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- By Katherine Hafner The Virginian-Pilot
Katherine Hafner
Reporter
Emailkatherine.hafner@pilotonline.com
- Jul 3, 2017
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The exterior of a 'computer-based gaming establishment' that bills itself as a vape shop, on Indian River Road in Chesapeake, photographed on Wednesday, June 28, 2017. It has some neighbors concerned, and the business is going through zoning issues with the city.
Vicki Cronis-Nohe | The Virginian-Pilot- Save
CHESAPEAKE
The storefront on Indian River Road looks empty – darkened, reflective windows allow no glimpse inside and there’s no sign denoting a name or description of the store.
Step inside the establishment – you must be buzzed in – and you will find customers playing games at computer stations amid the pungent smell of stale smoke.
Some neighbors in Indian River are concerned about this store – there are rumblings on community social media pages that it allows gambling by sidestepping state laws. Others don’t see any harm from the quiet establishment.
“They are skirting around the gaming laws,” said Adam Arbogast, president of the civic league for nearby Norfolk Highlands. “They’ll operate somewhere until somebody catches on.”
Police say they investigated the business earlier this year, and no charges or arrests came from it.
But seven years after the region saw the emergence of controversial “internet sweepstakes” establishments, the furtive business has drawn attention, from passersby to the city zoning department.
The exact nature of the business is unclear. Its owner, Thomas Hanson, did not return calls seeking comment.
When a Virginian-Pilot reporter visited the store at 4018 Indian River Road on a recent weekday evening, a cashier said customers must buy vapes – or e-cigarette devices – to play the computer games. The capacity for the establishment is around 60 and is busiest around 10 p.m., said the cashier, who declined to provide a full name. A bouncer sits at the front door to ensure those who enter are 18.
The city has determined the shop is a “computer-based gaming establishment,” requiring a permit to operate, and issued it a zoning violation a few months ago for not having one.
Hanson filed an appeal but dropped it the day of the Board of Zoning Appeals meeting on June 22.
Glenn Hampton, Hanson’s attorney, said in an email they plan to pursue a city permit. He did not respond to requests seeking further comment.
Hanson owns a similar business at 2044 Atlantic Ave. The city said he also lacked a permit for that location and cited him last May. He appealed that citation, which is now pending in Circuit Court.
In his appeal for that location, his lawyers described it as a “retail store” in which customers can “participate in computer based auctions at computer terminals” and “bid on various items of merchandise that are displayed on the computer screen.”
The store’s auction software uses an algorithm to determine when an auction ends, according to the court documents. Those who participate in the auction are then given a “free game piece” that can be used to play “promotional games of chance.”
Hanson argued in court documents that “having some incidental games does not make (the business) a ‘gaming establishment,’” and that it is instead primarily an “auction room.”
It’s unclear whether the Indian River location, which opened early this year, follows the same business model.
Some neighbors had planned to speak against the establishment at the recent Board of Zoning Appeals hearing before the appeal was dropped.
“If they’re legal, why are they hiding?” said Rogard Ross, who lives a block away. “It makes me think that what’s going on is not above board.”
Arbogast said he believes it’s “a predatory business just like payday loan facilities. ... It’s preying on low-income people who want to go in there and strike it rich.”
Many commenting on a community Facebook post, however, said they don’t think it’s hurting anyone. Some wrote that they know people who have made money there.
James Weinberg, a Virginia attorney whose specialties include gambling law, said there are three aspects to illegal gambling in Virginia: Are you paying anything of value to participate, is it a game of chance, and is there a prize?
“If you’re paying to play, it’s gambling in Virginia,” he said.
So-called “internet sweepstakes” businesses, often tucked in small shopping centers, started popping up around Hampton Roads in 2010.
That year, Virginia’s legislature had updated the state’s gambling statute to allow certain games and contests if they met outlined requirements – a provision that has since been repealed.
The sweepstakes businesses work by selling a product, such as phone cards or internet time. When a customer buys the product, they are awarded free credits they can use to play online games of chance or promotional “sweepstakes.”
“The products were really of little value, and people were really paying to play” the games, Weinberg said. Gaming rooms at North Carolina truck stops, where these businesses started locally, would be littered with such items as unused phone cards , he said.
In 2010, Virginia Beach authorities raided almost a dozen such storefronts, seized hundreds of computers and shuttered the businesses, according to Pilot archives.
The same year, Chesapeake added a section to its zoning code stating that sweepstakes businesses – falling under the name “computer-based gaming establishments” – need a permit from the city.
The gaming stores “exist in a gray zone between sweepstakes and unlawful gambling because they allow customers to reveal their instant-win codes through devices nearly identical to video slot machines,” according to a 2012 study from the John Marshall Journal of Information Technology & Privacy Law.
It’s also a legal gray area for police and prosecutors.
“It becomes a matter of discretion,” Weinberg said. “It’s shades of gray. That makes it hard prosecutorially.”
Chesapeake police declined to be interviewed about the Indian River store.
City Attorney Jan Proctor said she was unaware of any history of similar gaming establishments in Chesapeake aside from a zoning issue in 2014 with BidRite, an online bidding business on George Washington Highway. It settled with the city by agreeing to change its business model.
Joseph Falk, who owns the River Center Shoppes center on Indian River, said Hanson has been a model tenant.
“My business as a landlord is to get good, solid tenants who can take care of business and maintain a legal business,” he said. “That’s exactly what these folks are doing.”
Hanson’s company, Hanson Ventures LLC, is not registered with Virginia’s State Corporation Commission and appears to be based in Alabama. Out-of-state companies are supposed to register with Virginia if they make revenue in the state, according to the SCC.
Councilwoman Debbie Ritter said the topic has been a complicated legal issue in Virginia. She understands the concerns of residents but thinks the issue is up to the zoning department.
“I do sense there are people who are concerned that these aren’t establishments that fit into a neighborhood surrounding,” she said. “It’s a neighborhood character issue.”
The store will need the vote of City Council to obtain a permit.
Katherine Hafner, 757-222-5208, katherine.hafner@pilotonline.com . Follow @khafner15 on Twitter.
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+2Police suspected illegal gambling, raided 2 Virginia Beach stores, court documents say
An employee at Vapor Connect told an undercover detective: 'Gambling is illegal in Virginia, but you pay for vaping juices, oils or equipment, and you can play the games for free,' according to a recently unsealed search warrant.
- Chesapeake could eliminate online gaming businesses after many popped up illegally, officials say
- Chesapeake City Council shut off the legal route for computer-based gaming establishments
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Katherine Hafner
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Katherine Hafner writes about anything and everything for the Pilot's digital enterprise team, from oyster reefs built of coal ash to runaway zoo animals. She's a UCLA alum who joined the paper in 2015 and has covered Chesapeake City Hall.
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