The establishment, called the Internet Sweepstakes Café, and others like it have been popping up all over the country according to authorities. This is the first one in the Philadelphia region.
Lawmakers say businesses like it are skirting gaming laws, while operators say they are doing nothing wrong.
Philadelphia police officers say they spent a month and a half in an undercover investigation into the Internet Sweepstakes Café at 24th Street and Oregon Avenue.
"The customers came in, they had United States currency, they paid to get credits on a computer and then gambling was taking place," according to Lt. Ray Evers of the Philadelphia Police. "If they won, they actually received cash that day."
Published reports say there are more than a dozen "sweepstakes cafes" in Pennsylvania; Florida may have more than 1,000. Customers buy time at a computer and then must sign a waiver that reads they are not gambling.
The players receive a pin number which enters them into a sweepstakes. They either win on the spot or then lose and leave.
Lawmakers say they are trying to close loopholes while police close down the locations.
This is uncharted territory for police in Philadelphia.
"Now you have the internet type of operation that is current. That's something new that we see in the city and therefore we're in new waters, charting a new avenue of vice enforcement," according to Lt. Charles Green of the Philadelphia Police Department.
The lawyer for one of the owners of the Sweepstakes Internet Café in South Philadelphia maintained to reporters that his client is doing nothing wrong.
"From what I understand there's absolutely nothing illegal going on inside the premises," said attorney Raymond Driscoll. " People are astounded at what's going on, that they've come here and confiscated some items, obviously. I don't know what they are. Just waiting to get more information."
This is an ongoing investigation by Philadelphia police. There were no arrests today. But police said arrests are coming, and soon.