By Maggie Thurber | Special to Ohio Watchdog

Ohio Attorney General Mike DeWine, in a recent news release, appeared to bemoan the fact that there are more Internet cafes in Ohio than he thought.

A new law passed in June, Am. Sub. H.B. 386, which placed a moratorium on any new Internet cafes, required all such establishments to file an affidavit of existence with the AG’s office by July 11. The office received 667 affidavits, which is more than the 280 establishments they’d counted in March.

Normally, you’d expect celebration over the fact that there were more businesses in a state that has suffered economically. But there’s a problem with *this* type of business: they’re not — gasp! — regulated by the government. And since they’re not regulated, Ohioans obviously have no idea what they’re doing when they use one.

Now, when you first hear the term ‘Internet cafe,’ you probably think of a place people can go to access a computer with Internet capabilities. It probably also serves coffee, drinks and some food, but the primary purpose is to provide Internet access to the public, usually for a fee. They started in San Francisco and often are referred to as cybercafes.

But that’s not what we’re talking about. The firms covered under the law are better described as sweepstakes parlors, where people can participate in games of chance with prizes in conjunction with other services like Internet access.

Opponents of such businesses say it’s gambling, but proponents liken their offerings to the McDonald’s Monopoly game and Coke-Cola “My Coke Rewards” sweepstakes.

This is how it works:

• The business offers internet access for a fee.
• By paying for time to surf the web, the customer is entered into a sweepstakes.
• When they begin to use the computer, they are guided by the sweepstakes software that has been installed into a game room set up with casino-style games like Poker, Blackjack, or Wild Card.
• The customer plays a game for the chance to win a prize.

Another process is when the customer purchases a product like a phone card and, as part of the purchase, is given sweepstakes points they can use to play the games. If they win the game, they also receive a prize of either cash or merchandise. The sweepstakes points are pre-determined and they keep their phone cards with purchased minutes even if they don’t win the game.

With the establishment of casinos and racinos in the state, DeWine said Ohioans may assume that all types of gambling are legal and regulated. “While racinos and casinos are, internet cafes are unregulated and likely illegal forms of gambling,” his release stated.

“These internet cafes are multiplying at an alarming rate, and I again am encouraging the Ohio General Assembly to act swiftly to regulate them with the same scrutiny as other forms of gaming in Ohio,” DeWine said. ”Ohioans currently have no way of knowing that these games are what the cafes report them to be or if they are being completely ripped off by the owners.”

According to the release:

This huge number of parlors is capable of generating hundreds of millions of unregulated cash. Since there is no state regulation, licensing or oversight, there is no way to determine who is getting the money, where the money is going, whether any of these operators are felons, or whether any other criminal activity is funded by these proceeds.

But isn’t this true of every business in Ohio? You can start a company today and the government wouldn’t know who is getting the money or where the money was going. It wouldn’t know if you were a felon or whether any criminal activity was being funded by the proceeds.  Why would this be an issue for an Internet cafe?

And if it is an issue for an Internet cafe, can we expect it to be an issue for all companies in Ohio at some future date?

There already are plenty of laws against using your own money to fund criminal activity. That doesn’t seem to be an issue that needs further regulation.

But do we need “regulation, licensing and oversight” of all businesses so the government knows “who is getting the money, where the money is going and whether any operators are felons”? If it’s necessary for one, is it not necessary for all?

Is this need to regulate because some people and politicians are opposed to gambling in general? Perhaps, as some claim, it’s because the state doesn’t want anything to interfere with its own gambling operations known as the state lottery system.

Or maybe, like with other regulated businesses such as auctioneers, barbers and mobile home installers, Ohio just wants its cut in the form of fees, and control over the “hundreds of millions of unregulated cash.”

In 2009, a Toledo Municipal Court judge ruled that sweepstakes cafes have no element of risk and are not gambling enterprises. In June, the Cuyahoga County prosecutor sent cease-and-desist orders to Internet cafes in the county claiming they were all illegal gambling operations. Several companies challenged the order and were allowed to re-open, pending further court hearings.

Owners say they’re following the rules and employing people as well as paying taxes in their city, county and to the state, something the state and its residents appear to be desperate for. But should opening hundreds of new businesses and creating new jobs require a permission slip from a government that doesn’t like your particular type of operation?

That’s a question all Ohioans need to consider.

Maggie Thurber

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