[ N]o sooner is a lottery defined, and the definition applied to a given state of facts, than ingenuity is at work to evolve some scheme of evasion which is within the mischief, but not quite
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
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 had included seizing equipment, closing down shops, and initiating criminal prosecutions. That same day the trial court heard the matter and issued a temporary restraining order. The trial court held a second hearing on 14 March, and granted a preliminary injunction on 16 April 2008. On 18 July 2008, the General Assembly enacted Senate Bill 180, which made it unlawful to possess a game terminal that simulates slot machine games or games like video poker. Plaintiffs modified their systems to substitute gaming displays that did not involve simulations of traditional gambling games like slot machines or video poker. They sought a modification of the preliminary injunction to reflect these adjustments on 31 October 2008 and received such a modification on 5 December 2008.
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
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
On 1 October 2010, after the General Assembly enacted the current version of N.C.G.S. § 14-306.4, plaintiffs filed an amended complaint challenging the constitutionality of the statute under the First Amendment to the United States Constitution and Article I, Section 14 of the North Carolina Constitution. On 30 November 2010, the trial court concluded that the law is constitutional in all aspects except for the catch-all provision found in N.C.G.S. § 14-306.4(a)(3)(i), which it declared overbroad. Based upon that conclusion, the court dissolved the preliminary injunction and allowed law enforcement activity to proceed in accordance with its order. Both parties appealed.
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
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 that the Internet time sold by the cafés — albeit at fair market value — was not the primary subject of the transaction, but instead mere subterfuge.”
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.
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 First Amendment protection. Plaintiffs in the companion case, Sandhill Amusements, Inc. v. State of North Carolina, assert that the law is primarily a restriction on the announcement of the sweepstakes result, which they contend is protected speech. The State maintains that the law only prohibits specific conduct, namely, placing into operation an electronic machine that conducts sweepstakes using an entertaining display.
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,
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,
The second complicating factor is that not all protected speech actually involves words. The United States Supreme Court has “acknowledged that conduct may be ‘sufficiently imbued with elements of communication to fall within the scope of the First and Fourteenth Amendments.’ ” Texas v. Johnson,
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 —,
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-
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.