You, Too, Can Open a Slot Parlor in Your Local Strip Mall

Boomberg BusinessWeek
Features April 21, 2011, 5:00PM EST
The Casino Next Door
How slot machines snuck into the mall, along with money laundering, bribery, shootouts, and billions in profits
By Felix Gillette

Inside a one-story building on the edge of a strip mall in Central Florida, Joy Baker calculates the sum total of her morning bets. It's almost noon, and she's down $5. Not bad. Her husband, Tony, sits a few feet away. "This is the most fun we've had in 20 years," says Joy, who is 78 and retired. "At our age, we can't hike. You can't pay him to go to the movies. This gives us a reason to get up in the morning."

Tony concurs. "We enjoy this," he says. "We will be very bitter if the politicians take this away from us. I will take it personally."

It's a Wednesday morning in mid-March, and the Bakers are sitting inside Jacks, a new type of neighborhood business that is flourishing in shopping malls throughout Florida—and across America. Jacks bills itself as a "Business Center and Internet Cafe," but it looks more like a pop-up casino.

Jacks is about the size of a neighborhood deli. There is a bar next door and a convenience store around the corner. Inside, jumbo playing cards decorate the walls. The room is filled with about 30 desktop computers. Here and there, men and women sit in office chairs and tap at the computers. They are playing "sweepstakes" games that mimic the look and feel of traditional slot machines. Rows of symbols—cherries, lucky sevens, four-leaf clovers—tumble with every click of the mouse.

John Pate, a 50-year-old wearing a Harley-Davidson T-shirt, says he is wagering the equivalent of 60 cents a spin. "This place is pretty laid-back," says Pate. "You can come here and get your mind off everything. You're not going to win the mortgage. You're not going to lose the mortgage. It's pretty harmless."

Local law enforcement disagrees. Jacks is located in the town of Casselberry, in the heart of Seminole County, a former celery-growing region that is now a suburb of nearby Orlando. For the past couple of years, the vice squad of the local sheriff's department has been investigating Jacks and seven other similar businesses around the county for potentially violating state prohibitions on gambling. The cafe owners contend that what they are offering is not technically gambling but rather a form of "sweepstakes" promotions, which are currently legal under Florida state law. In January, after consulting with the sheriff's department, the five members of the local Board of County Commissioners passed an ordinance designed to shut down the mini-casinos.

The legal fight did not end there. As the commissioners soon learned, along with local officials throughout the U.S., getting rid of Internet sweepstakes cafes is not easy. Shortly after passing the ordinance, the commissioners were hit with multiple civil lawsuits filed in federal court. An attorney representing a chain of sweepstakes cafes headquartered in St. Augustine filed a 49-page complaint alleging, among other things, that the ordinance unfairly restricted the cafes' First Amendment rights to free speech. A lawyer working for a sweepstakes software company in New Jersey filed a 20-page complaint alleging that the commissioners had violated the commerce clause of the U.S. Constitution.

More than two months later, Seminole County awaits a court ruling. In the meantime, the sweepstakes cafes remain open.

The fight over the legality of the pop-up casinos in Seminole County is part of a broader battle that has been fought for six years in counties across the nation from North Carolina to Texas to Massachusetts. Along the way, cops have raided numerous sweepstakes cafes, confiscated computers, and seized safes full of cash. In September, cops in Virginia Beach, Va., raided a dozen game rooms and confiscated more than 400 computers. In March, police in West Valley City, Utah, shut down two sweepstakes cafes, detained 67 people, and seized 80 computers. Lawmakers in North Carolina passed legislation last year outlawing the business model. In February, Virginia did the same. In April, the Massachusetts Attorney General submitted emergency regulations to shut down the businesses.

And yet the sweepstakes cafes keep spreading.

James Mecham, the managing director of SweepsCoach, a Sacramento-based company that provides startup services to new sweepstakes cafes, says he has helped open some 200 around the country in recent years. Mecham says the number continues to grow and estimates that there are now somewhere between 3,000 and 5,000 operating in the U.S. On Google (GOOG) Maps, a search for "sweepstakes cafe" turns up 2,823 results in North America. Those are just the ones listing their services.

"Phones are ringing off the hook," says Mecham. "Everybody wants to open one."

It's a high-margin, cash-rich business. According to Mecham, each terminal at a thriving cafe typically grosses $1,000 to $5,000 per month. A medium-size business with, say, 100 machines would therefore gross around $250,000 a month, or in the ballpark of $3 million a year. All of which would suggest that in less than a decade, Internet sweepstakes cafes in the U.S. have grown into a collective $10 billion to $15 billion industry. . . .

I wonder how soon we will have stories on internet gambling cafes in DC -- completely legal ones with internet gambling.

Quote: SanchoPanza

"Phones are ringing off the hook," says Mecham. "Everybody wants to open one."
It's a high-margin, cash-rich business. Each terminal at a thriving cafe typically grosses $1,000 to $5,000 per month. A medium-size business with, say, 100 machines would therefore gross around $250,000 a month, or in the ballpark of $3 million a year. All of which would suggest that in less than a decade, Internet sweepstakes cafes in the U.S. have grown into a collective $10 billion to $15 billion industry. . . .

For the latest on the Industry, particularly in the State of Florida there is this August 6 2011 news item.

Internet Cafes .

A sort of Strip Mall Dotty's under the guise of an Internet Cafe that is conducting a lawful sweepstakes-like promotion. No licenses needed. Not a tavern. Not a casino. Just rent a spot in a strip mall and get a few computers.

"...The state of Florida needs to step up and pass ordinances to regulate these Internet cafes in Florida.

"These cafes are taking revenue away from the Florida lottery and slot machine devices," which, he claims, benefits education in Florida. Remove lottery revenue, for instance, and education enhancement revenue drops."

(Dunbar, however, does have a dog in the Internet cafe hunt. As an attorney, his gaming practice is Florida’s largest encompassing both lobbying and litigation for casinos, gaming suppliers, pari-mutuels, Indian tribes, sweepstakes and charities. He is the first to admit that it is not in the interest of any of his clients to allow Internet cafes to continue as they are.)..."

If you are dumb enough to play these you deserve to lose your money. By the way I checked out one near where I live and the employee seemed really apprehensive and suspicious with all the questions I was asking.

Yeah. I don't play at those stupid pseudo-slot machine parlors that offer electronic bingo machines with a faux graphical overlay.
Yet, when I go in to see how many machines they have and what sort of a crowd they get, I go in as a dummy who is just wandering by and is curious and more killing time than anything else. They have to view you as a prospective customer not a reporter or politician or investigator. Its a look dumb and act dumber situation if you want to get any information out of them or just wander around gawking.

This article is very amusing to me.

In Ohio, where I currently live, there are some VERY vague laws, and there are "Games of Skill" slot parlors that operate all over the city (and state for that matter). The poker rooms operate on a club status which the media "expose" about once or twice a year, but most of the card rooms operate 100% legally (some take a rake, which they are not supposed to do). At one club I frequent, next door there is an "Internet cafe" which always seems to be teeming with business. I couldn't figure out why this day in age a place like that would be so busy. I never went in as the clientele seems shady (the area the club is in isn't the best part of town, although the club is the best-run of all of them.)

Now I know what's going on in there...

Quote: Tiltpoul

I never went in as the clientele seems shady.

Shady? At these internet cafes the clientele seems to be retirees with various pension checks and nothing much else to do with their lives but drink, smoke and gamble.
If they chose to gamble unwisely but at a low-key and geographically convenient establishment... that is their choice.

Quote: FleaStiff

Shady? At these internet cafes the clientele seems to be retirees with various pension checks and nothing much else to do with their lives but drink, smoke and gamble.
If they chose to gamble unwisely but at a low-key and geographically convenient establishment... that is their choice.

As I mentioned earlier, there are "Games of Skills Arcades" and those places cater to the player you are referring to. No, this "Internet Cafe" caters to a very specific demographic that is suited to the area the strip mall is in. They have the door securely locked and about 4 NO FIREARMS signs around. I've been at the poker room when police were pursuing kids with a gun.

heather/ starts frantically filling out business loan application forms.

Massachusetts has not only banned internet cafes but is starting criminal investigations against them.

Quote: heather

heather/ starts frantically filling out business loan application forms.

You should also advertise for investors...

We have what they call '8-liner' places here for people to win 'prizes'. Vice shuts them down, then they pop up again, similar to Asian massage spa's(which we have a lot of), these are the 'happy ending' type spas I'm talking about.

Quote: heather

heather starts frantically filling out business loan application forms.

Rent in a Strip Mall,
Cost for the various computers and networking equipment,
Some coffee maker and some cold box for the soda machine.
Some comfortable chairs and a credit card deposit.
So what is the total expense likely to be?

Any internet cafes in Vegas? Maybe Dotty?
(Nah, I guess not. Stations came down hard on Dotty and The Dotty Clones, they would come down even harder on a faux internet cafe).

Florida seems to be the state that has them springing up everywhere there is a cheap strip mall and at least two retirees with pension checks.

Some Florida cities seem to be trying to pass ordinances but most internet cafes seem to be located in unincorporated areas so it would take a county wide ban of some sort.
I imagine the retirees who play in these places are simply too remote from an Indian casino so they play faux slot machines all day. Seems harmless .... seems also senseless too but so do a great many things that are perfectly legal.

Quote: FleaStiff

Any internet cafes in Vegas?

No point. They have the real thing.

Quote: pacomartin

No point. They have the real thing.

Not much point to it in Florida either. The Seminole slot machines may be distant but the dumb players don't seem to know they are getting shafted by these gambling sites.

Quote: FleaStiff

The Seminole slot machines may be distant but the dumb players don't seem to know they are getting shafted by these gambling sites.

If you build it, they will come ...

And get addicted.