The sweepstakes industry continues to face legal pressure across the US. Two new lawsuits were filed in Alabama and California, alleging sweepstakes casinos are nothing more than illegal gambling.
In Alabama, a class action lawsuit was filed against Stake.us, led by Laura Hall and her child, who is a minor, after Hall lost wages playing online games on the site. While in California, VGW is being sued for offering illegal online casinos. That lawsuit was filed by Aubrey Carillo and also names Ryan Seacrest as a guilty party alongside VGW.
Both cases were filed by the same law firm and are using the same arguments to justify their validity.
Different States, Similar Anti-Sweepstakes Arguments
In both Hall and Carillo's cases, the suit argues that Stake.us and VGW are operating illegal online casinos and should be closed, as well as pay damages to the plaintiffs. The lawsuits are arguing that they have legal precedent based on rulings that made internet cafes illegal a decade ago.
Back in the early 2010s, the US saw a rash of pop-up internet cafes, where patrons could buy internet time or other goods that would give them free tokens to play slot machines. By offering a dual-currency system, cafes believed they had removed the element of consideration that is necessary for the definition of a sweepstakes game.
Sadly, for them, courts in Alabama and California ruled that they were providing illegal gambling and banned them. These new lawsuits targeting sweepstakes casinos argue that these laws apply to them.
“In short, Defendant is copying the internet cafe playbook, but instead of selling Internet time, long-distance phone minutes, or small groceries coupled with supposedly “free” sweepstakes tokens, Defendant sells Gold Coins, which are then ignored so that players can use the Stake Cash for cryptocurrency gambling.”
Related News
How Will The Courts Rule?
How the courts rule in each case is uncertain. The ideal outcome for either side is that both courts rule in the same way.
Should both courts rule that sweeps are not gaming, the industry would receive a massive lifeline that could be quickly felt across the US, and likely quell the flurry of recent legal challenges. The inverse, ruling that sweeps are gaming, would create a firestorm of litigation in the US and likely put the industry in an existential crisis.
A split decision would throw even more chaos into the mix, giving both sides legal precedent to their position.
Why Are Anti-Sweeps Lawsuits Targeting Third Parties?
Both suits in question have some rather confusing third parties either added to the suit or named as co-plaintiffs. Why?
In Alabama, Laura Hall named her child, again, a minor, as having suffered an "injury" due to Hall's lost wages. Naming Hall's child likely serves as a way to prove that gambling has impacts beyond players.
In California, Ryan Seacrest was named in the suit, stating: “Someone this blessed in life does not need to hurt people for more money, but Defendant Seacrest does that by serving as the official celebrity endorser for ChumbaCasino.com. Defendant Seacrest promotes illegal gambling and in so doing, contributes to the rise of online gambling addiction among adults and adolescents.”
While the plaintiffs and their legal team feel his inclusion is merit-based, it also serves as a disincentive that could be felt industry-wide. Celebrities will be less ready to lend their name to a company like Stake.us if they feel it will in any way land them in legal trouble. Whether this lawsuit can lay blame at Seacrest's feet or not, the damage has been done.
What is "Prize, Chance, Consideration"?
I mentioned earlier in this piece that sweepstakes casinos argue they qualify as a true sweepstakes due to their dual-currency system, which removes the element of "consideration" from their product.
A sweepstakes game must have only two of the three elements below to qualify; having all three turns it into a lottery, making it illegal:
- Prize: Anything of value given to the winner.
- Chance: A winner is selected by chance.
- Consideration: A purchase is required to participate
By giving players a free way to play with their dual-currency system, where tokens can be acquired for free, sweepstakes games remove 'consideration' from their games. Or that's at least their legal argument.
