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Internet cafes face upcoming state regulation

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LAKE COUNTY – Internet cafes have been the topic of discussion in area council chambers and village halls since last summer. The big question has been whether or not they are legal. The owners say their customers are not gambling but are participating in sweepstakes games. Some officials around the county have stated they believe it is gambling.

 Some communities, such as Concord Township, Perry Village and Painesville, have placed a moratorium on allowing Internet cafes pending a ruling from the Ohio Attorney General as to whether they are legal or not.

Other communities such as Willoughby Hills, Mentor-on-the-Lake and Eastlake have passed legislation to regulate the businesses, generally charging an annual fee of $5,000 and $40 to $50 per machine per month.

“I have never had a complaint about that operation – not one,” said Councilman Ray Somich at a council meeting. “I have been in there … and the typical attendee is not a young kid; it is not a drunk; it’s middle-aged women for the most part that are in there.”

Willoughby Hills Mayor Bob Weger said if the attorney general ever issued an opinion that the operations constituted gambling, they would be shut down.

Mentor-on-the-Lake recently passed an ordinance which regulates sound levels, hours of operation, amount of liability insurance and information required on the application for license as well as the licensing fee and monthly charges.

“Until the state takes some formal position, we thought that the city of Mentor-on-the-Lake should regulate this to the best of our ability,” said MOL Law Director Jim Lyons.

Willoughby City Council President Jerry Ranally said Internet cafes were not an issue there because there was no zoning code which allowed such establishments.

“Municipalities operate a little differently than townships,” said Painesville Township Zoning Inspector Rich Constantine. “We’ve got a board of trustees, but we’ve got a zoning commission so certain aspects of business would be subject to zoning regulations and then trustees could put certain ordinances into effect, but usually their actions are subject to public hearing.”

The continued operation of WinZone is currently in litigation. The owner was told to shut down several months ago by Constantine since the café owner did not list the sweepstakes as part of its business when it first opened. The only items listed were providing Internet service, copy services, phone cards and ATM services.

Recently, Attorney General Mike DeWine called for legislation to regulate Internet cafes and have them overseen by the Ohio Casino Control Commission.  

"Internet cafes and sweepstakes that are skirting the law are growing in many of our communities. By establishing oversight of these previously unregulated games, law enforcement, consumers, and charities can all operate in a more fair environment," DeWine said in a press release.

According to the proposed regulation, “any skill-based amusement machine or sweepstakes machine would be required to: undergo a pre-play certification process; obtain a license issued by the Casino Control Commission and paid for by the applicant that certifies that the machines have been tested by an outside laboratory. The license would be required to be displayed for easy public inspection, and certification would be at the expense of the operator or manufacturer; post stickers on each machine providing an instant verifiable sign to law enforcement and proving that the operator has a license and that each machine has passed inspection; face criminal penalties for violating the licensing requirements.”

State representatives Nan Baker (R-Westlake) and Marlene Anielski (R-Walton Hills) are co-sponsoring legislation which could limit the number of machines per location to just five.

The attorney general’s office also placed on its website information about gambling and stated the following concerning sweepstakes, “Legitimate sweepstakes games, like those promoted by fast food restaurants, must be incidental to merely promote the purchase of a product. For example, this would include contests or sweepstakes where a customer is given a scratch off or other type of game piece that could lead to receiving a prize. Legitimate sweepstakes games do not require any money to play. (If participants pay to play, then the game is not a sweepstakes.)

“Ohio currently lacks a sweepstakes law. (Federal laws require that no purchase be necessary to participate in the sweepstakes. Purchasing a product may not increase the odds of winning, and odds must be publicly disclosed. Additionally, games complying with federal laws should make a list of winners available and show a beginning and ending date for the sweepstakes.)”

Any Ohioan who has concerns should contact the Attorney General's Office to file a complaint by calling 800-282-0515 or by visiting www.OhioAttorneyGeneral.gov/ConsumerComplaint.

“The way I read it, and I did report to council that it came out, he really hasn’t made a determination on his own, so we’re just going to continue to take our stand of a moratorium on it and may even extend the moratorium given the fact he’s recommended legislation for the Ohio Casino (Control) Commission to have jurisdiction over it,” said Jim Loiacono, solicitor for Perry Village. “I think now more than ever it’s kind of a wait and see where they’re coming from.”

He noted that he did not know if all locations were using the same types of machines and that some might be legal while others might not be.

Mark Belich, owner of Pete’s Internet Café at 35700 Lakeland Blvd. in Eastlake said he welcomes regulation of the businesses operating as Internet cafes.

“All industry needs regulation and I know that there are sweepstakes being run out of Internet cafes that have no legitimate standing for the basis of their pool, in other words their winning or losing tickets, which without regulation from (the) state people could just run a sweepstakes and never pay out any prizes,” he said.

Belich said he believes people should know what their odds are of winning and should be assured people are winning. For example, at Pete’s the chances of winning one cent to $1 was one in two; winning $10 to $15 was one in 165 and winning $1,000 to $4,200 was one in 1,380,953. He believed his top winner was $8,400.

Asked how his business operated, he said customers purchase phone cards for three cents per minute which can be used like any other phone card purchased elsewhere. A purchase of $1 worth of phone time earns the purchaser 100 sweepstakes points. Those points can be used to enter a sweepstakes but customers do not use the phone cards to play the sweepstakes.

“You use your sweeps points and you enter into the game and it tells you if you have a winning ticket or non-winning ticket,” Belich said. “Some are card games, slot machine games, keno or bingo. Like in any sweepstakes, there’s a preset number of winning tickets.

“The game has nothing to do with the outcome of your sweepstakes points.”

If a player selected a winning game, he can’t lose and if he selected a losing game, nothing he does can change the outcome.

Belich said the system he uses, Phone Sweeps, maintains the same odds automatically, but others do not. That is why he believes the industry needs regulation.

The manager of Cyber Palace in Mentor-on-the-Lake declined to comment for this story. Other owners could not be reached at the times called.


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