Gift Surplus, LLC v. State of North Carolina, 38 N.C. 1, 2022-NCSC-1 (Feb. 11, 2022)

The plaintiffs sought a declaratory judgment that their sweepstakes video games were lawful and did not violate G.S. 14-306.4 (banning certain video sweepstakes games). For the third time, the North Carolina Supreme Court held that the video games at issue are primarily games of chance in violation of the statute. While the games were modified to award more nominal money prizes and to allow players to “double nudge” game symbols into place to win, these changes did not alter the chance-based character of the games. The question of whether a game falls within the prohibition on games of chance in G.S. 14-306.4 is a mixed question of law and fact and is subject to de novo review where there is no dispute about how the game is played. Applying that standard, the Court unanimously held the modified games remained games of chance. In its words:

After considering plaintiffs’ game when viewed in its entirety, we hold that the results produced by plaintiffs’ equipment in terms of whether the player wins or loses and the relative amount of the player’s winnings or losses varies primarily with the vagaries of chance and not the extent of the player’s skill and dexterity. Gift Surplus Slip op. at 22 (cleaned up).

Because the Court determined the games at issue violated G.S. 14-306.4, it declined to consider whether the games also constituted illegal gambling.

The Court of Appeals majority opinion below held that the games violated the statute regardless of whether or not they were games of chance because the games constituted an “entertaining display” under the statute. This was error, as entertaining displays are not banned under the statute unless the game is one of chance. “Any doubt about whether the statute is only concerned with games of chance is resolved by subsection (i), the statute’s ‘catch-all provision,’ which prohibits sweepstakes through ‘[a]ny other video game not dependent on skill or dexterity.’” Id. at 12. The Court of Appeals was consequently affirmed as modified.