Ban on “Entertaining Displays” of Sweepstakes Results Violates the First Amendment

So holds the North Carolina Court of Appeals in Hest Technologies, Inc. v. State (N.C. App. Mar. 6, 2012). An excerpt:

[Hest uses its] proprietary sweepstakes management software … to conduct promotional sweepstakes as a means of marketing their [long-distance telephone time and high-speed internet service] products at the point of sale…. A player who has received a sweepstakes entry can only reveal this predetermined result by connecting to a computer terminal on which the sweepstakes software has been loaded. Once connected, the player has the option of either (1) choosing an “instant reveal,” whereby the results of the sweepstakes entry are immediately displayed on a computer screen; or (2) having the results revealed through a video game played on the computer terminal. The method by which the result is revealed does not affect the outcome of the sweepstakes. Moreover, customers retain the value of the purchased prepaid phone or internet time, regardless of the outcome of the sweepstakes….

On 20 July 2010, the North Carolina General Assembly … amended the North Carolina General Statutes to include a provision which prohibited conducting or promoting any sweepstakes which prohibited conducting or promoting any sweepstakes which utilized an “entertaining display.” Plaintiffs’ sweepstakes systems fell squarely within the ambit of the new N.C. Gen.Stat. § 14–306.4….

N.C. Gen.Stat. § 14–306.4 does not forbid the conducting or promotion of sweepstakes provided that the result of the sweepstakes entry is conveyed through any method other than an entertaining display…. Thus, it is the specific method of disseminating [lawful] sweepstakes results through an entertaining display that is criminalized by N.C. Gen.Stat. § 14–306.4….

[B]anning the dissemination of sweepstakes results through entertaining displays cannot be characterized as merely a regulation of conduct. Instead, that portion of N.C. Gen.Stat. § 14–306.4 which forbids “the reveal of a prize” by means of an entertaining display directly regulates protected speech under the First Amendment [and is unconstitutional.

The dissenter disagreed:

Here, N.C. Gen.Stat. § 14–306.4 does not prohibit plaintiffs from allowing a customer to play plaintiffs’ video games. Rather, the statute prohibits plaintiffs from conducting or promoting their sweepstakes through the use of a video game. Plaintiffs are free to allow anyone to play their video games so long as the video games are not used to conduct or promote a sweepstakes…. [T]he statute merely regulates conduct and not speech ….