Michigan AG Shuts Down Internet Gambling Cafes

Michigan AG Shuts Down Internet Gambling Cafes
May 31, 2012

Michigan Attorney General Bill Schuette reached an agreement in May with eight Internet Sweepstakes Cafes to shut them down. If they reopen, Schuette said, he will shut them down through criminal or civil court suits.

Leon Drolet, chairman of the Michigan Taxpayers Alliance, says he doubts the Attorney General is making the best use of resources by going after Internet Sweepstakes Cafes. Drolet says the state has incentives to crack down on any competition to the state’s own lottery, and casinos have powerful lobbying groups that contribute to political causes.

“There is not a lobbying group for following up on old murder cases that haven’t been solved,” Drolet said, but “there is a lobbying group to shut down competition in gambling. The state has a built-in incentive to protect their lottery interests. And there are special interest groups heavily involved in [political] campaigns. People respond to incentives. They get rewarded for shutting down competition. They get campaign contributions, and the state gets money in their coffers.”

Gambling Is State-Controlled
In Michigan, gambling is controlled by the state and includes only a handful of legal options, including the Michigan state lottery, which has taken in $15.9 billion over the last 40 years.

In addition to casinos, charitable gaming, horse racing, and the state lottery, Michigan allows a limited form of gambling “as a promotional activity.” There is no exception for Internet Sweepstakes Cafés.

The state defines an Internet Sweepstakes Café as a business “that offers customers Internet access on computer terminals for a fee and provides games of chance for customers to play for a chance to win a prize.”

Ensuring ‘Proper Payoffs’
Joy Yearout, a spokesperson for the Michigan Attorney General’s office, said Internet Sweepstakes Cafes pose a risk to gamblers.

“The difference is, existing legitimate gaming locations are authorized by law, and they are regulated to ensure citizens actually get a real opportunity to win,” Yearout said.

“As far as Internet Sweepstakes Cafes go, for all we know, no one is winning except for the people running it. That’s one problem with unregulated gaming—there are no assurances that customers will receive the proper payoffs. And if citizens are ripped off, they have no recourse under the law, since the operations weren’t even legal in the first place.”

Yearout says unregulated gaming that’s left unchecked often results in more serious crimes, such as money laundering, tax evasion, drug trafficking, larceny, and fraud.

Considering Legal Challenge
Tony Edwards, a Minneapolis attorney, represents Innovative Entertainment of Michigan, which licenses and supplies the gaming software for the eight Internet cafes that were shut down.

Edwards says his client didn’t break the law and is considering a civil legal challenge.

“These cafes are relatively victimless compared to violent crimes or property damage crimes,” Drolet said.

Tom Gantert (gantert@mackinac.org) is senior capitol correspondent for the Michigan-based Mackinac Center for Public Policy.