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02/21/2013

News / California phone store loses business license over sweepstakes

The City Manager of the Californian city of American Canyon has revoked the license of a recently-opened phone store because of the disproportionately large amount of time that customers spent playing sweepstakes, as well as the meager space devoted to actual retail sales. This meant that the business was engaged in entertainment, which requires special licensure that the shop did not have.

In her four-page decision, City Manager Dana Shigley also mentioned the recent statewide advisory from California Attorney General Kamala Harris that the operations of many similar “Internet cafes” throughout the state constitute illegal gambling.

The store in question, Freedom PCS, presented itself as a retail store that sold pre-paid phone cards, Internet access, cell phones and other telecommunication goods and services. The shop itself features rows of computers with gaming software, a cashier protected by thick thermoplastic and an armed security guard.

In a February 4 hearing, the Freedom PCS’s attorney, Scott Emblidge, claimed that the store’s sweepstakes, which awarded winners with on-the-spot cash prizes, were merely promotional and were not the principle source of its revenue.

The City Council also voted Tuesday to impose a 45-day moratorium on the operation of similar businesses. The time would be used to examine whether the activities of these shops constituted illegal gambling or any other breach of corporate law. The discussion that took place in the City Council underscored the fact that similar shops were sprouting up all over the San Francisco Bay Area.

“I believe the City of Hayward is undertaking this exact issue this evening,” Councilmember Belia Ramos Bennett was quoted by local newspaper The American Canyon Eagle as saying.

The Hayward City Council passed a similar moratorium on “Computer Gaming and Internet Access Businesses” Tuesday evening.

Freedom PCS has 15 days to appeal the revocation of its license, during which time it can continue to operate, City Manager Shigley noted.

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