Potentially illegal ‘sweepstakes’ games raise millions for veterans

AUSTIN (KXAN) — Many of our country’s military veterans who fought for our freedom overseas return home needing financial help. And often your charitable donations help them through hard times. But would you change your mind about donating to veterans charities if you found out the way you’re donating could potentially be illegal? A KXAN investigation finds the way some donations are brought in walks a very fine line with gambling.

In Texas, gambling, or paying money for a chance to win more money is against the law. But there are legal “sweepstakes” games where players can win cash or prizes because no purchase or payment is necessary for a chance to win.

But KXAN’s investigation found computerized sweepstakes video games in bars and VFW posts across Central Texas that law enforcement officials, including the Texas Attorney General, say are illegal because people are paying to play and win money. Veterans groups and the companies operating the games claim they are legal because there is no payment necessary to play, and when players do pay it’s a “donation.”

KXAN found you can pay to win cash in game rooms that look and sound like casinos. We also talked to an Austin woman who says she has a gambling addiction because of these games and lost tens of thousands of dollars playing them.

“It’s still illegal and they shouldn’t be doing it.”
— Doug Lowe, Anderson County District Attorney

“I did play the games for fun and to win money,” the woman, who does not want her name used, told KXAN.

“Do you believe this is illegal gambling?” asked KXAN Investigator Brian Collister.

“Absolutely,” she responded. “I’ve learned enough to know what’s legal legal and what’s not.”

Veterans groups and companies operating the games claiming players can play for free and are donating to veterans charities when they do pay. But, she and other players we spoke to say that’s not exactly how it works. She took our producer, who wore a hidden camera, in to places like a bar in Pflugerville.

Our producer asked the bartender what we needed to do to play the computer video games. “I need your driver’s license and how much money you want to play,” the bartender said. The “sweepstakes” games, according to signs posted in the bar benefit a group called AMVETS.

We’re told we can win big money.

“How does it work?” our producer asked.

“If you hit one of the jackpots or one of the pots you can collect up to $500 in a day,” the bartender explained. “If you win like the $1,000 (jackpot) you’ll get $500 and then you come back tomorrow and then I give you another $500,” she continued.

Players must first set up an account with the bartender and receive an account number. Then players are given one free dollar’s worth of play on their account to start with. To play more, a “donation” is required.

“Do you win anything with a dollar?” our producer asks. “The odds are extremely low,” the bartender laughed.

“So, what, give $20 a try?” our producer asks. “Yeah,” she replied.

We asked another player for a little advice on winning big.

“What’s the best way to jack it up?” our producer asked a man playing a game close by. “Man…just the more money you bet the more money you win,” he said.

With our $20 it didn’t take long to win more cash. Our producer won $21 on one spin. Soon after we went to the bar to collect our winnings.

“You won $34.00,” said the bartender after looking up our account information. “You want to cash out or do you want to play it?” she asked our producer.

“I think I’ll quit while I’m ahead,” our producer replied and the bartender paid us $34.00.

We found other computer sweepstakes game machines operated by a company called VSweeps in numerous local bars and VFW posts. To play these games players receive a card that holds their account information. At VFW Post 8925 in southeast Austin, our producer received a card with a free dollar’s worth of play on it.

“How does it work?” our producer asks the bartender. “Just donate over there,” she replied, pointing to a machine.

Players must agree to 10 pages of rules before playing.
Players must agree to 10 pages of rules before playing. Click to read more.

To play more than the free dollar, players swipe their card and insert money in to the machine which then loads that money on to the player’s card. The players the swipe at the game terminals to play.

We put $20 in the machine. After playing for a while, our winnings grew to $38. We went back to the bar and receive our payout.

KXAN contacted several local law enforcement agencies about the legality of the sweepstakes game machines, but all declined to comment. Travis County Attorney David Escamilla told KXAN over the phone that it would be inappropriate for him or any of his staff to talk about the matter because of a pending lawsuit in Travis County in which the issue of whether or not these games are illegal is still before the court.

So, we headed 200 miles east to Anderson County to meet District Attorney Doug Lowe who has successfully prosecuted manufacturers and operators of sweepstakes video games.

“It’s just a ruse to try and get around the laws of the state of Texas,” Lowe said of the sweepstakes. “In my opinion based on my experience, my knowledge of these games, that is an illegal activity in the state of Texas. It’s illegal gambling. It’s illegal sweepstakes,” Lowe continued. He calls the sweepstakes an illegal lottery.

KXAN spoke with the owner of the Pflugerville bar by phone. He says he believes the games are legal and has a compliance notification from TABC posted on the wall.

No one with AMVETS, VSweeps or the Texas VFW would talk on camera with KXAN about the sweepstakes games.

Texas Attorney General Greg Abbott says the sweepstakes games are illegal. In fact the Attorney General’s office sued an indian tribe and gaming company over its sweepstakes games. In 2002, then Texas Attorney General John Cornyn ruled the sweepstakes games are illegal.

Austin Attorney Jennifer Riggs, who represents the Texas VFW said in a written statement:

“Because the Office of the Attorney General takes a very expansive view of what constitutes “gambling” and has chosen to attack all charitable sweepstakes, not just the VFW’s “Support A Veteran Sweepstakes”, the VFW has had to defend its sweepstakes in court. To date, the VFW’s efforts have been successful. Because the courts do not want cases tried in the media, however, the VFW must respectfully decline an interview.”

Click to read full statement
Click to read full statement

Still, some in law enforcement who appreciate the sacrifices made by veterans, think this is a battle veterans groups will not win.

“I think to some extent they’ve been the victim of a good sales pitch that slick people are good at doing,” said Doug Lowe. “But, it’s still illegal and they shouldn’t be doing it.”

According to the most recent financial records filed with the Internal Revenue Service, The VFW’s sweepstakes via VSweeps brought in about $12 million in 2012. The company operating the machines, VSweeps kept half of that money.

KXAN will keep you posted on the pending litigation and whether or not local law enforcement take action.

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