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1/1/2007 - January 2007 Educational Update - Sweepstakes Opinion Not The Answer

AN EDUCATIONAL UPDATE FROM

THE SOUTHEAST LAW INSTITUTETM, INC.

 

To:                  SLI Supporters                                 

 

Date:               January 2007

 

From:              A. Eric Johnston

 

Re:                  Sweepstakes Opinion Not the Answer

 

 

            The short version of the story is that on December 15, 2005, Milton McGregor began operating the "Megasweeps" sweepstakes at the Birmingham Race Course, legal claims were filed, the trial court ruled the sweepstakes were not a lottery or gambling operation, but on appeal, the Alabama Supreme Court said the sweepstakes devices are illegal "slot machines."  These events will close down the numerous similar sweepstakes operations which have since sprung up, but do not solve the problem.

 

            The Supreme Court opinion explained at length how the sweepstakes device operates and held it is a "slot machine," which is an illegal gambling device.  This attention to detail, however, does not serve the bigger picture of more clearly defining prohibited lotteries and thereby precluding more types of gambling than just the "Megasweeps" sweepstakes.  While Mr. McGregor says he will seek other court remedies, it is unlikely any state or federal court will change this opinion.  As currently configured, sweepstakes operations will close down.

 

            Mr. McGregor's odds for succeeding in the Legislature have been and are greater than his chances in the courts.  Because the Supreme Court did not address the constitutionality of sweepstakes, but only reviewed the definition of a slot machine, a simple statutory amendment could put Mr. McGregor back in business. 

 

            The elements of a lottery are (l) a prize (2) awarded by chance (3) for a consideration.  The trial court ruled as a matter of fact and of law that the element of consideration was lacking in the sweepstakes and therefore did not meet the definition of a lottery.  It also ruled the individual components of the sweepstakes did not fit definitions of illegal gambling devices.  The Supreme Court only addressed the second issue and left the question of what is a lottery unanswered.

 

            Last January, prior to these court opinions, the Southeast Law Institute wrote a legal opinion and an editorial published by The Birmingham News pointing out a 1938 Alabama Supreme Court opinion that any operation in the nature of these sweepstakes is a lottery prohibited by the Alabama Constitution and that as such, it would fall within the statutory criminal code of specific crimes.  A 1988 case confused the issue and the present case would have been an opportunity to clarify the law.  By having a broader definition of prohibited activities, the Court's opinion could have reached further than just this configuration of machines.  Because the opinion was limited to the technicalities of the Megasweeps machines, slot machines and statutory definitions, tweaks in the statute or the operation of the sweepstakes device would result in renewed gambling operations, another lawsuit and appeal, and another Supreme Court opinion, all the while gambling profits are being made.

 

            Amending the statute to get around this opinion is a reasonable possibility for Mr. McGregor.  Amending the Constitution to get around a lottery prohibition would have been unlikely.  Several ideas come to mind on how the present statute may be changed to permit a new cycle of gambling and lawsuits.  Personally, I have always felt Mr. McGregor enjoys playing the political/legal game of chance; it must be far more fun than his sweepstakes or bingo machines, with much greater rewards. 

 

            The Birmingham News recently opined that "[W]hat's needed is comprehensive action by the Legislature and Alabama voters to set the right parameters and to close off loopholes beyond that."  With court opinions such as they are and the brevity of the current constitutional section prohibiting lotteries, a constitutional amendment is the only way to solve this problem.  This was attempted last year.  Shortly after the trial court permitted the sweepstakes, we participated in the drafting of a bill that had the approval of the Governor and Attorney General.  The bill was introduced into the 2006 Regular Session of the Alabama Legislature and assigned to the usual committees that had been set up for "approving" gambling legislation, but the bill was DOA.  The effort was doomed before it began.

 

            Now, as then, a "called special session" of the Legislature to deal with this problem is the only way it will be solved.  We urge the Governor to do so.  In the meantime, we will return to our efforts to defeat the ubiquitous legislative efforts to expand gambling and the circuitous arguments in the courts. 

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