Is a free-to-play promotional sweepstakes with computer terminals legal under Arkansas anti-gambling laws?

Plain-English summary

Attorney General Leslie Rutledge addressed three questions from Representative Mary Broadaway about the "RMT Sweepstakes," a promotional program offered through retail terminals. Under the facts presented, the AG concluded the sweepstakes likely does not violate either the Arkansas Constitution's prohibition on lotteries or the state's general anti-gambling statutes. The terminals themselves likely do not qualify as illegal gambling devices because they do not determine who wins or loses (the winners were predetermined at the start of the promotion).

The opinion stresses that the so-called "Chuck E. Cheese law" (Ark. Code Ann. § 26-57-401 et seq.), which sets up a licensing scheme for coin-operated amusement devices, is a tax statute and does not decide whether something is illegal gambling. That question is governed by the separate anti-gambling code at § 5-66-101 et seq.

The bottom line is hedged on purpose: the AG cannot find facts, so any final call on a particular sweepstakes or terminal has to come from the local prosecuting attorney or a court applying these rules to the specific evidence.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What is the three-part test for a "lottery" under Arkansas law?
A: The Arkansas Supreme Court has long defined a lottery as a scheme involving (1) consideration paid by participants, (2) winning determined predominantly by chance, and (3) a prize. If any one of those elements is missing, the scheme is not a constitutionally prohibited lottery. Cox v. Daniels, 374 Ark. 437, 288 S.W.3d 591 (2008); Burks v. Harris, 91 Ark. 205, 120 S.W. 979 (1909).

Q: Why didn't the AG just find the RMT sweepstakes legal outright?
A: Because the AG cannot act as a factfinder. Whether a particular machine, in actual operation, becomes a gambling device, or whether participants are paying inflated prices to disguise consideration, is a fact-bound question. Only a prosecutor or a court can make that call.

Q: Does paying a regular price for a product, with a free sweepstakes entry, count as "consideration"?
A: Under the facts described, no. The opinion notes that direct or indirect consideration can satisfy the lottery test, but where the product is sold at its regular (not inflated) price and free entries are also available without purchase, the consideration element is not met. Compare Op. Att'y Gen. 2004-357 (noting that inflated food and beverage prices may supply the consideration element).

Q: What is the "Chuck E. Cheese law" and how does it interact with anti-gambling rules?
A: It is the body of law at Ark. Code Ann. § 26-57-401 et seq. that licenses and taxes "coin-operated amusement devices." A licensed amusement device is excluded from the antigambling statutes' definition of valuable consideration. But the Arkansas Supreme Court has said the Chuck E. Cheese law "relate[s] to taxes and not criminal conduct," so whether something is illegal gambling turns on the separate anti-gambling code.

Q: What counts as a "gambling device" in Arkansas?
A: Two categories. A per se gambling device is one whose only reasonable and profitable use is in a game of chance, or that is adapted or designed to determine the winner of such a game. A device can also become a gambling device as actually used if it is converted to gaming. Under the facts here, the RMT terminals do not decide outcomes (winners were predetermined), so they are unlikely to fall into either category, but a court would have to look at each specific machine.

Q: Did the 2015 amendments to the Chuck E. Cheese law change what is gambling?
A: No. Act 1209 of 2015 carved out "casino-gambling-style games" (draw games, slot machines, roulette, craps, video poker, and similar games) from the "amusement device" tax exclusion. But that amendment did not change the anti-gambling statutes themselves. Whether a device is an illegal gambling device is still a separate, fact-specific inquiry.

Background and statutory framework

The Arkansas Constitution at article 19, § 14(f) prohibits lotteries and the sale of lottery tickets, with limited exceptions not relevant here. The Arkansas Criminal Code separately prohibits "gambling" and "gaming" at Ark. Code Ann. §§ 5-66-103 and -104. Section 5-66-104(a) makes it unlawful to set up, keep, or exhibit any "gaming table or gambling device" that is either adapted for a game of chance or one at which money or property may be won or lost.

The Chuck E. Cheese law sits at Ark. Code Ann. § 26-57-401 et seq. and creates a parallel licensing and tax regime for "coin-operated amusement devices." A device that qualifies as an amusement device is exempted from the antigambling code's definition of valuable consideration. The 2015 amendment (Act 1209) added the "casino-gambling-style games" exclusion that pulls slot machines, video poker, and similar devices back out of the amusement device category.

The Arkansas Supreme Court has consistently treated each device's status as a fact question. In State v. 26 Gaming Machines, 356 Ark. 47, 145 S.W.3d 368 (2004), the court walked through the per se and as-used categories and emphasized that the focus is whether a machine has been "created for the ... purposes of gambling." In Stanley v. State, 194 Ark. 483, 107 S.W.2d 532 (1937), an "electric baseball marble slot machine" was held a gaming device per se even though it awarded no prize, because the player paid to win runs by chance.

Citations and references

Statutes:

• Ark. Const. art. 19, § 14(f) (lottery prohibition)
• Ark. Code Ann. § 5-66-101(a) (liberal construction)
• Ark. Code Ann. § 5-66-103 (gaming)
• Ark. Code Ann. § 5-66-104 (gambling devices)
• Ark. Code Ann. § 26-57-401 et seq. (coin-operated amusement devices)
• Ark. Code Ann. § 26-57-402 (amusement device exclusion)

Cases:

• Cox v. Daniels, 374 Ark. 437, 288 S.W.3d 591 (2008) (defines lottery elements)
• Sharp v. State, 350 Ark. 529, 88 S.W.3d 848 (2002) (Chuck E. Cheese law is tax-only)
• State v. 26 Gaming Machines, 356 Ark. 47, 145 S.W.3d 368 (2004) (per se vs. as-used gambling devices)
• Stanley v. State, 194 Ark. 483, 107 S.W.2d 532 (1937) (no prize required for per se device)
• Pre-Paid Solutions, Inc. v. City of Little Rock, 343 Ark. 317, 34 S.W.3d 360 (2001) (definition of gaming device)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-073
November 29, 2016
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

The Honorable Mary Broadaway
State Representative
924 West Court Street
Paragould, AR 72450

Dear Representative Broadaway:

This is in response to your request for my opinion concerning the operation of a particular promotional "sweepstakes" in Arkansas in light of our anti-gambling laws and recent amendments to the so-called "Chuck E. Cheese law" (Ark. Code Ann. § 26-57-401 et seq. (Repl. 2014 and Supp. 2015)).

You state that there is "significant confusion and disagreement with regard to how and when the provisions of [section] 26-57-402 apply" and you ask the following questions regarding a particular sweepstakes program:

1. Does the RMT Sweepstakes comport with Arkansas law?
2. Do the RMT Sweepstakes computer terminals comport with Arkansas law?
3. If the RMT Sweepstakes and/or its computer terminals are in violation of Arkansas [law], in what manner and respect do they violate the law?

RESPONSE

The statute you mention, Ark. Code Ann. § 26-57-402, is part of the body of law commonly known as the "Chuck E. Cheese law," which creates a licensing and regulatory scheme for "coin-operated amusement devices." It is my opinion that the answers to your questions regarding the legality of RMT Sweepstakes do not turn on the application of this law. The answers to your questions depend instead, in my opinion, upon whether this sweepstakes program is illegal under Arkansas' anti-gambling laws.

Based upon the specific facts stated with your request for my opinion, it appears that the program does not violate the constitutional prohibition on lotteries or the general statutory prohibition on gambling. It further appears, based upon the facts provided, that the computer terminals are not illegal gambling devices. I must emphasize, however, that this opinion is based solely upon the application of the relevant law to the set of facts you have submitted. The answers to your questions can be affected by many factual variables. Consequently, your questions ultimately require factual determinations that are outside the scope of an Attorney General's opinion. Questions of this nature must be decided by the local prosecuting attorney or other law enforcement authorities, subject to possible judicial review.

DISCUSSION

You have indicated that your request for my opinion is prompted at least in part by the question whether "sweepstakes, in particular the RMT Sweepstakes, are implicated under the new amendments [to the Chuck E. Cheese law]." I will therefore first address these amendments.

The statute you mention, Ark. Code Ann. § 26-57-402, excludes "amusement devices" from the criminal statutes prohibiting gambling. It is part of the body of law commonly known as the "Chuck E. Cheese law," which creates a licensing and regulatory scheme for "coin-operated amusement devices." If a device is an "amusement device" under this law, then the owner must pay a privilege tax and a license fee; and the device will be excluded from the anti-gambling statutes found at Ark. Code Ann. § 5-66-101 et seq.

The Chuck E. Cheese law states that it "shall [not] be deemed to authorize any machine commonly known as a slot machine, roscoe, or jackpot, or any machine equipped with any automatic money payoff mechanism." A recent amendment to the law identifies devices that constitute "casino-gambling-style games" and that are not included as "amusement devices":

"Amusement device" does not include a machine, device, or apparatus that constitutes a casino-gambling-style game, including without limitation mechanical or electronic:
(i) Draw games;
(ii) Slot machines;
(iii) Roulette wheels;
(iv) Craps;
(v) Video poker; and
(vi) Casino-gambling-style games of any other type in which the outcome is determined substantially by chance.

These machines and devices are therefore excluded from the "amusement device" exception to the anti-gambling statutes. The amendment that added these excluded devices did not, however, amend the anti-gambling statutes. The question whether a particular device is an illegal gambling device requires a separate, fact-specific inquiry into the particular device at issue. As stated by the Arkansas Supreme Court, the Chuck E. Cheese law "relate[s] to taxes and not criminal conduct."

It is therefore my opinion that the answers to your questions regarding the legality of RMT Sweepstakes do not turn on the application of the Chuck E. Cheese law. The answers to your questions depend instead upon whether this sweepstakes program is illegal under Arkansas' anti-gambling laws. I will address the relevant anti-gambling provisions in the course of responding to your specific questions.

Question 1: Does the RMT Sweepstakes comport with Arkansas law?

This question must be analyzed under both the constitution and statutes. With certain exceptions not applicable to the sweepstakes you have described, the Arkansas Constitution prohibits "lotteries and the sale of lottery tickets," and the Arkansas Criminal Code prohibits "gambling" and "gaming."

Lottery prohibition

As defined by the Arkansas Supreme Court, a "lottery" is "a species of gaming, which may be defined as a scheme for the distribution of prizes by chance among persons who have paid, or agreed to pay, a valuable consideration for the chance to obtain a prize." This creates a three-prong test. The first question is whether consideration is paid to participate; the second question is whether the game is controlled by chance such that winning is not influenced by the skill or judgment of those participating; and the third question is whether a prize is awarded. If any of these questions is answered in the negative, the scheme will not be considered a lottery.

Under the initial part of the "lottery" test, the question is whether consideration, either direct or indirect, is exchanged to participate. Based on the facts that you have provided, it is unlikely the RMT Sweepstakes constitutes a prohibited lottery. The information provided by you indicates that the RMT Sweepstakes is free to play. That is, none of the methods available to participate in the sweepstakes (purchasing a product in the sweepstakes promotion at regular price to receive a free entry, requesting a free sweepstakes entry from the store clerk, and requesting any number of free entries by mail) requires a participant to pay to participate in the sweepstakes. Nor is there any indication from the facts you have stated that participants are purchasing a product at an inflated price for an opportunity to participate.

It must be emphasized, however, that the question whether a particular scheme constitutes a lottery is entirely a question of fact. I cannot act as a factfinder in issuing opinions. Only a court, sitting as a factfinder, could definitively determine whether the RMT Sweepstakes constitutes a lottery contrary to the constitutional prohibition on that species of gaming.

Statutory prohibition on gaming

The Arkansas statutes pertaining to gambling prohibit, in relevant part, "gaming" and "gambling devices." The Code does not define the terms "gambling" or "gaming." The Arkansas Supreme Court, however, has treated the two terms as interchangeable and has defined "gaming" as "the risking of money between two or more persons, on a contest or chance of any kind, where one must be the loser and the other gainer." Accordingly, absent the risking of money or other valuable property in the outcome of a contest, there is no gambling.

Because, according to the facts you have provided, no one pays (or otherwise provides valuable consideration) to participate in the RMT Sweepstakes, the sweepstakes program does not appear to violate the general prohibition against gambling. Again, however, the determination whether a certain scheme is in violation of the Arkansas' anti-gambling laws does not fall to this office, but must instead be undertaken by a prosecuting attorney or court, analyzing the specific facts at issue.

Question 2: Do the RMT Sweepstakes computer terminals comport with Arkansas law?

The Arkansas Code specifies that a person may not keep or exhibit "any gaming table or gambling device":

It is unlawful for a person to set up, keep, or exhibit any gaming table or gambling device, commonly called 'A.B.C.,' 'E.O.,' roulette, or rouge et noir, any faro bank, or any other gaming table or gambling device, or bank of the like or similar kind, or of any other description although not named in this section, regardless of the name or denomination, either:
(1) Adapted, devised, or designed for the purpose of playing any game of chance; or
(2) At which any money or property may be won or lost.

Based on this statute, the relevant question here is whether the RMT Sweepstakes computer terminals are "gambling device[s]."

The antigambling statutes are to be construed liberally, "with a view of preventing persons from evading the penalty of law by changing the name or the invention of new names or devices that are now, or may hereafter be, brought into practice, in any and in all kinds of gaming ...." A device may be a prohibited gambling device by being either a per se gambling device or a gambling device by actual use.

Per se gambling device

The "mere possession of [a per se gambling device] is punishable" under Ark. Code Ann. § 5-66-104, quoted above. The Arkansas Supreme Court has determined that a device may be a per se gambling device when it is adapted or designed to determine the winner and loser in a game of chance, and whose "only reasonable and profitable use ... is use in a game of chance." A device may be a per se gambling device "even where no prize [is] awarded." Determining whether a device is a "gambling device" requires the fact finder to examine the particular device at issue. The focus of the Court is to ascertain whether or not a machine has been "created for the ... purposes of gambling."

With respect to the RMT Sweepstakes computer terminals, it is clear that the computer terminals are a device. Based on the facts you have stated, however, it appears that these computer terminals do not determine the winner and loser. Specifically, you state that "the computer terminals and the computer games do not determine whether a participant is a winner, nor do they change the participant's chance of winning, as the winning entries were predetermined at the beginning of the sweepstakes." The fact that the computer terminals as devices do not determine whether a player will win or lose the game is significant. If a device does not determine the question as to who wins and who loses the game, it seems that the reason to play the machine is not to play a game of chance; and consequently, the device likely will not fall within the prohibition on gambling devices per se.

Without a court examining these particular devices, however, I am unable to offer a definitive answer as to whether the RMT Sweepstakes computer terminals are or are not gambling devices per se. The Arkansas Supreme Court has examined devices on an individual, case-by-case basis to determine whether a specific device is a gambling device per se.

Gambling device by actual use

The Court has also recognized that certain devices may be gaming devices as actually operated, or converted to an unlawful use, and on that basis found to be in violation of section 5-66-104.

The facts you have stated regarding the RMT Sweepstakes computer terminals you describe do not include evidence that the terminals are actually used or converted for gambling purposes. This is because the stated facts suggest (1) there is no payment (or other valuable consideration) to play; and (2) the device does not determine whether a participant is a winner.

But again, the question whether any particular device is used or converted for the purpose of gambling, within the anti-gambling prohibition, is ultimately one of fact and outside the scope of this opinion.

CONCLUSION

In conclusion, assuming absolutely no deviation from the factual scenario described, the sweepstakes program and the computer devices you describe are unlikely, in my opinion, to be held to violate either the constitutional prohibition on lotteries or the statutory anti-gambling laws. Ultimately, however, your questions require an evaluation of all the particular surrounding circumstances. This factual inquiry is outside the scope of an Attorney General's opinion. Questions of this nature can only be definitively decided by the local prosecutor or other law enforcement authorities, subject to possible judicial review.

Sincerely,

LESLIE RUTLEDGE
Attorney General