For Immediate Release - June 24, 2011

AG COAKLEY ISSUES PERMANENT REGULATION BANNING SO CALLED "INTERNET CAFES" AND "PHONE CARD LOTTERIES" THAT OFFER ILLEGAL GAMBLING

BOSTON - Citing evidence of illegal gambling and the lack of consumer protections, Attorney General Martha Coakley's Office today issued a permanent regulation under the Consumer Protection Act that will ban illegal gambling at so called "Internet Cafes" and other establishments across the Commonwealth. The regulation, issued following a May 24 th public hearing and a public comment period, is substantively identical to the emergency regulation issued by the Attorney General on April 7, 2011.

"This regulation will enforce long-standing gambling laws and protect consumers," AG Coakley said. "The regulation makes clear that companies cannot skirt our laws by disguising gambling as something else, such as the sale of internet access. These establishments were illegal when they started, and they are illegal now."

The Attorney General's Office issued the emergency regulation in April after the office received a number of questions and complaints regarding alleged unlawful gambling operations that had recently opened for business across the Commonwealth. Though the businesses purport to sell goods or services, such as internet access or phone cards, the Attorney General's investigation found those sales were a pretext for unlawful lotteries, online slot parlors, sweepstakes and similar gambling. The regulation makes clear that these practices are against the law. Those that violate the law may be subject to injunctions, civil penalties and other relief under the Consumer Protection Act.

The emergency regulation was challenged in Superior Court by an operator of a Springfield "cyber café" who sought a court order to restrict enforcement of the regulation. On May 13, 2011, Judge Richard Carey of the Hampden Superior Court denied the cyber café owners request for preliminary injunction. In addition to the regulation, Attorney General Coakley has also begun a criminal investigation into the facilitation of possible illegal gaming at facilities that claim to be 'Internet Cafes' at establishments located in Bristol and Hampden Counties.

The regulations target two activities in particular, namely:

Cyber Cafes :

The so called "cyber cafes" feature dozens of computer screens at which patrons play video slot machines, lotteries, or similar games where the winning numbers are revealed each time the player uses game credits-or money-to play the game. Gamblers typically pay for a swipe card-for example, 1000 points for $10-and use their points to play the lottery, sweepstakes or video slots. If they win, they can redeem the points accrued on their swipe card for cash. More often, they play until their money is exhausted, and then stop or pay more money to keep playing. These establishments purport to sell internet time, coupled with the opportunity to win prizes in a lottery, sweepstakes, or video slots. But, the Attorney General Office's investigation found that sale of internet time is a ruse, as virtually all customers pay money to gamble, and that is how the establishments are promoted.

Phone Card Lotteries :

Certain convenience stores and bars around Massachusetts house "phone card" lottery machines that offer the chance to win a prize by playing a lottery, sweepstakes, or a different game like slots or poker. To have a chance to win at the gambling, the player buys a phone card, offering some number of minutes of phone calling, which is generated in the form of a receipt or stub. While the purchase of a phone card allows a customer to gamble, winnings typically are redeemed in cash.

The regulation is designed to end this practice of de facto gambling operations posing as sellers of goods or services. The regulation provides:

" . . . . [I]t is unfair or deceptive in violation of [c. 93A] for any person to engage in a business or engage in a transaction where a gambling purpose predominates over the bona fide sale of bona fide goods or services."

The Secretary of State's office published the final regulation today in the Massachusetts Register. The regulation becomes effective immediately. The Attorney General's Office reviewed twenty comments received during the public comment period and at the May 24 th hearing, from citizens, businesses that promote the gambling parlors, and other interested parties

The Massachusetts Consumer Protection Act (chapter 93A) authorizes the Attorney General to promulgate regulations to identify "unfair or deceptive acts or practices" in trade or commerce. The Attorney General promulgated the regulation in April on an emergency basis after receiving complaints and determining that the wide scale operation of unlawful gambling establishments posed an unacceptable risk to the public health, safety and welfare.

Copies of the regulation, 940 CMR 30.00 are available on the Attorney General's website at www.mass.gov/ago/regulations.

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