Exclusive: Those "skill games" arcades feed off of Charlotte's lower-income neighborhoods

But there’s no Skee-ball at this arcade.

Inside are online slots and “fish games,” where you bet money to shoot at colorful fish swimming across the screen. Another location even had poker.

In short, it’s gambling.

What’s happening: Charlotte police say they don’t know how many arcades like this there are here. But using Google search results, Axios conducted an analysis that revealed more than 30 citywide. There are likely more, as many do not have addresses listed or do not appear in search results.

• Nearly 70% of those we did find were located in the lowest-income neighborhoods, where the average household earns below $51,000.

The legality of the businesses is murky, at best. Games of chance are banned in North Carolina, and some games, like slot machines and video poker, are explicitly prohibited.

Driving the news: State legislators have introduced a bill that, if it passes, would legalize some video gambling machines.

• The idea is to capture some of the revenue from the gambling operations and direct it toward state needs, like higher education.

Why it matters: In addition to the legal concerns, the concentration of arcades in the poorest areas of town raises questions about wealth being extracted from those who can least afford it.

• For instance, on a changing stretch of The Plaza, three arcades entice passersby with glitzy neon lights and large signs advertising skill games.
• But just around the corner, down 36th Street, is the main section of NoDa, one of the busiest neighborhoods in the city. There are no gambling houses in NoDa.

Community leaders believe those patterns are intentional.

Jeff Pharr, a board member of the North End Community Coalition, says the arcade in the former bank on North Graham is symbolic in many ways, and it’s an impediment to the progress he wants to see.

• Banks already have fewer branches in places like north Charlotte, helping allow predatory lending to proliferate.

Pharr questions why in the “crescent,” where the low-income and minority populations of the city are concentrated, there are plenty of arcades, but few essential community amenities.

Meanwhile, in the“wedge,” the wealthier, whiter southeastern section of Charlotte, he sees bank after bank, and grocery store across from grocery store.

• “I have never seen something that proliferated in poorer neighborhoods that doesn’t proliferate in richer neighborhoods that turns out to be a really positive thing overall,” he said.

Between the lines: There’s a direct relationship between the income of residents in a census tract, and the location of arcades, Axios’ analysis found.

• The average household income of a census tract without an arcade is $75,278. For those with at least one arcade, it was $44,299.
• As the number of arcades in a census tract increases, the average household income largely decreases. Add one arcade, and it’s $42,766. The average income in a census tract with two arcades is $51,587. Add a third arcade, and it’s $36,991.

Zoom in: The only census tract with three arcades that we identified is on Charlotte’s west side, along Wilkinson Boulevard. It encompasses the Ashley Park and Westerly Hills neighborhoods, and part of the areas on the other side of Wilkinson.

Rickey Hall, board chairman of the West Boulevard Neighborhood Coalition, has been working to improve economic mobility and quality of life in the adjacent West Boulevard corridor.

But he sees the arcades concentrated near the area as a detriment to those efforts.

• “It just seems that these lost wages machines are popping up everywhere as a growth enterprise … that stands to gain significantly, while the community and families and individuals and lives are heavily impacted,” he said.

Legal concerns

Arcades often try to justify their legality by saying the games they offer are based on skill, says Chris Poole, special agent in charge of the North Carolina Alcohol Law Enforcement’s Gaming Section.

But in my experience visiting them, there was little skill involved.

• To play the online slots, you give the cashier money, and in exchange he gives you a code that allows you to log into one of the computers. Then you select from several themes, choose how much money you want to bet, and start spinning.
• The fish game resembles more of a video game than a traditional Casino-style one. You sit at a long table, add money directly into the machine, and choose your weapon against the fish. A button allows you to adjust your bet, and you use another button to “shoot” and capture the fish, mermaid or other sea object that flies across the screen. The bigger the item you catch, the more you can win.

Yes, but: Whether or not the games are based on skill, a gaming machine in North Carolina cannot legally pay out cash or a cash equivalent like a gift card, Poole tells me. But these still do.

• The only exception to that would be in game of skill, like Pac-Man or other typical arcade games, businesses can provide up to $10 worth of merchandise one time. Machines also cannot allow you to bet more than eight credits in one play.

Poole’s office has visited around 300 sweepstakes locations across the state in the last four years. They’ve yet to see one that was operating within the law.

Ultimately, unless it’s a business with an ABC or lottery permit, it’s up to local law enforcement to decide what to do, he said.

Sheriffs across North Carolina commonly receive calls from desperate family members, after a relative spent their paycheck at the arcades, says Eddie Caldwell, executive vice president and general counsel of the North Carolina Sheriffs’ Association.

• “These folks are preying on the folks that are least financially able to take a hit,” he tells me. “And then they can’t pay their rent, can’t pay their electric bill, can’t provide for their children, can’t buy their medicine.”

But in order to bring a case against an arcade, Caldwell says law enforcement has to go undercover and play the games to determine they are illegal.

The resources of law enforcement, and the willingness of district attorneys to prosecute cases, Poole says, factor into how aggressive enforcement is. Some counties, he said, have eliminated the sweepstakes locations through their actions, while for others, it’s not as high of a priority as violent crime.

• Charlotte-Mecklenburg Police have continued to see an uptick in the number of arcades in the area, says CMPD spokesperson Rob Tufano. Police work closely with ALE to enforce the gambling laws against those that are operating illegally, he said.

I contacted numerous arcades between in-person visits, phone calls (though many of the numbers were disconnected) and messages, and was unable to reach any owners or managers for an interview.

Legislative efforts

There are two approaches that have long been taken for what some call “vices” like gambling: prohibition, or regulation.

Flashback: For a long time, North Carolina tried the first approach.

But that has failed, says state Rep. Harry Warren, a Republican from Rowan County who is one of the sponsors of the bill to legalize some video lottery games.

• “Most times when you try to eliminate an activity, a vice activity like this, or what some people would call a sin activity, what you really do is drive it underground,” Warren tells me. “And so, this brings it out in the open and regulates it, brings integrity to the play, and provides the opportunity for people to play in a safe way.”

Details: The bill would allow video gambling machines to be regulated and licensed by the state lottery commission. The odds of winning each game must be posted nearby, and the games can’t allow people to wager more than a certain amount.

• The state would get 40% of the revenue from the games, Warren said, operators would receive 35%, and merchants would keep 25%.

Potential windfall: Warren estimates the legalization of the machines will produce around $992 million in revenue for the state in five years. That’s based on a report a consultant conducted for the state on the gaming machines a few years ago.

• Using the proceeds from video gambling, the state would distribute $2 million per year to each of the state’s five public HBCUs, as well as UNC Pembroke, Warren said.
• The bill also establishes a forgivable loan program for community college students, provides grants to law enforcement agencies to pursue illegal gambling cases and adds funding for more ALE officers.
• Money left over will flow to the state’s general fund.

Yes, but: Elsewhere, those kinds of revenue projections haven’t panned out. A 2019 ProPublica investigation found that in Illinois, which allowed video gambling in the wake of the recession, brought in more than $1 billion less than what lawmakers anticipated, while regulatory costs were higher than expected.

• Warren says he’s pretty confident in the state’s revenue predictions.

The bill still has to be approved by the full state house and senate. But there’s momentum, Warren said, around addressing gambling, particularly as a sports betting bill works its way through the legislature.

The other side: The sheriffs’ association is concerned that the bill doesn’t outlaw the machines currently in existence, Caldwell says. Warren says it doesn’t need to, because they already are banned.

• No matter what, Caldwell says the sheriffs’ association opposes the bill because of the societal and public safety problems video gambling poses.

Community concerns: Back in Charlotte, community advocates are skeptical.

• Hall believes the benefits should be reaped directly by the neighborhoods that are harmed by the arcades.
• “None of that wealth creation is being left in the communities in which it is being taken out of,” he said. “And that comes from the pockets of those who can least afford to do it. That doesn’t seem right to me.”