U.S. District Judge Leslie E. Kobayashi says the sweepstakes machines that police seized from six Oahu arcades in September appear to be gambling devices prohibited under state law.
Kobayashi made the finding in a 28-page written order she issued Thursday.
The order denied a request from the arcade businesses for the return of the machines and to prohibit police from making further seizures. It also denied the city’s request for a ruling in its favor in the businesses’ lawsuit accusing the city and Honolulu police of violating their constitutional right against illegal searches and seizures and their right to acquire and possess the machines.
Kobayashi made those rulings in January. The written order states her reasons.
Honolulu Prosecutor Keith Kaneshiro said the order "confirms that the machines were properly seized and that they should remain in police custody as evidence in an ongoing gambling investigation."
Police seized 77 machines Sept. 27 from arcades in Ewa Beach, Pearl City, Wahiawa, Waikiki, Waipahu and on Ward Avenue. No one was arrested.
Keith Kiuchi, lawyer for the arcade businesses and for PJY Enterprises — the company that distributes and services the machines — said Kobayashi found only one feature of the machines to constitute gambling.
"She hasn’t found the entire sweepstakes scheme to be gambling," Kiuchi said.
State law defines gambling as staking or risking something of value on the outcome of a game of chance for an opportunity to win something of value.
PJY and the arcade businesses have argued that the machines are not gambling devices because there is no cost to enter the sweepstakes. People get free entries when they buy discount coupons and, like the McDonald’s Monopoly game, they can enter without making a purchase.
They say the machines are a marketing tool for online retailer Products Direct and that the machines’ casino-type games are a fun way for shoppers to find out whether any of their entries are winners.
Kobayashi said the machines operate as games of chance and that people who play the casino-type games have the opportunity to win or receive something of value. She said the players stake something of value when they double up their wagers after a win.
PJY manager Tracy Yoshimura told Kobayashi at a hearing in December that players can wager their free entries in the casino-type games to win more entries. They can use the new entries to increase their chances of winning in the sweepstakes or redeem them for money.
Kobayashi did not rule whether the money players put into the machines to play the games are wagers, as the city claims, or payments for discount coupons.
Honolulu police say the discount coupons are a sham and that players don’t use them. Police said officers were unable to play without buying coupons and that the products the online retailer offers for sale can be purchased for much less elsewhere.
Kobayashi said her finding is preliminary and was made to help her decide whether to grant the arcade businesses’ request for the machines’ return and against further seizures.
One of the requirements for an injunction is the requester’s likelihood of winning its case. Kobayashi said based on her finding, the businesses are less likely than not to win their constitutional-violation claims against the city.
