Mr. M's advertises itself as an "Internet and Cafe" on its sign on Fair Oaks Boulevard in Carmichael, but what happens inside looks more like a small casino.
On a recent weeknight, 20 people were playing games of chance, including computer slot machines with sound effects that rang like the real thing.
On Tuesday, Sacramento County supervisors turned down an appeal by Mr. M's owner, Martel Mendoza, to have a previous rejection of his business license overturned. The county's tax and license collector had revoked it in August, following an investigation by law enforcement officials.
According to state and county officials, the "cafe" is a concealed gambling operation and part of a growing trend across California.
In an advisory sent to law-enforcement officials last month, the state Bureau of Gambling Control said Internet cafes with gambling are opening with "increasing frequency." The bureau "considers Internet cafes that offer these types of sweepstakes to be illegal gambling operations," the advisory states.
Michelle Gregory, a spokeswoman at the state Department of Justice, said local law enforcement officials have contacted the department about illegal gambling operations across the state. The department has been providing advice and assistance to the jurisdictions, including Sacramento County.
About 15 similar gambling operations have opened in the past couple of years in unincorporated Sacramento County, said Guy Fuson, the county's business license manager. Typically they use an Internet cafe or other type of business as a front, he said.
Three of the operations have lost their business licenses, others decided to close after being told they were illegal, and some are still in operation, he said.
In an unsuccessful bid to restore Mendoza's license before the supervisors Tuesday, Mendoza's attorney, Harlan W. Goodson, echoed what defense attorneys have said in other cases. He said Mr. M's provides legal sweepstakes games such as the Monopoly games that McDonald's offers. They're a form of advertising and protected free speech, he said.
The Sacramento County District Attorney's Office has worked with the Sheriff's Department and the Sacramento Police Department to close a number of Internet cafes offering illegal gambling, spokeswoman Shelly Orio said.
The office has filed cases against four operations, with 10 defendants, and has investigations open against other stores with gambling, she said.
Fuson said officials are worried that customers aren't the only ones losing money because of the gambling.
"Gambling isn't the biggest problem," he said. "The real problem is that legitimate businesses are complaining. These places attract prostitution, drug dealing and trash."
In April, when the Sheriff's Department conducted a raid on Mr. M's, a man suspiciously tried to leave out the back door, according to an investigative report. He was carrying 9 grams of methamphetamine, a scale and a narcotic pipe, the report said.
Fuson said the increase in illegal gambling is tied in part to the county's decision a little over a year ago to ban marijuana dispensaries. Some of the illegal gambling operations have been run by former dispensary operators, he said.
At places such as Mr. M's, customers go in and get a card that contains credits and swipe it on a computer terminal. The terminal gives customers the option of using the Internet or playing sweepstakes games.
Typically, the sweepstakes software is operated on site, according to the Department of Justice. Customers are paid their winnings on-site.
Some people who have tried to open such operations in Sacramento County freely stated their intent and were denied, Fuson said. Others, such as Mendoza, have not been forthcoming.
In his application, he said he would offer "copying, faxing, printing, Internet, coffee, soda, snack prepackaged." His attorney argued Tuesday that he did not deceive the county but offered the sweepstakes as marketing for the other products.