Entrepreneurship

'Sweepstakes Cafes' Circumvent Gambling Laws

If it looks like gambling, and the customers think they're gambling, is it gambling? That's the question facing state lawmakers and law enforcers as they confront a growing number of "sweepstakes cafes." The businesses are essentially internet cafes that offer time on computer terminals with slot machine and card game software. But in order to get around state gambling laws, cafe owners argue that the games are really sweepstakes along the lines of the Monopoly promotion by McDonald's. With an estimated 3,000 to 5,000 cafes operating in the U.S., the phenomenon is posing a problem for gambling regulators. Some lawmakers accuse the businesses of preying on the poor and the elderly and think they should be banned, while cafe owners push for legalization and regulation. Meanwhile, the number of cafes continues to grow. They're incredibly lucrative. Each terminal typically grosses $1,000 to $5,000 per month, so a medium-sized business with 100 machines would make about $3 million a year. James Mecham, who runs a business setting up sweepstakes cafes, says, "I tell people, 'If you're looking for a reason not to do this, read the news. But if you're looking for a reason to do it, look at someone's bank account who is in it.' These guys make tons of money."