COLUMBIA, SC — North Carolina’s Republican governor, Pat McCrory, this week found himself giving back campaign contributions tied to so-called Internet “sweepstakes cafes”—and beating back questions about his ties to the video gambling industry.
It’s been a rough couple of months for the sweepstakes industry. (The name refers to the argument that video gambling entrepreneurs use to claim their business is legitimate—likening it to legal “sweepstakes” contests, like McDonald’s “Monopoly” promotion.) Earlier this month, a years-long state-federal racketeering probe led to dozens of arrests amid charges that a Florida-based charity called Allied Veterans of the World was really a $300 million front for an Internet gambling business, as well as the resignation of that state’s lieutenant governor.
But the industry doesn’t plan to go quietly. “North Carolina’s crippled video sweepstakes industry says it’ll keep asking lawmakers and Gov. Pat McCrory to consider legislation to regulate and tax their games despite a gambling scandal in Florida,” WRAL in Raleigh reported on March 21.
Those requests are accompanied by a steady flow of campaign cash. In a solid piece published Tuesday, Associated Press reporters Michael Biesecker and Mitch Weiss reported on that contribution McCrory returned (it came from a woman whose husband was indicted in Ohio on charges connected to an illegal gambling operation). They also document, with an assist from the watchdog group Democracy North Carolina, more than $50,000 in donations to McCrory from the industry that hadn’t previously been reported.
The sweepstakes operators, though, haven’t limited their focus to the governor’s mansion. Biesecker and Weiss write:
The AP verified the donations Democracy North Carolina identified to McCrory’s campaign finance reports and also searched for cash distributed by the same individuals to other campaigns. All told, they gave at least $140,000 in political donations in recent years.
Those donations were part of a much larger flood of money from sweepstakes operators that quietly flowed into campaign accounts of North Carolina politicians from both parties during the state’s most recent election cycle. Lobbyists for the sweepstakes industry are gearing up to push for new legislation legalizing the cafes, which continue to operate in the state despite repeated attempts by lawmakers to shut them down.
The story now unfolding in North Carolina—of law enforcement crackdowns and lobbying pushback, a lucrative industry operating in legal limbo, and political money flowing through both legal and at-times illegal channels—is a familiar one. It’s practically a mirror image of events in recent decades just across the state line, where last Friday South Carolina Gov. Nikki Haley signed a bill banning sweepstakes cafes. So as the legislative debate over the sweepstakes industry, and the influence the industry wields, plays out in the Tar Heel state, North Carolina reporters might find lessons in the experience of their neighbors to the south. (Disclosure: As a staff writer for the Columbia, SC Free Times, I’ve covered the debate over the industry here.)
Cindi Ross Scoppe, a longtime columnist for The State, the daily newspaper in Columbia, described the history in South Carolina this way in a February 2012 column:
Video gambling snuck into our state while no one was watching, gaining a foothold in out-of-the-way convenience stores and bars and then waging an insurgent battle through the courts, aided by a crooked senator who deceived his colleagues into passing what he called a “technical amendment” that in fact legalized gambling.
By the time we realized what had happened, it had grown to a $3 billion-a-year industry. It was nearly impossible to walk into a convenience store without seeing a machine, with its flashing neon lights beckoning players. Restaurants and bars were overrun with them. Gaudy casinos dotted nearly every corner and created ready-made villages along the state borders.
When Gov. David Beasley challenged the poker barons’ refusal to obey our meager laws, they took him out, and set about trying to buy themselves a Legislature that would rescind all the restrictions.
The state Supreme Court abolished video poker in South Carolina in 1999, but conflicting rulings by magistrate judges left the legal status of similar gambling operations unclear—an ambiguity that the new law seeks to eliminate.
Perhaps more than any other journalist in the state, Scoppe—a recipient of the Hal Hovey-Peter Harkness Award bestowed by Governing magazine for outstanding coverage of state and local government—chronicled video poker’s heyday, its abolition, and its attempted return in recent years as the sweepstakes industry. So I asked Scoppe what advice she would give reporters covering the sweepstakes battle in North Carolina.