[ N]o sooner is a lottery defined, and the definition applied to a given state of facts,
State v. Lipkin,
In an effort to curtail the use of a perceived loophole in the. State’s gambling laws, the General Assembly passed N.C.G.S. § 14-306.4, which bans the operation of electronic machines that conduct sweepstakes through the use of an “entertaining display.” See N.C.G.S. § 14-306.4(b) (2011). Claiming an unconstitutional restriction on their freedom of speech, plaintiffs challenged the new law. The Court of Appeals declared the statute an overbroad restriction on protected speech and struck it down as unconstitutional. We conclude that this legislation regulates conduct and not protected speech and now reverse.
Since the founding of this nation, states have exercised the police power to regulate gambling. See, e.g., Calcutt v. McGeachy,
As new technology has developed, the General Assembly has faced the advent of “video poker” and other forms of gambling involving computers and the Internet. In 2006 the General Assembly banned video poker and all other forms of electronic gambling. Since that time companies have developed systems that appear to sidestep traditional gambling restrictions by combining legal sweepstakes with video games that simulate a gambling environment, thus purportedly removing the “bet” or consideration element of gambling.
Originally, plaintiffs’ systems used simulations of poker or traditional slot machine games to reveal the sweepstakes result; however, law enforcement officers around the state began to take action against establishments using plaintiffs’ systems, treating the devices as illegal slot machines. On 4 March 2008, plaintiffs sought a declaration that their systems are legal and an injunction prohibiting defendants from taking adverse action against retailers selling their products, which
On 8 July 2010, the General Assembly enacted House Bill 80, captioned “An Act to Ban the Use of Electronic Machines and Devices for Sweepstakes Purposes,” which is now codified as N.C.G.S. § 14-306.4. Ch. 103, 2009 N.C. Sess. Laws (Reg. Sess. 2010), 408. The Preamble to the Session Law includes a statement of purpose underlying the new law. After briefly reviewing the history of gambling laws in the state and recent efforts to ban video poker and similar games, the General Assembly noted that “companies have developed electronic machines and devices to gamble through pretextual sweepstakes relationships with Internet service, telephone cards, and office supplies, among other products,” and that “such electronic sweepstakes systems utilizing video poker machines and other similar simulated game play create the same encouragement of vice and dissipation as other forms of gambling ... by encouraging repeated play, even when allegedly used as a marketing technique.” Id., pmbl., at 408.
In relevant part, Chapter 103 of the 2010 Session Laws makes it unlawful to “operate, or place into operation, an electronic machine or device” to “[c]onduct a sweepstakes through the use of an entertaining display.” Id., Sec. 1, at 409-10. An “electronic machine or device” is defined as “a mechanically, electrically or electronically operated machine or device . . . that is intended to be used by a sweepstakes entrant, that uses energy, and that is capable of displaying information on a screen or other mechanism.” Id., at 408. An “entertaining display” is defined as “visual information, capable of being seen by a sweepstakes entrant, that takes the form of actual game play, or simulated game play.” Id., at 409. The statute contains a nonexclusive list of examples of such displays, including, among others, “video poker” and “video bingo,” as well as a catch-all provision covering “[a]ny other video game not dependent on skill or dexterity that is played while revealing a prize as the result of an entry into a sweepstakes.” Id.
Plaintiffs are companies that, according to their motion for a preliminary injunction, “market and sell prepaid products, primarily long-distance telephone and/or high-speed internet service.” As a promotion, plaintiffs have developed electronic sweepstakes systems. Sweepstakes participants obtain entries from a predetermined, finite pool of entries — some of which are associated with a prize value and some of which are not — either after a qualifying purchase of plaintiffs’ products or at no charge upon request.2 Participants receive a magnetic stripe card which allows them to access a gamestation terminal and stores the information related to their individual sweepstakes entries. At the terminal “the program reveals the content of the sweepstakes entry using different displays that simulate various game themes.” These simulated games do not determine, and cannot modify, the sweepstakes outcome or any prize that might be associated with a sweepstakes entry. Any prize amount won through the sweepstakes may be claimed in cash at the counter of the establishment or may be used at the game terminal to purchase more of the product in one-dollar increments, thereby enabling the customer to immediately receive more sweepstakes entries.
On 1 October 2010, after the General Assembly enacted the current version of
The Court of Appeals majority concluded that both the announcement of the sweepstakes result and the video games are protected speech and that the definition of “entertaining display” in the statute is virtually unlimited. Hest Techs., Inc. v. State ex rel. Perdue, — N.C. App. —, —,
This case has arisen in the context of repeated efforts by the General Assembly to combat the perceived “vice and dissipation” of gambling, as noted in the preamble to the legislation. The statute banning this type of sweepstakes and video game combination is the culmination of a protracted effort by the General Assembly to eradicate electronic gambling. In 2006 the legislature banned video poker and similar video gambling games. In response, businesses reformatted their machines to include sweepstakes rather than direct betting, but used the same video gambling interfaces to simulate the gambling experience. In 2008 the General Assembly banned the use of simulated slot machines and simulated video gambling in “server-based electronic game promotion[s],” which were defined to encompass these sweepstakes. See Act of July 18, 2008, ch. 122, sec. 1, 2007 N.C. Sess. Laws (Reg. Sess. 2008) 464, 464. In response, sweepstakes businesses altered their video game displays to avoid traditional gambling themes like poker. The General Assembly responded with House Bill 80, a more general ban on electronic sweepstakes promotions. In many ways, this entire saga — and ultimately our decision here — were foretold with uncanny accuracy by this Court nearly one hundred years ago in State v. Lipkin, quoted at the outset of this opinion. A similar theme arose in 1923 when the General Assembly first specifically banned slot machines. See Calcutt,
While one can question whether these systems meet the traditional definition of gambling — because plaintiffs have ostensibly separated the consideration or “bet” element from the game of chance feature by offering “free” sweepstakes entries — it is clear that the General Assembly considered these sweepstakes systems to be the functional equivalent of gambling, thus presenting the same social evils as those it identified in traditional forms of gambling. See Ch. 103, pmbl., 2009 N.C. Sess. Laws (Reg. Sess. 2010) at 408 (“[Electronic sweepstakes systems utilizing video poker machines and other similar simulated game play create the same encouragement of vice and dissipation as other forms of gambling ... by encouraging repeated play, even when allegedly used as a marketing technique[.]” (emphasis added)). In effect, the General Assembly determined that plaintiffs’ business models, involving sales of Internet time and telephone cards with accompanying “free” sweepstakes entries, are a mere pretext for the conduct of a de facto gambling scheme. The Preamble to the Session Law contains legislative findings to this effect, and “[although the legislative findings and declaration of policy have no magical quality to make valid that which is invalid, and are subject to judicial review, they are entitled to weight in construing the statute.” Redev. Comm’n of Greensboro v. Sec. Nat’l Bank of Greensboro,
Elsewhere in the country, other courts facing challenges to the enforcement of similar laws have upheld them precisely because the Internet sweepstakes systems have been viewed as gambling in disguise. In United States v. Davis the Fifth Circuit Court of Appeals concluded that “the main purpose and function of [the] Internet cafés was to induce people to play the sweepstakes, and
It would be convenient for this Court to similarly declare that plaintiffs’ systems constitute gambling because “gambling[ ]implicates no constitutionally protected right; rather, it falls into a category of ‘vice’ activity that could be, and frequently has been, banned altogether.” United States v. Edge Broad. Co.,
In the end, though, the label the General Assembly has placed on this activity is not dispositive. What matters is that the General Assembly has identified a threat to the public and acted to address it. “It is well settled that the police power of the state may be exerted to preserve and protect the public morals. It may regulate or prohibit any practice or business the tendency of which, as shown by experience, is to weaken or corrupt the morals of those who follow it or to encourage idleness instead of habits of industry.” State v. Felton,
The central issue we face here is whether to characterize what N.C.G.S. § 14-306.4 actually regulates as conduct or protected speech. Plaintiffs argue that the law prohibits the video games involved in their sweepstakes systems, and that these video games are entertainment and thus merit full
We are convinced that N.C.G.S. § 14-306.4 primarily regulates noncommunicative conduct rather than protected speech. This conclusion turns directly on how we describe what N.C.G.S. § 14-306.4 does. The statute here makes it “unlawful for any person to operate, or place into operation, an electronic machine or device” to “[c]onduct a sweepstakes through the use of an entertaining display.” N.C.G.S. § 14-306.4(b). Operating or placing into operation an electronic machiné is clearly conduct, not speech. We conclude that the act of running a sweepstakes is conduct rather than speech, despite the fact that sweepstakes participants must be informed whether they have won or lost. “ ‘[I]t has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed.’ ” Ohralik v. Ohio State Bar Ass’n,
Plaintiffs maintain that the video games, or “entertaining display,” involved in the sweepstakes systems represent speech protected by the First Amendment. The flaw in this argument is that the statute does not prohibit the video games, only the conduct of a sweepstakes that happens to announce its result through such video games. As the federal district court in the Middle District of Florida decided in a nearly identical case, plaintiffs “are free to provide the video games to their patrons and their patrons are free to play them — and thus make and receive whatever protected message is communicated by the video game — so long as the games are not associated with the conduct of a payoff.” Allied Veterans of the World, Inc. v. Seminole Cnty.,
The First Amendment to the United States Constitution reads in part that “Congress shall make no law . . . abridging the freedom of speech.” U.S. Const, amend. I. The North Carolina Constitution states: “Freedom of speech and of the press are two of the great bulwarks of liberty and therefore shall never be restrained . . . .” N.C. Const, art. I, § 14. Read without context, these provisions appear to be crystal clear, bright-line rules. History, necessity, and judicial precedent have proven otherwise: “Freedom of speech is not an unlimited, unqualified right.” State v. Leigh,
The first complicating factor here is that not all speech is protected speech. There exist “certain well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem.” Chaplinsky v. New Hampshire,
In short, what at first glance appears to be a bright-line prohibition on laws restricting speech relies, in operation, on careful application of the proper level of scrutiny based on the nature of the speech and the importance of the governmental interest involved.' Regulation of so-called pure speech, a term that most often refers to political advocacy, must pass strict scrutiny: the government must show a compelling interest in the regulation, and the regulation must be narrowly tailored to achieve that interest. See Ariz. Free Enter. Club’s Freedom Club PAC v. Bennett, — U.S. —, —,
Plaintiffs argue that two recent First Amendment decisions from the United States Supreme Court require that we hold their systems to be protected under the First Amendment: Brown v. Entm’t Merchs. Ass’n, — U.S. —,
We conclude that Sorrell does not apply here. First, Sorrell did not definitively determine that the prescriber-identifiable prescription data at issue in that case was actually protected speech, allowing only that there is “a strong argument that prescriber-identifying information is speech for First Amendment purposes.” — U.S. at —,
We find the analysis of the Court of Appeals for the Seventh Circuit in There to Care, Inc. v. Comm’r of Ind. Dep’t of Revenue,
Is bingo speech? People buy cards in the hope of winning back more than they spend. A voice at the front of the hall drones “B-2” and “G-49”; after a while someone at the back of the hall shouts “BINGO!” and gets a prize. These words do not convey ideas; any other combination of letters and numbers would serve the purpose equally well. They employ vocal cords but are no more “expression” than are such statements as “21” in a game of blackjack or “three peaches!” by someone who has just pulled the handle of a one-armed bandit.
Id. at 1167. Telling a sweepstakes participant that he or she has won or lost is no more protected speech than calling “Bingo!” or “21.”
Similarly, Brown does not apply here. While Brown confirmed that First Amendment protection extends to video games, the Court struck down the state law at issue because it was a content-based restriction on violent video games. — U.S. at —,
Plaintiffs argue that even if the statute ostensibly targets conduct, their speech (the result announcement or the video game) is still restricted in violation of the First Amendment. This argument also fails. Even if we were to conclude that section 14-306.4, while directed at conduct, burdens some speech, “the First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech.” Sorrell, — U.S. at —,
Under O’Brien a regulation of conduct that incidentally burdens speech
is sufficiently justified if it is within the constitutional power of the Government; if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.
The statute’s compliance with this last prong of the O’Brien test effectively forecloses plaintiffs’ overbreadth argument, which formed the basis of the Court of Appeals’ decision. “ [Particularly where conduct and not merely speech is involved, we believe that the over-breadth of a statute must not only be real, but substantial as well, judged in relation to the statute’s plainly legitimate sweep.” Broadrick v. Oklahoma,
Ironically, plaintiffs concede that the State could ban all sweepstakes (despite the fact that such a ban would still burden their alleged speech) but they argue that the State cannot selectively ban particular sweepstakes that implicate specific legislative concerns. This Court has rejected that argument:
[T]here is no constitutional requirement that a regulation, in other respects permissible, must reach every class to which it might be applied — that the Legislature must be held rigidly to the choice of regulating all or none. ... It is enough that the present statute strikes at the evil where it is felt and reaches the class of cases where it most frequently occurs.
Adams v. N.C. Dep’t of Natural & Econ. Res.,
Plaintiffs have attempted to “skillfully disguise] ]” conduct with a facade of speech to gain First Amendment protection for their conduct. Lipkin,
Therefore, the decision of the Court of Appeals is reversed. This case .is remanded to the Court of Appeals for further remand to the Superior Court, Guilford County, for further proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
Notes
. Gambling is traditionally understood to contain three elements: chance, consideration, and prize or reward. See, e.g., Ward v. W. Oil Co.,
. Plaintiffs argue that the General Assembly is not free to attach a “vice” label to any particular activity and therefore render it unprotected by the First Amendment. While in general this assertion may be true, plaintiffs’ argument fails here. If plaintiffs were correct that the government cannot regulate any vices that involve speech, then North Carolina’s ban on video poker would also be unconstitutional. Video poker involves a video game and a results announcement just as much as plaintiffs’ systems do here, but no one questions whether the State can constitutionally ban video poker.
. We note that plaintiffs do not actually permit their customers to play their video games outside the context of the sweepstakes. Plaintiffs have chosen to make acquisition of sweepstakes entries a prerequisite to playing the video games.
. The trial judge at the preliminary injunction hearing offered a scenario in which the statute might apply to a hypothetical restaurant sweepstakes involving an entertaining display, but hypothetical overbreadth is not sufficient to strike down an otherwise constitutional law.
. Free entries are limited to one entry per day if requested in person and one entry per mailed-in request if sought by mail; the number of mail-in requests for entries is unrestricted.