Kentucky may have found a new way to put more pressure on sweepstakes casino operators: Turn cease-and-desist letters into lawsuits with real consequences.
The state’s recent action against VGW, the company behind Chumba Casino, LuckyLand Slots, Global Poker, LuckyLand Casino, and soon-to-launch United Slots, represents one of the most aggressive enforcement moves against a sweepstakes casino operator to date.
Rather than following the familiar path of issuing a cease-and-desist letter and waiting to see if the operator complies, Kentucky Attorney General Russell Coleman skipped that step entirely and filed a lawsuit last month. He also sued prediction market apps Kalshi and Polymarket, arguing they are offering illegal gambling products under Kentucky law.
The VGW lawsuit — if it actually plays out — may be notable because it could signal a shift in how states approach sweepstakes casino enforcement going forward.
Coleman: VGW offers gambling, ‘regardless of how it’s packaged’
Here’s what was said about the VGW case in the official press release announcing the lawsuit:
VGW and its affiliates operate unlawful sweepstakes casino websites that use two different types of virtual gambling chips. The sweepstakes casino games are designed to look and feel like traditional casino games with slot machines and blackjack games. According to a study cited in the complaint, they also exploit the same psychological triggers related to addiction.
The online casinos offer two types of chips – one for free and one with a cash value. Users pay real money for so-called Sweeps Coins just like gamblers pay for poker chips at a real casino. They are also able to cash out their winnings.
“This company may use new technology and a new scheme to hide, but the reality is the same,” said Attorney General Coleman. “Our Office has a duty to stop illegal gambling in Kentucky regardless of how it’s packaged.”
VGW has long maintained its dual-currency gaming ecosystem — with non-redeemable Gold Coins that players can purchase and redeemable Sweeps Coins that players cannot purchase — is not real-money gambling for an variety of reasons, including that players don’t have to spend any money to receive and play with Sweeps Coins.
Replacing threat of legal action with actual legal action
Over the past couple of years, cease-and-desist letters have become one of the most common tools used by regulators and Attorneys General looking to push sweepstakes casinos out of their states.
But the effectiveness of those letters isn’t ironclad, so to speak.
Yes, some operators leave quickly after receiving one. But others continue operating while weighing their legal options.
And, in some cases, companies have simply ignored them.
Kentucky appears to be taking a different approach.
Instead of warning VGW that legal action could come later, the state moved directly to that legal action. You could argue this lawsuit functions as a cease-and-desist letter with more teeth. The state is no longer asking an operator to voluntarily comply. It’s forcing the issue with litigation. The lawsuit demands VGW leave Kentucky, and it also seeks civil penalties.
A cease-and-desist letter can be trifled with. A lawsuit necessitates a more immediate business decision. Facing a lawsuit like the one in Kentucky, sweeps casinos would have to weigh the costs of defending a legal battle versus simply exiting a market.
How VGW lawsuit differs from PokerStars lawsuit
Some in the industry have compared the VGW lawsuit to Kentucky’s previous legal battle with PokerStars. Kentucky recovered roughly $300 million in that case — making it one of the largest monetary recoveries in the history of gambling lawsuits — but it came after more than a decade of back-and-forth action in the judicial system.
The circumstances surrounding the VGW lawsuit, though, are different.
The PokerStars case involved years of alleged illegal real-money poker activity before the federal crackdown on offshore online poker operators. The damages piled up over time, and the legal battle stretched across multiple appeals before finally reaching its conclusion in 2021.
The VGW case appears far more focused on immediate enforcement.
Kentucky doesn’t need to win a massive judgment for the lawsuit to win here. If VGW decides that continuing operations (Sweeps Coin gameplay, in particular) in the state is not worth the legal uncertainty, the state could achieve its primary objective — VGW leaving.
Using a lawsuit as an enforcement mechanism?
In that sense, the lawsuit itself may be the enforcement mechanism.
That’s what makes this case worth watching beyond Kentucky. If filing a lawsuit is more effective than issuing a cease-and-desist letter, other Attorneys General may consider following suit.
Again, cease-and-desist letters only work when companies decide to listen. A lawsuit filed by a state Attorney General is harder to ignore. Even operators that believe they have strong legal standing still have to deal with legal costs and the uncertainty of a court case.
Of course, every state has different laws, and each operator will evaluate these situations differently. Kentucky’s broader legal action also includes Kalshi and Polymarket, which involve a separate debate over federal authority and prediction markets. Those companies have argued that federal commodities law gives the federal government authority over their event contracts, creating a different legal landscape than the one facing sweepstakes casino operators.
VGW’s case, however, may become an example of whether states are willing to move beyond traditional regulatory warnings and directly into courtroom enforcement. Depending on how it plays out, of course.
