Court Opinion

ID: 9348165
Source: CourtListenerOpinion
Date Created: 2022-12-19 22:11:32.691653+00
Date Added: 2024-06-11T16:41:17.496036
License: Public Domain

IN THE SUPREME COURT OF NORTH CAROLINA

                                   2022-NCSC-1

                                   No. 363A14-4

                              Filed 11 February 2022

GIFT SURPLUS, LLC, and SANDHILL AMUSEMENTS, INC.,

Plaintiffs,

v.

STATE OF NORTH CAROLINA, ex rel. ROY COOPER, GOVERNOR, in his
official capacity, BRANCH HEAD OF THE ALCOHOL LAW ENFORCEMENT
BRANCH OF THE STATE BUREAU OF INVESTIGATION, MARK J. SENTER,
in his official capacity, SECRETARY OF THE NORTH CAROLINA
DEPARTMENT OF PUBLIC SAFETY, ERIK A. HOOKS, in his official capacity,
and DIRECTOR OF THE NORTH CAROLINA STATE BUREAU OF
INVESTIGATION, BOB SCHURMEIER, in his official capacity.

      On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision

of the Court of Appeals, 268 N.C. App. 1 (2019), reversing an order entered on 2

February 2018 by Judge Ebern T. Watson III, in the Superior Court, Onslow County.

Heard in the Supreme Court on 23 March 2021.

      Fox Rothschild LLP, by Elizabeth Brooks Scherer, Troy D. Shelton and Kip D.
      Nelson; Hyler & Agan PLLC, by George B. Hyler, Jr.; and Grace, Tisdale,
      Clifton, P.A., by Michael A. Grace for plaintiff-appellants.

      Joshua Stein, Attorney General, by James W. Doggett, Deputy Solicitor
      General, Olga Vysotskaya de Brito, Special Deputy Attorney General, and Ryan
      Y. Park, Solicitor General, for the State.

      Edmond W. Caldwell, Jr. and Matthew L. Boyatt, for North Carolina Sheriffs’
      Association; Fred P. Baggett for North Carolina Association of Chiefs of Police;
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           and Jim O’Neill for North Carolina Conference of District Attorneys, amici
           curiae.

           HUDSON, Justice.

¶1         Gift Surplus, LLC, and Sandhill Amusements, Inc., (plaintiffs) sued Governor

     Roy Cooper and several state law enforcement officials (defendants) seeking a

     declaratory judgment that their operation of a sweepstakes through video game

     kiosks does not violate N.C.G.S. § 14-306.4, North Carolina’s criminal prohibition on

     certain video sweepstakes. This case presents the third time plaintiffs have appeared

     before this Court seeking to avoid liability under North Carolina’s ban on video

     sweepstakes. The question presented here is whether plaintiffs’ new game, as

     modified since plaintiffs last appeared before this Court, is not “dependent on skill or

     chance” and is thus criminalized by N.C.G.S. § 14-306.4 (2021), which prohibits the

     operation of sweepstakes conducted through video games of chance. As we held over

     one hundred years ago and reaffirmed when plaintiffs appeared before this Court

     challenging the video sweepstakes ban twelve years ago,

                  [n]o sooner is a lottery defined, and the definition applied
                  to a given state of facts, than ingenuity is at work to evolve
                  some scheme of evasion which is within the mischief, but
                  not quite within the letter of the definition. But, in this
                  way, it is not possible to escape the law’s condemnation, for
                  it will strip the transaction of all its thin and false apparel
                  and consider it in its very nakedness. It will look to the
                  substance and not to the form of it, in order to disclose its
                  real elements and the pernicious tendencies which the law
                  is seeking to prevent. The Court will inquire, not into the
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                  name, but into the game, however skillfully disguised, in
                  order to ascertain if it is prohibited. It is the one playing at
                  the game who is influenced by the hope enticingly held out,
                  which is often false or disappointing, that he will, perhaps
                  and by good luck, get something for nothing, or a great deal
                  for a very little outlay. This is the lure that draws the
                  credulous and unsuspecting into the deceptive scheme, and
                  it is what the law denounces as wrong and demoralizing.

     Hest Techs., Inc. v. State ex rel. Perdue, 366 N.C. 289, 289 (2012) (quoting State v.

     Lipkin, 169 N.C. 265, 271 (1915)). After “inquir[ing], not into the name, but into the

     game, however skillfully disguised” of plaintiffs, we hold that chance predominates

     over skill in plaintiffs’ new game and, accordingly, that this game is a game of chance

     that violates the sweepstakes statute. Accordingly, we modify and affirm the decision

     of the Court of Appeals.

                                      I.      Background

¶2         This case follows from the North Carolina General Assembly’s repeated efforts

     since 2006 to ban all video-gaming machines, including video poker and other video

     card games. Act of June 6, 2006, N.C. Sess. Law 2006-6, §§ 4, 12, 2006 N.C. Sess.

     Laws 4, 4–5, 7 (codified as amended at N.C.G.S. § 14-306.1A (2021)). Since this first

     prohibition was enacted, owners of video-gaming machines have developed machines

     with various interactive operations, in apparent efforts to circumvent the ban. See

     Hest, 366 N.C. at 291. In response to these perceived loopholes, the General Assembly

     enacted Session Law 2010-103, “An Act to Ban the Use of Electronic Machines and

     Devices for Sweepstakes Purposes,” codified at N.C.G.S. § 14-306.4. 2010 N.C. Sess.
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     Laws Ch. 408. N.C.G.S. § 14-306.4 makes it illegal to “[c]onduct a sweepstakes

     through the use of an entertaining display.” N.C.G.S. § 14-306.4(b).1

¶3          Following enactment of the law, purveyors of video-game kiosks that were

     purportedly for sweepstakes challenged the law on First Amendment grounds. In

     Hest, this Court held that N.C.G.S. § 14-306.4 regulated conduct, with only incidental

     burdens on speech, and that the law was supported by a rational basis. 366 N.C. at

     303. One of the plaintiffs here, Sandhill Amusements, was among a group of vendor-

     plaintiffs in a related case making the same First Amendment argument, which was

     rejected by this Court for the reasons stated in Hest. Sandhill Amusements, Inc. v.

     State, 366 N.C. 323, 324 (2012) (per curiam). Although the record shows Sandhill has

     a long history as a video-gaming company, in that lawsuit it argued it was a business

     that sold long-distance phone time, merely using video sweepstakes to promote its

     service.

¶4          In 2013, shortly after our decision in Hest, Sandhill began operating and

     distributing video-gaming kiosks for sweepstakes for plaintiff Gift Surplus. Gift

     Surplus operates an e-commerce website, www.giftsurplus.com, but does not

     maintain an inventory of the products it advertises and instead buys products as

     necessary to fill orders as a drop shipping business.

            A fuller history of the General Assembly’s efforts to combat the circumvention of
            1

     gambling laws is provided in Hest, 366 N.C. at 289–92.
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¶5          In its business arrangement with Sandhill, Gift Surplus designs sweepstakes

     kiosks that it licenses to third-party operators like Sandhill. Sandhill places the

     kiosks into operation in convenience stores and retail establishments across North

     Carolina. The establishments are predominantly patronized by low-income

     customers, who Gift Surplus has identified as its target demographic.

¶6          Gift Surplus’s kiosks appear like large video-game machines that look akin to

     video slot machines. When players put money into the kiosks, they receive what

     appear to be paper receipts called “e-credits” that can be exchanged either for

     products on Gift Surplus’s drop shipping website or to play Gift Surplus’s phone

     games. Players also receive sweepstakes entries which can be used to immediately

     play games on the kiosks. The kiosks offer five similar games, all featuring reel-

     spinning video resembling a slot machine. When the game begins, the reels spin, but

     the three slots never come to a stop in a complete line. Instead, players always have

     to “nudge” the slots up or down so that three symbols align on the middle line. In the

     initial iteration of these games, players only had to nudge one symbol into place to

     win.

¶7          The game also limits the number of players who can win meaningful prizes.

     On 75% of turns, the player will never be able to play for the largest prize of $2400

     and, under the original setup, could win nothing.

¶8          Gift Surplus and Sandhill subsequently filed the present lawsuit, seeking a
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       declaratory judgment and preliminary and permanent injunctive relief initially

       against the Sheriff of Onslow County and then against the Governor and the present

       state defendants. A trial court judge issued a preliminary injunction for plaintiffs,

       which defendants appealed.

¶9           A divided panel of the Court of Appeals dismissed the appeal in Sandhill

       Amusements, Inc. v. Sheriff of Onslow Cty., 236 N.C. App. 340 (2014), rev’d per

       curiam, Sandhill Amusements, Inc. v. Miller, 368 N.C. 91 (2015). Then-Judge Ervin

       dissented from the Court of Appeals majority, reasoning that plaintiffs could not show

       a likelihood of success on the merits at trial because chance predominated over skill

       in plaintiffs’ game and, accordingly, it violated N.C.G.S. § 14-306.4, so the

       preliminary injunction should have been denied. Id. at 369–70 (Ervin, J., dissenting).

       On appeal, this Court reversed the decision of the Court of Appeals and adopted the

       reasoning of Judge Ervin’s dissenting opinion. Sandhill Amusements, Inc. v. Miller,

       368 N.C. 91 (2015).

¶ 10         On remand to the trial court, Gift Surplus made two changes to its games.

       First, they added a “winner-every-time” modification, so that, on the 75% of turns on

       which users originally could not win any prize, retailers can set up the machine to

       award a token prize of a few cents. Second, Gift Surplus added a “double nudge”

       modification, so that instead of nudging one symbol to win, retailers could set up the

       machines to require players to nudge two symbols into place.
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¶ 11         After a bench trial, the trial court held that the sweepstakes game is lawful,

       relying on the new modifications made since remand to conclude that, based on the

       amended complaint and with the modifications, skill predominates over chance in

       plaintiffs’ new game, unlike the game in Sandhill.

¶ 12         The trial court further concluded that the sale of Gift Surplus’s “e-credits” was

       not a pretext for gambling. At trial, defendants presented evidence that the receipt-

       like e-credits are often thrown away rather than being redeemed in the online store

       or phone games. An officer in the Brunswick County Sheriff’s Office testified that he

       visited an establishment and observed players at the kiosks throw e-credits away

       and, after searching the trash, found over $10,000 of unused e-credit receipts.

¶ 13         Defendants appealed the trial court’s judgment to the Court of Appeals. At the

       Court of Appeals, the panel unanimously reversed the trial court judgment but issued

       three separate opinions. See Gift Surplus, LLC v. State ex rel. Cooper, 268 N.C. App.

       1 (2019). First, Judge Murphy, in an opinion joined by Judge Collins, held that, since

       plaintiffs’ new game was “visual information, capable of being seen by a sweepstakes

       entrant, that takes the form of actual game play, or simulated game play,” the

       sweepstakes was conducted through an “entertaining display,” regardless of whether

       the game was a game of chance or not. Id. at 4–5. Judge Bryant concurred in the

       result and would have required that the game not depend on skill or dexterity and

       held that “the games at issue do not amount to games whose outcomes are determined
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       by skill and dexterity, but rather, chance.” Id. at 13 (Bryant, J., concurring in the

       result). Judge Collins joined fully with Judge Murphy’s opinion, but wrote a separate

       opinion reasoning that “[t]o the extent our Supreme Court’s adoption of Judge Ervin’s

       dissent in Sandhill signals the Court’s determination that a sweepstakes game falls

       within [N.C.G.S.] § 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 . . .” Id. at 6–7 (Collins, J., concurring). Since the Court of Appeals

       held plaintiffs’ new game violated N.C.G.S. § 14-306.4, it declined to reach the

       separate question of whether it also violated North Carolina’s prohibition on

       gambling. Id. at 5.

¶ 14          Plaintiffs filed a notice of appeal based on a constitutional question, which this

       Court dismissed, and a petition for discretionary review, which was allowed.

       Defendants filed a conditional petition for discretionary review, which was also

       allowed.

                                           II.     Analysis

¶ 15          On appeal, plaintiffs first argue the Court of Appeals erred by applying a new

       legal standard for claims under the video sweepstakes statute rather than the

       predominant-factor test. Second, plaintiffs argue the application of the predominant-

       factor test is reviewed deferentially rather than de novo. Third, plaintiffs argue that,

       under the predominant-factor test, the trial court correctly determined that chance
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                                             Opinion of the Court

       did not predominate over skill in plaintiffs’ new game and Judge Collins in her

       concurring opinion at the Court of Appeals erred in stating otherwise., plaintiffs

       argue that their new game does not constitute gambling. We consider plaintiffs’

       arguments in turn.

       A. The Predominant-Factor Test Under N.C.G.S. § 14-306.4

¶ 16          Plaintiffs first argue the majority opinion below erred in failing to apply the

       predominant-factor test under N.C.G.S. § 14-306.4 as applied in then-Judge Ervin’s

       dissent in Sandhill and as adopted by this Court. Defendants do not argue for the

       majority’s holding that it is not necessary to decide whether games “are chance or

       skill-based.” Gift Surplus, 268 N.C. App. at 4. We agree and hold that the majority

       opinion erred in failing to consider whether skill or chance predominates in the game

       under the sweepstakes statute as interpreted by this Court’s prior decision in

       Sandhill.2

              2Plaintiffs argue the majority erred in failing to apply the predominant-factor test for
       a myriad of procedural reasons, including that the Court of Appeals “swapped horses on
       appeal” for the appellant, that it violated the law-of-the-case doctrine, that defendants failed
       to make that argument before the trial court and so abandoned it under North Carolina Rule
       of Appellate Procedure 10, that even if properly raised defendants abandoned the argument
       on appeal under Appellate Rule 28(b)(6), that adopting a theory not argued offends notions
       of equity and fundamental fairness, and, taken together, violation of these doctrines
       contravenes the “principle of party presentation” recently enunciated by the Supreme Court
       of the United States. See United States v. Sineneng-Smith, 140 S. Ct. 1575, 1578–89 (2020).
       While the majority opinion’s discarding of the predominant-factor test in interpreting
       N.C.G.S. § 14-306.4 in favor of a theory not advanced by any party was doubtless procedurally
       improper, we need not reach these issues to hold that the majority below erred because it
       contravened binding precedent of this Court in Sandhill. See Cannon v. Miller, 313 N.C. 324,
       324 (1985) (holding the Court of Appeals has no authority to overrule decisions of this Court).
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                                          Opinion of the Court

¶ 17         North Carolina’s criminal code prohibits sweepstakes conducted through

       electronic machines using video games of chance. This prohibition was codified at

       N.C.G.S. § 14-306.4, entitled “Electronic machines and devices for sweepstakes

       prohibited.” Under this statute, a sweepstakes is defined as “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 any prize, the

       determination of which is based upon chance.” N.C.G.S. § 14-306.4(a)(5). N.C.G.S. §

       14-306.4(b) provides that “it shall be unlawful for any person to operate, or place into

       operation, an electronic machine or device to . . . [c]onduct a sweepstakes through the

       use of an entertaining display, including the entry process or the reveal of a prize.”

       N.C.G.S. § 14-306(b), (b)(1) (2019). The statute defines “entertaining display” as

       follows:

                    [V]isual information, capable of being seen by a
                    sweepstakes entrant, that takes the form of actual game
                    play, or simulated game play, such as, by way of
                    illustration and not exclusion:
                    a.     A video poker game or any other kind of video
                           playing card game.
                    b.     A video bingo game.
                    c.     A video craps game.
                    d.     A video keno game.
                    e.     A video lotto game.
                    f.     Eight liner.
                    g.     Pot-of-gold.
                    h.     A video game based on or involving the random or
                           chance matching of different pictures, words,
                           numbers, or symbols not dependent on the skill or
                           dexterity of the player.
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                    i.     Any other video game not dependent on skill or
                           dexterity that is played while revealing a prize as
                           the result of an entry into a sweepstakes.

       N.C.G.S. § 14-306.4(a)(3).

¶ 18         In Sandhill, this Court adopted then-Judge Ervin’s opinion dissenting from

       the majority opinion of the Court of Appeals. Sandhill Amusements, Inc. v. Miller,

       368 N.C. 91 (2015). In his dissenting opinion, Judge Ervin reasoned that “given that

       [plaintiffs’] equipment and activities . . . clearly involve the use of electronic devices

       to engage in or simulate game play based upon which a participant may win or

       become eligible to win a prize, the only basis upon which [p]laintiffs’ equipment and

       activities can avoid running afoul of [N.C.G.S.] § 14-306.4(b) is in the event that the

       game or simulated game involved is ‘dependent on skill or dexterity.’ ” Sandhill, 236

       N.C. App. at 365 (Ervin, J., dissenting). In adopting the dissenting opinion, therefore,

       this Court necessarily held that sweepstakes conducted through an “entertaining

       display” under the statute is only prohibited when the game or simulated game is not

       “dependent on skill or dexterity.”

¶ 19         The majority opinion below, however, held that it “need not decide whether

       these sweepstakes are chance or skill-based in order to hold that they violate N.C.G.S.

       § 14-306.4,” noting that “[r]egardless of whether it is dependent on skill or dexterity, a

       video sweepstakes falls within the entertaining display prohibition simply if it is

       ‘visual information, capable of being seen by a sweepstakes entrant, that takes the
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       form of actual game play, or simulated game play[.]’ ” Gift Surplus, 268 N.C. App. at

       4–5 (emphasis added) (quoting N.C.G.S. § 14-306.4(a)(3)). It based its interpretation

       on the fact that the list of prohibited games in the definition of “entertaining display”

       in N.C.G.S. § 14-306.4(a)(3) was set out “by way of illustration and not exclusion.”

¶ 20         We conclude that the majority erred in this interpretation of the sweepstakes

       statute. Although the list in question was not intended to be exhaustive, the list of

       types of game play included in the statute, including poker and other card games,

       bingo, and craps, contemplates only games of chance. Any doubt about whether the

       statute is only concerned with games of chance is resolved by subsection (i), the

       statute’s “catch-all provision,” see Hest, 366 N.C. at 292, which prohibits sweepstakes

       through “[a]ny other video game not dependent on skill or dexterity . . . .” The canon

       of construction ejusdem generis provides that “where general words follow a

       designation of particular subjects or things, the meaning of the general words should

       be construed as including only things of the same kind, character, and nature as those

       specifically enumerated.” Smith v. Smith, 314 N.C. 80, 87 (1985). Applying this

       principle to the catch-all provision, the logical implication of this provision is that the

       other games listed are also games “not dependent on skill or dexterity” and that only

       sweepstakes conducted through video games of chance are prohibited under N.C.G.S.

       § 14-306.4. In other words, the majority erred in concluding that the non-

       exhaustiveness of the list meant that the only limitation on other games being
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       included was that they must be video games and not that they must be games of

       chance. In doing so, the majority directly contravened the dissenting opinion in

       Sandhill that this Court adopted as its own, which held that a sweepstakes is not

       conducted through an electronic display when it involves a game or simulated game

       “dependent on skill or dexterity.” Sandhill, 236 N.C. App. at 365. Accordingly, we

       reaffirm our prior holding that N.C.G.S. § 14-306.4 prohibits sweepstakes conducted

       “through the use of an entertaining display,” but only when the electronic display

       “takes the form of actual game play, or simulated game play” where the game in

       question is “not dependent on skill or dexterity.” N.C.G.S. § 14-306.4(a)(3); see

       Sandhill, 236 N.C. App. at 365.

¶ 21         The question, then, is not whether plaintiffs’ new game is conducted through

       an electronic display, but whether the video game is “not dependent on skill or

       dexterity.” In Sandhill, by adopting the dissenting opinion, we held that this

       reference to skill and dexterity incorporates “the traditional distinction between a

       game of skill and a game of chance pursuant to state law” such that it prohibits

       sweepstakes conducted through video games in which “chance predominates over

       skill.” Sandhill, 236 N.C. App. at 368. In Sandhill, relying on the Court of Appeals’

       prior decision in Collins Coin, Judge Ervin reasoned that “[a] game of chance is such

       a game as is determined entirely or in part by lot or mere luck, and in which

       judgment, practice, skill or adroitness have honestly no office at all, or are thwarted
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by chance”; that “[a] game of skill, on the other hand, is one in which nothing is left

to chance, but superior knowledge and attention, or superior strength, agility and

practice gain the victory”; and, accordingly, that “[i]t would seem that the test of the

character of any kind of a game . . . as to whether it is a game of chance or a game of

skill is not whether it contains an element of chance or an element of skill, but which

of these is the dominating element that determines the result of the game, to be found

from the facts of each kind of game,” or, “to speak alternatively, whether or not the

element of chance is present in such a manner as to thwart the exercise of skill or

judgment.” Sandhill, 236 N.C. App. at 368 (quoting Collins Coin Music Co., 117 N.C.

App. 405, 408 (1994)) (cleaned up). In Crazie Overstock Promotions, LLC v. State,

argued the same day as this case, we summarized the predominant-factor test under

N.C.G.S. § 14-306.4 based on this caselaw as follows:

             [T]he relevant test for use in determining whether the
             operation of an electronic gaming device does or does not
             violate N.C.G.S. § 14-306.4(a) is whether, viewed in its
             entirety, the results produced by that equipment in terms
             of whether the player wins or loses and the relative amount
             of the player’s winnings or losses varies primarily with the
             vagaries of chance or the extent of the player’s skill and
             dexterity.

377 N.C. 391, 2021-NCSC-57, ¶ 23. We reaffirm that the predominant-factor test is

the applicable test for determining whether a video sweepstakes is conducted through

a game of chance as prohibited under N.C.G.S. § 14-306.4.
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       B. The Standard of Review for the Predominant-Factor Test

¶ 22         Plaintiffs argue that defendants and Judge Collins’s concurring opinion

       propose the wrong standard of review in applying the predominant-factor test under

       N.C.G.S. § 14-306.4. Specifically, plaintiffs argue that “[a] factfinder’s determination

       as to whether a game complies with the predominant-factor test is reviewed

       deferentially.” Plaintiffs contend “the proper standard of review of a trial court’s

       predominance analysis in a bench trial would be whether competent evidence

       supports the factfinder’s determination that skill or dexterity predominate over

       chance in a particular game.” Plaintiffs argue that “because the factfinder, whether

       judge or jury, is in the best position to conduct the balance or ‘weighing’ required by

       the predominant-factor test, the application of that legal standard is a factual issue

       entitled to deference.”

¶ 23         Defendants in turn argue, citing State v. Gupton, 30 N.C. 271 (1848), that the

       question of whether a game is a game of skill or a game of chance—that is, the

       question of whether chance or skill predominates under the predominant-factor

       test—is a mixed question of law and fact, and, citing Gupton and Best v. Duke

       University, 337 N.C. 742, 750 (1994), that “mixed questions like these are reviewed

       de novo where, as here, there is no factual dispute about how a game is played.”

       Moreover, defendants note that while findings of fact from a bench trial are reviewed

       for substantial evidence, an appellate court conducts “de novo review of a conclusion
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       of law that the trial court [has] mislabeled as a finding of fact.” Farm Bureau v. Cully’s

       Motorcross Park, 366 N.C. 505, 512 (2013).

¶ 24         In neither Sandhill nor Crazie Overstock, our Court’s recent cases applying

       N.C.G.S. § 14-306.4, did we expressly state the standard of review exercised by

       appellate courts in evaluating a trial court’s determination of whether chance or skill

       predominates in a game under that statute. However, in both cases, our Court did

       not defer to the trial court’s conclusion as to whether chance or skill predominated in

       the game but freely substituted its own judgment based on the undisputed evidence.

       See Sandhill, 236 N.C. App. at 370 (“As a result, . . . I am compelled by the undisputed

       evidence to conclude that the element of chance dominates the element of skill in the

       operation of Plaintiffs’ machines.” (cleaned up)); Crazie Overstock, LLC, 2021-NCSC-

       57 ¶ 25 (holding based on the undisputed evidence that “chance necessarily

       predominates over the exercise of skill or dexterity” in the plaintiff’s game).

       Accordingly, we hold that whether chance or skill predominates in a given game is a

       mixed question of fact and law and is therefore reviewed de novo when there is no

       factual dispute about how a game is played. See Best, 337 N.C. at 750. This approach

       is consistent with Gupton, our first decision enunciating and applying the

       predominant-factor test to a game of “ten pins,” or modern-day bowling, where Chief

       Justice Ruffin, speaking for the Court, reviewed de novo the trial court’s

       determination that the indictment adequately alleged a “game of chance” prohibited
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       by our criminal laws and held that skill predominated over chance in the game. See

       Gupton, 30 N.C. at 275.

       C. Application of the Predominant-Factor Test

¶ 25         Having determined that the predominant-factor test will properly determine

       whether plaintiffs’ video sweepstakes is conducted through a game of chance as

       prohibited by N.C.G.S. § 14-306.4 and that the question of whether chance or skill

       predominates in plaintiffs’ new game is a mixed question of fact and law, we must

       now apply the predominant-factor test to the undisputed facts of plaintiffs’ new game

       to determine whether plaintiffs’ game is a game of chance. The question is “whether,

       viewed in its entirety, the results produced by [plaintiffs’] equipment in terms of

       whether the player wins or loses and the relative amount of the player’s winnings or

       losses varies primarily with the vagaries of chance or the extent of the player’s skill

       and dexterity.” Crazie Overstock, LLC, 377 N.C. 391, 2021-NCSC-57, ¶ 23.

¶ 26         In Sandhill, the dissenting opinion adopted by this Court held that chance

       predominated over skill and dexterity in plaintiffs’ game as then constituted because

       (1) “the machine and equipment at issue . . . only permitted a predetermined number

       of winners,” (2) “use of the equipment . . . will result in the playing of certain games

       in which the player will be unable to win anything of value regardless of the skill or

       dexterity that he or she displays,” (3) “the extent to which the opportunity arises for

       the ‘nudging’ activity . . . appears to be purely chance-based,” and (4) even assuming
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                                          Opinion of the Court

       “nudging” a symbol in one direction or another involves skill or dexterity, “this

       isolated opportunity for such consideration to affect the outcome [does not] override[]

       the impact of the other features” of plaintiffs’ game. Sandhill, 236 N.C. App. at 369.

¶ 27         Since our reversal of the preliminary injunction in Sandhill, plaintiffs contend

       that they have modified their game in two ways that support the trial court’s

       determination that chance does not predominate over skill or dexterity such that

       plaintiffs’ new game is not a game of chance and avoids the reach of N.C.G.S. § 14-

       306.4. First, plaintiffs argue its new game “contains a ‘winner-every-time’ feature”

       allowing every player who “nudges” the slot “to claim a monetary prize of some

       amount.” Second, plaintiffs argue “the ‘double nudge’ feature increases the amount of

       skill and dexterity required in the redesigned sweepstakes games.”

¶ 28         Defendants, in contrast, argue that plaintiffs’ new game, like its original game,

       is “similar to traditional reel-spinning slot machines,” and, like the role of chance in

       slot machines and poker, “chance controls the symbols that appear for players to

       nudge.” Defendants contend that plaintiffs’ two new modifications do not

       fundamentally alter the character of plaintiffs’ game and cause skill or dexterity to

       predominate over chance such that our holding in Sandhill as to plaintiffs’ original

       game no longer applies.

¶ 29         We first consider the change plaintiffs call a “ ‘winner-every-time’ feature.” In

       the original game, in 75% of turns a player took, the reels did not align so that a
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                                          Opinion of the Court

       nudge could nudge them into place and no prize could be won at all. In plaintiffs’ new

       game, on 75% of turns a “¢” symbol appears one “nudge” from the middle row. If the

       player nudges the ¢ symbol to the middle row, they now receive a nominal prize of

       some cents.

¶ 30         We hold the purported “winner-every-time” feature does not alter plaintiffs’

       game such that chance does not predominate over skill or dexterity. On 75% of turns

       players of plaintiffs’ games will still have no opportunity to compete for the largest

       possible prize of $2400. Plaintiffs argue that “the sweepstakes statute does not

       discriminate among different cash prizes,” and “money has value” irrespective of how

       little it is. N.C.G.S. § 14-306.4(a)(4) defines a “prize” as “any gift, award, gratuity,

       good, service, credit, or anything else of value. . .” But this definition has no bearing

       on whether the game in which the putative prize is awarded is “not dependent on

       skill or dexterity.” N.C.G.S. § 14-306.4(a)(3). If chance determines the prizes for which

       players may play, then, as in the case of traditional slot machines, “the return to the

       player is . . . dependent on . . . chance.” State v. Abbott, 218 N.C. 470, 479 (1940).

¶ 31         We next consider the “double-nudge” modification which, plaintiffs argue,

       “increases the amount of skill and dexterity required in the redesigned sweepstakes

       games.” In the original games, two of the reels would automatically align and the

       third reel would show a symbol one tick out of alignment such that the player had to

       press a button to “nudge” the symbol once up or down into alignment to win a prize.
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                                         Opinion of the Court

¶ 32         In Sandhill, Judge Ervin assumed arguendo that “nudging” a symbol up or

       down into alignment involved skill or dexterity. On remand, the trial court concluded

       nudging involved skill because “data from actual game play in the field and data from

       lab tests, both regarding the single-nudge-only games, reveal error rates that show

       the games are dependent on skill.” The trial court also concluded the game involved

       dexterity because the games required both “fine motor control of the hands and visual

       accuracy” and “the ability to recognize and implement winning patterns” based on

       playing the game and the lab data. Finally, the trial court concluded the double-nudge

       modification increased the amount of skill and dexterity “[b]ecause the [player] must

       evaluate the game to determine the number of nudges required and then take the

       required action (one nudge or two separate nudges).”

¶ 33         Contrary to the trial court’s conclusion that plaintiffs’ games involve skill and

       dexterity, we cannot conclude based on the undisputed record evidence that skill and

       dexterity have any more than a de minimis role in plaintiffs’ new games, whether

       they are required to make one or two “nudges” of the reels. Plaintiffs’ own expert,

       whose testimony concerning error data from lab tests is the basis for the trial court’s

       conclusion that nudging involved skill and dexterity, testified that, for the single-

       nudge game, players correctly nudged the reel into place between 86% and 90% of the

       time. While the trial court infers that the error rate for double nudging involves more

       skill and dexterity, that inference is by no means warranted. A game need not be won
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                                          Opinion of the Court

       100% of the time for there to be nothing more than a minimal level of skill or dexterity

       involved, and undisputed evidence shows that the skill and dexterity involved is

       essentially de minimis.

¶ 34         In applying the predominant-factor test, we view plaintiffs’ game in the

       entirety. In Hest, we observed that “the Court will inquire, not into the name, but into

       the game, however skillfully disguised, in order to ascertain if it is prohibited.” Hest,

       366 N.C. at 289. This approach is confirmed by N.C.G.S. § 14-306.4, which clarifies

       that “[i]t is the intent of this section to prohibit any mechanism that seeks to avoid

       application of this section through the use of any subterfuge or pretense whatsoever.”

       N.C.G.S. § 14-306.4(c).

¶ 35         Here, chance controls plaintiffs’ game by determining that in 75% of turns,

       players will not be eligible to play for the top prize and, indeed, cannot play for

       anything more than mere cents. Accordingly, just as is the case with a traditional slot

       machine, the return to the player in plaintiffs’ game is dependent on chance. Abbott,

       218 N.C. at 479. Nothing about the “nudge” (or even a “double nudge”) obviates this

       fundamental aspect of plaintiffs’ game. First, the skill and dexterity required to

       “nudge” a reel up or down is de minimis. More fundamentally, even assuming there

       was a meaningful level of skill or dexterity involved in the game, chance would always

       predominate because, when chance determines the relative winnings for which a

       player is able to play, chance “can override or thwart the exercise of skill.” Sandhill,
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                                    Opinion of the Court

236 N.C. App. at 369. As in Crazie Overstock, LLC, “the extent to which a customer

is able to win more than a minimal amount of money is controlled by the outcome of

[Plaintiffs’ games’ initial reel spin] regardless of the level of skill and dexterity that

the player displays while participating in [nudging the reels]. Crazie Overstock, LLC,

2021-NCSC-57, ¶25. This situation is also analogous to the game of poker, which,

despite involving a much greater level of skill, the Court of Appeals has held to be a

game of chance because the drawing of “cards . . . at random” causes chance to

predominate over skill. Collins Coin, 117 N.C. App. at 409; accord Joker Club, L.L.C.

v. Hardin, 183 N.C. App. 92, 99 (2007) (“No amount of skill can change a deuce into

an ace.”). Here, the “winner-every-time” modification to permit a nominal award of a

few cents and the “double-nudge” modification are nothing more than “thin and false

apparel” over the plaintiffs’ games that the law “will strip . . . [to] consider [the game]

in its very nakedness.”3 Hest, 366 N.C. at 289 (citation omitted). After considering

plaintiffs’ game when “viewed in its entirety,” we hold that “the results produced by

[plaintiffs’] equipment in terms of whether the player wins or loses and the relative

amount of the player’s winnings or losses varies primarily with the vagaries of chance

[and not] the extent of the player’s skill and dexterity.” Crazie Overstock, LLC, 2021-

       3 Indeed, as defendants note, there is no guarantee that the “double-nudge” and
“winner-every-time” modifications on which plaintiffs rely would even be available in actual
game play since operators of kiosks may disable them or not stock the machine with coins.
In such cases, the games are the same ones we held to be illegal in Sandhill.
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                                         Opinion of the Court

       NCSC-57, ¶ 23. Accordingly, we hold that plaintiffs’ game violates N.C.G.S. § 14-

       306.4(a)’s prohibition on sweepstakes conducted through video games of chance.

       D. Gambling

¶ 36         Plaintiff further argues its game does not constitute illegal gambling under

       North Carolina’s criminal code, while the State contends that it does. Since this Court

       holds that plaintiffs’ conduct violates one aspect of our State’s criminal code, we

       decline to reach this issue, which was also not reached by the Court of Appeals.

                                      III.   Conclusion

¶ 37         We conclude that in plaintiffs’ new game, as in their game addressed in

       Sandhill, chance predominates over skill and, accordingly, it is a video game of

       chance prohibited by N.C.G.S. § 14-306.4. Because this holding is dispositive of the

       case, we need not address the other issues raised by the parties. Accordingly, we

       modify and affirm the opinion of the Court of Appeals.

             MODIFIED AND AFFIRMED.

       Justices ERVIN and BERGER did not participate in the consideration or decision of
       this case.