New Internet cafe tests limits of state gaming laws

Elsewhere, the debate over Internet sweepstakes cafés is well under way. North Carolina banned such operations last summer, though separate lawsuits have complicated enforcement. Similar prohibiting legislation has stalled amid legal battles in Florida — where nearly 1,000 such storefronts reportedly could gross a combined $1 billion this year. How it works

The way it works is patrons pay $10 per hour of Internet time. With that comes 1,000 sweepstakes entries. Patrons have the option of surfing the web, Britt said, playing video games or going on a site operated by a private software company that offers a couple dozen sweepstakes games. They can buy more Internet time for more entries, and win credit for still more time and entries. Unused time can be redeemed for cash or remain on a patron's individual account as credit for the next visit. To be legally considered gambling, there must be a prize, chance and consideration, meaning some investment or wager.

"You have to pay money. If it's a freebie, and everybody is allowed to enter without any money, then it's not gambling in most states," said Joseph Kelly, a business law professor at State University of New York at Buffalo. "The issue is when you pay to log onto the Internet, and the sweepstakes winning possibilities are free." But while the state handles regulation and oversight of the Off-Track Betting parlor across the street, officials have yet to categorize Megabytes.

A sweepstakes café "is basically unregulated, and that's unfortunate," said Kelly, who has written on Internet gambling and speaks globally about gaming issues. "You don't know whether the operators are suitable. You don't know whether the players receive warning about excessive gambling. And, let's be honest, the government is losing out on a lot of revenue." In Rochester, police and city officials offer limited comment, other than to say they are aware of Megabytes and are looking into the matter. Along with questions of zoning compliance is whether the business requires an amusement center license, which would trigger police background checks of owners and operators and police chief approval of any games, and prohibit any cash awards.

Britt counters that he doesn't have amusement games, but rather Internet stations where patrons can visit a site offering sweepstakes games.

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