Crazie Overstock Promotions, LLC v. State

Crazie Overstock Promotions, LLC (Crazie) (plaintiff) sold gift certificates that patrons could use in Crazie’s stores. For every $10 spent on gift certificates, patrons received 1,000 game points that they could use to play two electronic games. First, the Reward Game was a chance-based game that simulated a slot machine. Patrons could wager game points for the chance to win reward points. Patrons who lost all their plays in the Reward Game were still given 100 reward points. After playing the Reward Game, patrons could take their earned reward points and wager them in the Dexterity Game. The Dexterity Game was a skill-based game that tested patrons’ hand-eye coordination. Patrons won dexterity points based on their performance and then redeemed those dexterity points for cash at a rate of $1 per 100 points. The Dexterity Game was easy, and over 95 percent of patrons were able to win at least some money. In May 2016, the State of North Carolina (the state) (defendant) began investigating Crazie to determine if Crazie was engaging in illegal gambling. Crazie sued the state, seeking a declaratory judgment that its gaming machines were lawful. The trial court granted summary judgment for the state, concluding that Crazie was violating North Carolina’s lotteries and gaming statutes. Specifically, the court found that Crazie’s program violated North Carolina General Statute § 14-306.1A by operating a video-gaming machine that allowed patrons to wager for the opportunity to win money or something of value in a game of chance and violated § 14-306.4 by operating a video-gaming machine that allowed patrons, with or without paying consideration, the opportunity to win a prize in a game of chance. Crazie appealed, arguing that its program should be considered a game of skill, rather than a game of chance, because patrons could win money only by performing well in the skill-based Dexterity Game.