Operators of sweepstakes cafés hope their investment doesn't go bust

GAME OF CHANCE 

Operators of sweepstakes cafés hope their investment doesn't go bust

Paradise can be found at the intersection of Snow Rd. and Chevrolet Blvd. in Parma. The Internet Paradise feels like a barebones casino, nestled in a storefront between an Eagles' lodge and a Mr. Hero. Big letters on the window say you can make copies, send faxes, surf the net, and win cash. But nobody's here for the fax machine.

Inside, customers sit at any of four dozen personal computers in four long rows, playing electronic games from keno to poker, though most choose slot-machine simulators. It all feels like a casino, and you can even walk out with a pocket of cash like a casino. But Internet Paradise is no casino, at least not in the eyes of those who set rules on such things. It's a "sweepstakes café," also known as an internet café.

Whatever you call them, they're a hotbed of legal controversy in Ohio — and especially in Cleveland, where local law enforcement has cracked down on cafés in recent months despite having no specific law on the books against them. The confusion has left dozens of entrepreneurs on their way into the business standing on the sidelines until the smoke clears.

"I've represented café owners who sink their whole life savings into these storefronts, only to be told they're illegal," says Donald Malarcik, an attorney who has represented café owners across Northeast Ohio. "It's an example of the worst form of government intrusion into people's lives."

At the center of the problem is a patchwork of opinion that has done little to offer clarity. Outgoing Ohio Attorney General Richard Cordray has declined to rule on the business model, instead deferring such decisions to local governments. (Attorney General-elect Mike DeWine opposed casino gambling, so it seems unlikely his arrival will give sweepstakes cafés a boost.)

Last November, a Toledo judge ruled that the cafés do not constitute gambling in the eyes of the law. The key distinction, according to the judge, is that the games in question are all about luck and not skill, since the odds of winning are set in advance.

The typical setup is the same: Guests log on to a computer and are greeted with a disclaimer that reads like the legal notice on a McDonald's scratch-off card. Spend $20, and you'll get 2,000 "sweepstakes points" — basically renting network time, with which you could surf the web, make a spreadsheet, or play games that have predetermined odds or nothing at stake.

Entrepreneurs across the state took the Toledo ruling as a green light to open cafés like Internet Paradise. In recent months, dozens of new applications for such businesses were pending across Northeast Ohio, including seven in Cleveland proper and another five in Parma. But not all civic authorities have concurred with the ruling's subtle distinctions.

In Summit County, cafés are legal in autonomous pockets like Barberton, while the City of Akron opposes them. Last year, Springfield police arrested the operator of a café that used a different payout model, and she was sentenced to a three-week jail term this year.

Police raided the Blackhawk Café in East Cleveland in July, but did not charge the owner with a crime. A month later, after the owner successfully applied for a zoning variance, the Blackhawk reopened.

Last month, Cleveland police raided the Cyber House on the city's west side. A month-long undercover investigation revealed that — no surprise — some patrons expressed displeasure about losing money on the games. City prosecutors are moving forward with misdemeanor gambling charges against the owner of the Cyber House and an employee. No court date has been set.

"[Café opponents] falsely believe sweepstakes are gambling," says Malarcik. "Police confuse the law that governs skill games [with those that apply to] sweepstakes. We have to go to great lengths to educate them. That fundamental misunderstanding is part of the problem." Malarcik is representing the owner of the Cyber House in its case against the city.

"It is fair to assume that the prosecution and resolution of [the Cyber House case] will have an impact on similar gambling houses operating in the city," says Cleveland Law Director Robert Triozzi. For now, he has recommended that Cleveland City Council table discussion on the legality of cafés. While police and prosecutors are against the cafés, city council had proposed an annual fee of $20,000 to operate them legally.

Some suburbs have chosen to quietly collect licensing fees — usually closer to $1,000 annually — rather than stomp out the cafés. Richmond Heights and Parma are among those that have halted talks on the issue.

Tom Coyne, the former Brook Park mayor who is now a lobbyist representing sweepstakes cafés, welcomes uniform regulation. He points out the significant investment prospective owners must make: Several local businessmen he represents are ready to spend between $200,000 and $300,000, which he calls typical for larger operations like Cyber House. Coyne makes the same argument that helped convince Ohio voters to approve real casinos: A regulated industry means more tax dollars.

"It's a legitimate chance for people to make some money and enjoy themselves," he says. "They haven't been declared illegal, and for people that come into the business legitimately, it could be the bingo of the 21st century."

The owners of Internet Paradise, Blackhawk, Cyber House, and other regional cafés declined requests to discuss their businesses for this story.

Mike Nelson owns the Little Africa Village, a renovated warehouse in East Cleveland that houses the Kitchen Internet Sweepstakes Café, which opened just before Cleveland started dropping the hammer. He says it's already turned around the fortunes of his complex.

"We couldn't get people to come here because we're at 68th and Superior," says Nelson. "The neighborhood has a bad reputation. Now that we have the sweepstakes games, now we've got people coming in, people working, people buying food. It's a transformation. It's like the Indians got the casinos: It's OK in Richmond Heights, it's OK in Parma, but it's not OK on 68th and Superior? We want to know why."

Send feedback to dferris@clevescene.com.

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