DeWine again this week encouraged state legislators to pass legislation that would provide statewide uniform regulation of these businesses that have popped up around Butler and Warren counties as well as across the state.
There are 782 Internet/sweepstakes cafes that are registered in Ohio and are not affected by a one-year moratorium that started June 11 when Gov. John Kasich signed House Bill 386 into law that made a number of changes to the laws governing casinos, lottery terminals, bingo and other related areas.
DeWine said many of these businesses have as many as 20 to 30 machines each.
“The vast majority of these businesses are not regulated,” DeWine said. “Consumers have the right to know what the odds are and what they payouts before they buy these cards. People know the odds and payouts after they buy a card and after it’s displayed. This is the only example in the state of outright gambling in the open without regulation.”
DeWine said the state has no authority to do background checks on the business owners and employees as well as determining if the software and the machines themselves are gambling devices. In addition, he said there are no provisions for auditing these businesses or trace where the money goes as there are no financial reporting requirements to prevent money laundering.
“We have no idea of the amount of money being generated but these places are making a lot of money,” he said. “We’ve sent out investigators to look at these places and we know it has to be hundreds of millions a year.”
Dan Tierney, a spokesman for the Attorney General’s office, said they have received complaints about veterans groups and other organizations, who are already regulated, that they were seeing decreases in their charitable bingo games when the Internet/sweepstakes cafes opened.
There are 17 parlors in Butler County and three in Warren County, according to DeWine’s office. Twelve of the parlors are located in Middletown.
DeWine hopes the Ohio General Assembly will consider establishing regulations when it convenes its lame-duck session this fall as his office has no enforcement or regulatory powers over the cafes.
By purchasing Internet phone cards, and using them to play Keno or Vegas-style slot-machine games on computers, customers become eligible to win sweepstakes prizes that range from $20 to $5,000 at some cafés.
For every $1 spent on a phone card, 100 sweepstakes points are included. When the card is swiped at one of the Internet café’s computers, the points can be redeemed to make entries on the games.
Roy Smith, who owns cafes in Hamilton and Middletown, said when a patron puts the phone card in the machine they find out the odds and the amount of the prize they won and they can take their winnings or play on the machine. He said the sweepstakes points are only to promote sales of the long distance phone cards.
Cathy Newton, who manages the three cafes for Smith, said patrons are paid their prize in cash. She said the most she’s paid out has been $2,500. The cafe on South Erie Boulevard has 40 machines while the other on Brookwood has 25 machines. The Middletown cafe on Breiel Boulevard also has 25 machines.
Smith said his cafes have a 92 percent payback which is higher than the state minimum of 85 percent. As for the potential for money laundering, Smith said that could happen with any business and not just the cafes.
“You could win up to $4,000 or more or walk out with a $20 phone card with 600 minutes,” he said. “There are no risks or gamble because the profit is made on sales of the cards.”
Smith disagreed with DeWine about the amount of regulation on the cafes. In Hamilton, he had to pay $26,000 in permit fees for each location as well as provide the city with financial statements from each location, providing a list of employees to ensure they have no criminal records and provide a list of customers who win $10 or more so that they can be taxed on their winnings.
“It’s not friendly,” he said.
Hamilton and Middletown police said there have been no incidents or calls for service at any of the cafes in those communities.
Newton said the cafe’s are “more of a social gathering place. It’s really not what you might expect.
“It’s really your ‘bingo crowd’ because it gives people something to do,” she said. “Some will spend the day or a morning or the evening here.”
Newton said evenings and weekends are the busiest times for the cafes she manages for Smith.
“We’ve been here about a year and the customer base grows monthly,” she said. “I think people in the community will decide if it’s going to succeed or not.”
Truman, who was playing Keno at Erie Sweepstakes on South Erie Boulevard, said he comes in a couple of times a week.
“It’s closer than the boat and I don’t lose as much,” he said. “I didn’t about it for about six months.”
The Hamilton resident said he’ll spend about $30 when he comes to the cafe. “I’m not a big gambler,” he said.
As for additional regulation by the state on the cafes, Truman said, “they ought to leave them alone. People come here to relax and it gives them something to do.”
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