Source: http://goldalexlaw.com/gaming-litigation-and-gaming-matters/
Timestamp: 2019-04-24 20:06:03+00:00

Document:
In Massachusetts, issues have risen with respect to the legality of the operation of certain gaming machines within the Commonwealth. This Attorney had been retained by various companies to represent their interests with respect to the continued use of their gaming devices within business establishments. These machines have included gaming machines such as “phone card machines”.
Some communities took action against the business establishments and/or vendors of the gaming machines in various forms including but not limited to: criminal complaints, civil violations, liquor license violations etc.
The issue that had been presented in those various situations of the operation of the gaming machines within restaurants, bars and other business establishments is whether the game qualifies as a sweepstakes, which is lawful in Massachusetts, or a lottery which is unlawful pursuant M.G.L. c. 271 §7.
The leading case in Massachusetts addressing these issues had been, Commonwealth vs. Webb, 68 Mass. App. Ct. 167 (2007). This is a Massachusetts Appeals Court decision that was upheld by the highest court in Massachusetts, the Supreme Judicial Court.
The court explained that in order to prove a violation of M.G.L. c. 271, §7 governing illegal gaming as to these machines, there were three elements of a lottery as follows: 1) the payment of a price; 2) for the possibility or chance of winning a prize; and 3) with the result depending upon hazard or chance. The court held that if the game can be played free of charge and without purchase of a product, the promotion generally constitutes a sweepstakes rather than a lottery and is not a violation M.G.L. c. 271 §7. Specifically, the Appeals Court in Commonwealth vs. Webb, 68 Mass. App. Ct. at 172 n.9 stated that “if the posted free play option furnished an opportunity in reality for interested persons to play the game without purchase or payment”, the “price” element of the lottery statute will not be satisfied, and the promotion will be considered a sweepstakes.
The gaming machines being operated in various communities throughout the Commonwealth had clearly allowed a free play option. Signs affixed to the machines alert customers of the availability of unlimited free play.
the form of cash or gift certificates; any items of value are sufficient to satisfy the statutory element of a prices.” Id 68 Mass. App. Ct. at 167. In Commonwealth vs. Webb, the merchants chose the particular prize to be awarded, either cash or gift certificates. Many sweepstakes also offer either option.
The court also reviewed the machines as selling a legitimate product at a competitive price. The phone card machines sell phone time minutes to consumers for every dollar spent. In the Webb case, there was no showing that the phone time rates were not competitive with rates charged by other phone companies. The Appeals Court rejected the prosecution’s argument that the phone cards were not legitimate.
Further, in the past, the Commonwealth of Massachusetts, Office of Consumer Affairs and Business Regulation, Division of Standards, has awarded approval to other companies for their Phone Card Machine and approved it under the provisions of M.G.L. c. 94, §283.
However, legislative changes went into effect that seeming changed the landscape in this area. This legislation was in response to the operation of various “internet cafes” or “cyber cafes” throughout the state.
Outside certain statutory exceptions, existing statutes prohibit the business of gambling, including M.G.L. c. 271 which prohibits, among other unlawful gambling activities, illegal lotteries, namely, soliciting or accepting a payment for the chance to win a prize. These statutes are designed to protect the public’s health, safety and welfare. The purpose of 940 CMR 30.00 is to protect Massachusetts consumers and the public from unlawful lotteries, sweepstakes and other forms of illegal gambling by defining unfair and deceptive acts or practices in the promotion and sale of lotteries, sweepstakes and other forms of illegal gambling. A business that induces consumers to participate in illegal and unregulated forms of gambling by posing as a legitimate business or claiming to offer legitimate sales transactions is unfair and deceptive in violation of M.G.L. c. 93A, § 2(a).
(d) as charitable gaming, so called, conducted under M.G.L. c. 271.
The Attorney General’s regulations are not intended to be all inclusive as to the types of activities prohibited by M.G.L. c. 93A, § 2(a). Acts or practices not specifically prohibited by 940 CMR 30.00 are not necessarily consistent with Chapter 93A. All references in 940 CMR 30.00 to statutes and other regulations shall include amendments made to such statutes and other regulations after the promulgation of 940 CMR 30.00.
940 CMR 30.00 shall not be interpreted to authorize any lottery, game, gaming device, contest or activity prohibited by M.G.L. c. 271 or any other applicable law.
Chance means the opportunity to win a prize where the likelihood of winning is determined by some element of chance.
Customer means any natural person who pays for, or is solicited to pay for, directly or indirectly, either (i) a chance to win a prize; or (ii) goods or services offered in connection with a chance to win a prize.
that sells or offers for sale either (i) a chance to win a prize; or (ii) goods or services offered in connection with a chance to win a prize.
Free Play means the play of a lottery, sweepstakes, similar game or use of gaming devices without providing anything of value in return for that play or use.
Free Play Option means the opportunity to play a lottery, sweepstakes, similar game or use of gaming devices without providing anything of value in return for that play or use.
Gambling purpose means that the motivation of the customer in making a payment is to participate in a lottery, sweepstakes, similar game or use of gaming devices.
Game means an activity that involves some element of chance and an opportunity to win a prize.
Payment means providing any money, property or thing of value.
Person means a natural or artificial entity, including, but not limited to, individual, partnership, limited liability company, association, trust or corporation or other legal entities.
Prize means any gift, award, gratuity, money, good, service, credit, or anything else of value, which may be transferred to or for the benefit of a person, whether possession of the prize is actually transferred, or placed on an account or other record as evidence of the intent to transfer the prize.
Lottery means a game or activity that includes a payment for a chance to win a prize.
Sweepstakes means any game, advertising scheme or plan, or other promotion, which, with or without payment of any consideration, a person may enter to win or become eligible to receive a prize, the determination of which is based upon an element of chance.
30.04: Prohibition on unlawful lotteries, sweepstakes and de facto gambling.
(1) It is an unfair and deceptive act or practice in violation of M.G.L. c. 93A, § 2(a) for a person to solicit or accept payment for a chance to win a prize.
(2) With respect to a business or a transaction that involves or purports to involve both a chance to win a prize and the sale or purported sale of a good or service, it is an unfair and deceptive act or practice in violation of M.G.L. c. 93A, § 2(a) for any person to engage in a business or engage in a transaction where a gambling purpose predominates over the bona fide sale of bona fide goods or services.
30.05: Criteria for determining whether a gambling purpose predominates.
(g) Whether customers who purchase or purportedly purchase goods or services in connection with a lottery, sweepstakes, similar game or use of gaming devices achieve any advantages, whether immediate or over a period of time, in winning a prize over customers who do not purchase or purportedly purchase goods or services.
(h) With respect to businesses that use or purport to use a lottery, sweepstakes, similar game or use of gaming devices to promote the sale of goods or services offered or purportedly offered by the business, whether such promotion is occasional and of limited duration as compared to permanent or of undefined or long-term duration.
If any provision of these regulations or the application of such provision to any person or circumstances is held to be invalid, the validity of the remainder of these regulations and the applicability of such provision to other persons or circumstances shall not be affected.
In May of 2013, as reported in the Revere Journal, B & B Cyber Cafe Owners along with their corporation, were indicted on charges of operating an illegal slot parlor. The charges stemmed from unlawful operation of a game or gaming device, organizing or promoting a lottery, operating an illegal lottery, allowing lotteries in a building, and the sale of lottery tickets.
Investigation revealed that patrons of this Internet café were paying nearly exclusively for the right to gamble. Authorities alleged that patrons were not, as advertised, simply paying for Internet time and playing a free sweepstakes. Investigators also allege that, “no purchase required” opportunities were of no legal significance and gambling was the only clear purpose for this café.
The action by the AG’s Office was a direct result of complaints regarding alleged unlawful gambling operations. The AG’s office issued permanent civil regulations in June 2011 under the Massachusetts Consumer Protection Act. The Act banned the operation of so called “cyber cafés” or loophole casinos and similar establishments across the Commonwealth. Those that violate the law may be subject to injunctions, criminal charges, civil penalties and other relief under the Consumer Protection Act. Additionally, in August 2012, Governor Deval Patrick signed into law legislation the above legislation that further enhanced the criminal penalties for illegal gambling at “cyber cafés” throughout Massachusetts. The new law has gone into effect and establishes a new crime for conducting or promoting an unauthorized sweepstakes that is executed through the use of the entertaining display of an electronic machine. The new crime carries a penalty of up to $250,000 per offending machine and/or imprisonment of up to 15 years in state prison.
In August 2012, two individuals and their corporation pleaded guilty to gaming charges in connection with operations out of Internet cafés in Fall River and Fairhaven.
In June 2013, the owner and corporation of a former Chicopee cyber cafe, Cafeno’s, plead guilty to charges that they ran an illegal slot parlor. Guilty pleas were given to charges of organizing or promoting gambling services, operating an illegal lottery, allowing lotteries in a building, and the sale and advertising of lottery tickets. The corporation, Cafeno’s Inc., also plead guilty to the same charges, as well as to charges of aiding, assisting, procuring, counseling, or advising a false tax return.
Mass. Attorney General Martha Coakley’s office maintained that the evidence showed that customers of Cafeno’s were paying “nearly exclusively” for the right to gamble. The cafe’s operators told investigators that customers were paying for Internet time and playing free sweepstakes. Further investigation by the state also found falsified state tax returns and that radio ads “promoted the lottery aspect of the business,” which is a violation of state law.
Each of the defendants were sentenced to two years of probation and more than $250,000 of the defendants’ assets were forfeited to the state, with $100,000 of that money being forfeited by the corporation as a fine. The case against another defendant is pending as of this writing.
As this area continues to evolve, it is anticipated that new types of business ventures may be entertained by clients and they would be well advised to seek legal counsel before beginning any such venture in light of the new regulations and enforcement in Massachusetts.

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