Rancho Cordova leaders are moving swiftly to quash what they say are mini-casinos disguised as Internet cafes.
Last week, the City Council approved a 45-day moratorium that prevents such businesses from opening while officials explore an ordinance to ban them outright.
"This stuff is illegal and we don't want it in Rancho Cordova," said Linda Budge, the city's mayor.
Typically found in neighborhood strip malls, the cafes contain computers that run casino games, according to the state Department of Justice. Customers purchase a "sweepstakes" card to play the games and can cash out the winnings at the store.
The Justice Department issued an advisory in December calling the businesses "illegal gambling operations," but enforcement often falls under the jurisdiction of local governments.
Operators and their vendors contend the businesses are legitimate and operate within the confines of the law.
"The problem is perception," said Phillip Walker of Oz's Internet Cafe and Hub in Bakersfield. "People think it's gambling because the computer resembles a slot machine."
So far, the moratorium is pre-emptive since no sweepstakes cafes are operating in Rancho Cordova. In the past six months, the city received three business license applications for what officials suspect to be sweepstakes operations because they involve setting up computer terminals in a retail environment.
Before the moratorium, two of the businesses were approved, but have not yet opened, said planning director Paul Junker. The city denied a third application last week after the moratorium took effect.
"They call it a sweepstakes, but it's very obvious that it's gambling," Rancho Cordova Police Officer Mark Baxter said, adding that the storefronts were magnets for crime.
The moratorium follows a crackdown by other cities and counties across the state. Hayward's City Council pushed through a similar ban on sweepstakes stores last month.
Walker is fighting a court order that prevents his cafe from offering sweepstakes games. Since the prizes are "preselected" and do not require the customer to play the games, Walker argues the practice isn't gambling.
Anthony Ranaldi, CEO of Delaware-based sweepstakes vendor Sweeps Logic, compared the sweepstakes to the scratch-off Monopoly game offered at McDonald's.
"You buy two hours' worth of Internet time and receive entries to play the games," Ranaldi said. "It's the same as buying a cheeseburger and winning a prize."
The sweepstakes stores started popping up in the Sacramento region the last two years, but most have been shut down by law enforcement. In January, Sacramento County supervisors rejected one storeowner's attempt to keep his sweepstakes cafe in Carmichael.
Nationwide, sweepstakes cafes have gained a foothold in at least a dozen states, drawing the ire of government leaders, law enforcement and traditional gambling interests alike. Massachusetts, Pennsylvania and North Carolina are among a small roster of states that have passed legislation explicitly banning the practice.
"There's no licensing requirement, no background check and no regulation," said Judy Patterson, executive director of the American Gaming Association, a group that represents commercial casinos and equipment manufacturers. "Where's the integrity?"
Call The Bee's Richard Chang, (916) 321-1018. Follow him on Twitter @RichardYChang.