UPDATE: On February 24, the Colorado Senate passed House Bill 1047 with no amendments.
Colorado House Bill 1047 would make internet sweepstakes cafés illegal under Colorado law. The law declares that internet sweepstakes cafés and similar establishments in which simulated gambling devices are used to award prizes to customers do not comply with existing constitutional and statutory requirements for the conduct of licensed gambling activity in Colorado and, therefore, the operation of these businesses is contrary to public policy. In the legislative declaration, it describe internet sweepstakes cafés as business locations that make available electronic machines, systems, and devices enable gambling through pretextual sweepstakes relationships predicated on the sale of internet services, telephone cards, and other products. After moving quickly through the House, H.B. 1047 was introduced in the Senate on February 17. It remains to be seen whether it will be passed by the Senate and, ultimately, signed by the Governor. This bill would be effective immediately upon being signed by the Governor.
More particularly, as currently drafted, the new law would make it unlawful to "offer a simulated gambling device if the person offers, facilitates, contracts for, or otherwise makes available to or for members of the public or members of an organization or club any simulated gambling device where: (a) the payment of consideration is required or permitted for use of the device, for admission to premises on which the device is located, or for the purchase of any product or service associated with access to or use of the device; and (b) as a consequence of, in connection with, or after the play of the simulated gambling device, an award of a prize is expressly or implicitly made to a person using the device."
"Simulated gambling device" is defined broadly as "a mechanically or electronically operated machine, network, system, program, or device that is used by an entrant and that displays simulated gambling displays on a screen or other mechanism at a business location, including a private club, that is owned, leased, or otherwise possessed, in whole or in part, by a person conducting the game or by that person's partners, affiliates, subsidiaries, agents, or contractors. the term includes: (a) a video poker game or any other kind of video card game; (b) a video bingo game;(c) a video craps game; (d) a video keno game; (e) a video lotto game; (f) a video roulette game;(g) a pot-of-gold;(h) an eight-liner; (i) a video game based on or involving the random or chance matching of different pictures, words, numbers, or symbols;(j) an electronic gaming machine, including a personal computer of any size or configuration that performs any of the functions of an electronic gaming machine;(k) a slot machine; and(l) a device that functions as, or simulates the play of, a slot machine." The term "prize" is also defined broadly as "a gift, award, gratuity, good, service, credit, or anything else of value that may be transferred to a person, whether or not possession of the prize is actually transferred or placed on an account or other record as evidence of the intent to transfer the prize. " It does not include "free or additional play or any intangible or virtual award that cannot be converted into money, goods, or services." Additional definitions are included in the bill.
In addition to a violation of this law being a Class 3 misdemeanor, the Attorney General and District Attorney would have the right to apply to the district court for injunctive relief and damages up to "three times the dollar amount of business transacted or facilitated by any person" payable to the local jurisdiction in which the person is located, advertises for entrants or does business. In addition, "a person who suffers any ascertainable loss of money or of any tangible or intangible personal property as a result of a violation of this [law] and who also holds a license to offer gambling services under Colorado law may apply to the district court of any district where the person who violates [this law] is or was located, advertises for entrants, or does business for appropriate additional relief," including injunctive relief, damages up to and include three times the actual damages sustained as a result of the violation of the law, and reasonable attorneys' fees and costs. A criminal conviction would be deemed to be prima facie evidence of the liability of the convicted person.
Conducting or assisting in the conduct of gaming wagering activities and live or simulcast racing and pari-mutuel wagering activities otherwise authorized by Colorado law would not be a violation of this new law. In addition, Internet service providers and others who only supply equipment, web design, or connectivity to an internet sweepstakes café are exempt unless their primary purpose is to support the conduct of gambling as a business.
Other states have cracked down on internet sweepstakes. Most notably, Florida has been quite aggressive. In one case. A Florida attorney, Kelly Mathis, was sentenced to 6 years in jail for illegal activity associated with internet sweepstakes cafes.