game of skill rather than chance.

Plaintiff argued that certain specific attributes of its game distinguish it from those previously held illegal under Section 14-306.4. We disagreed. First, Plaintiff argued that its game is not prohibited under Section 14-306.4 because the prize available to the player is determined prior to any video gameplay, and therefore playing the game does not determine whether a player has a winning or losing entry. Plaintiff’s argument ignores the plain text of the statute: Section 14- 306.4(b) not only proscribes the use of an entertaining display to enter the sweepstakes and determine the result, but it also prohibits the use of such a display for the “reveal of a prize.” The fact that the available prize is determined upon the purchase of Youbux and receipt of the accompanying sweepstakes entries does not change the fact that it is revealed via an entertaining display. No matter when the results are determined, use of an entertaining display to reveal the prize is prohibited. Nor does the existence of the “instant reveal” feature change our analysis. Plaintiff argued the instant reveal function does not make use of an entertaining display because it involves no video gameplay and the instant reveal is unadorned. Even assuming the instant reveal feature does not make use of an entertaining display and is legal under Section 14-306.4, that option does not thereby render legal the other option available at the kiosk, which does use such an entertaining display to reveal prizes. The feature of the product by which sweepstakes prizes are revealed through an entertaining display remains illegal and prohibited by statute.

The most prominent difference between Plaintiff’s game and those at issue in earlier appellate decisions is the incorporation of the “Follow-Me” game. When a player plays a round of Plaintiff’s game and no prize is revealed, they are given the opportunity to play a pattern matching game which, if successfully played, rewards them with a refund of the sweepstakes entries wagered that round. Plaintiff’s game incorporates a dexterity element in each round a player plays. However, this does not automatically render the game one in which skill or dexterity predominate over chance. Plaintiff failed to show that skill or dexterity, via the Follow-Me feature, predominate over chance in determining the results of the game.

Plaintiff’s game is exactly the type of electronic sweepstakes the legislature intended to prohibit by enacting Section 14-306.4. Chance predominates skill or dexterity in determining the outcome of Plaintiff’s game. Therefore, Plaintiff has not shown a likelihood of success in its claim for declaratory judgment. Consequently, the court erred in granting Plaintiff’s motion for a preliminary injunction.

Reversed and remanded.

No Limit Games LLC v. Sheriff of Robeson County, North Carolina, Burnis Wilkins (Lawyers’ Weekly No. 011-337-25, 32 pp.) (Tobias Hampson, J.) Appealed from Robeson County Superior Court (e Michael A. Stone, J.) Rossabi Law Partners, by Gavin J. Reardon and Amiel J. Rossabi, for Plaintiff-Appellee; Attorney General Joshua H. Stein, by Deputy Solicitor General James W. Doggett, Special Deputy Attorney General Tamika L. Henderson, and Special Deputy Attorney General Michael Bulleri, for Defendants-Appellants. North Carolina Court of Appeals