The Florida Case That Could Send Shockwaves Through The Sweeps Industry

Written By:   Author Thumbnail Valerie Cross
Author Thumbnail Valerie Cross
Valerie Cross, Ph.D., is a skilled editor, writer, and content strategist with over seven years in the iGaming, poker, and sports betting industry. She has led content teams, managed regional gambling sites, and covered ...
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Take a look inside the Florida lawsuit that could alter the future of sweepstakes gaming — mainly because it ropes in a payment processor as a defendant, too.

In the litany of court cases involving sweepstakes casinos over the last six months, some stand out as particularly defining for the industry’s future. It doesn’t come as a surprise that one such critical case comes from Florida, where anti-sweepstakes laws, albeit of the land-based variety, are well-established.

Two gaming attorneys point to Knapp v. VGW Holdings Ltd. as a potentially pivotal court case in part because it names payment processor WorldPay as a defendant. The case was filed Feb. 28, 2024, and is scheduled to be heard later this year in the U.S. District Court for the Middle District of Florida.

Two Holland & Knight LLP attorneys, Native American law attorney James Meggesto and law associate Samir Patel, penned an analysis in which they lay out why the case could prove pivotal in the ongoing legal battles around the sweepstakes gaming model. 

In that analysis, Meggesto and Patel also point out the potential significance of WorldPay being denied a motion to dismiss back on Nov. 25, 2024, noting that WorldPay’s “failure to withdraw from the case may serve as a warning to other payment processors working with sweepstakes casinos.” 

Souring sweepstakes operators in the eyes of payment processors would clearly have a devastating impact on the industry.

Why Florida?

Florida could be a strong candidate for setting a legal precedent on the sweeps front because it’s one of few states that explicitly outlaws retail sweepstakes models previously employed through internet cafes, and also games of chance where money is bet.

“Section 849.08 of the Florida Statutes prohibits unlicensed lotteries, while Section 849.14 makes it illegal to engage in any game of chance in which money or something of value is wagered,” the lawyers wrote.

In the case in question, plaintiff Eric A. Knapp alleges that LuckyLand Slots and Chumba Casino owner VGW Holdings violates Florida gambling law by allowing customers to purchase virtual currency to play games where you have a chance to win real money prizes. In Knapp’s view, and in the view of other plaintiffs in similar cases to date, VGW (and/or other sweeps casinos) are conducting illegal gambling activities disguised as sweepstakes

Dual currency system includes freemium model

Central to the sweeps casino model is the dual-currency system. One such virtual currency (often called “Gold Coins”) carries no monetary value and fits the traditional “freemium” or social casino model where the coins can be purchased (or received for free) but they can never be redeemed for real money or prizes of value.

The other currency (often called “Sweeps Coins”), regardless of whether it is obtained for free or as a “bonus” in purchased Gold Coins packages, can eventually be “redeemed” (essentially, cashed out) for real money at a ratio of $1 per 1 SC.   

The fact that these sites do offer a freemium gaming model within, and customers don’t buy the Sweeps Coins directly (and don’t gamble with real money, per se), are arguments VGW and others use to defend the model’s legality within sweepstakes exemptions.

As the analysis points out, VGW argues that “(customers) are purchasing entertainment, the gold coins, and receiving an entry into a sweepstakes — via sweep coins.”

In Florida law and according to the Florida Supreme Court, an illegal lottery must include all three of the following elements: (1) consideration, (2) random selection by chance, and (3) a prize. VGW has successfully argued elsewhere that their games don’t require consideration, as customers are technically able to play their games without ever making a purchase. 

But the question here is will that argument hold up in the Florida court of law. And what if it doesn’t?

A matter of precedent?

Meggesto and Patel also mention a 1998 internet sweepstakes cafe case, AGO 98-07, which Florida gambling attorney Daniel Wallach has likened to the present case. Those cafes had machines that dispensed telephone cards that came with sweepstakes tickets to enter cash prize raffles, which the attorney general at the time determined constituted illegal gambling under Florida law. 

“The opinion found that even if a consumer product, such as a phone card, is attached to the transaction, the inclusion of a sweepstakes based on chance makes the operation illegal under Florida law,” Meggesto and Patel wrote.

“Both the attorney general’s opinion and the plaintiff’s claims in Knapp emphasize the core legal principles that if a game involves an element of chance and monetary consideration, it likely falls under Florida’s prohibition of unlicensed gambling operations.”

These two lawyers believe that the model for online sweeps casinos employs both of those things. 

Potential impact on sweeps sites in Florida and beyond

They also think that if the court rules in that direction, it could have a sweeping negative impact on the sweepstakes gaming industry.

“A ruling against VGW in this case could set a powerful precedent in Florida, affirming the state’s commitment to protect regulated industries and uphold the integrity of its gaming laws,” the lawyers wrote. “Nationally, it could spur Congress to enact legislation clarifying the line between traditional sweepstakes contests and sweepstakes-based casino gaming.”

As of now, clarification of online sweepstakes law falls to individual states. But most states do not have the level of legal precedent or clarity on the sweepstakes model as Florida has. 

Whether a ruling in this case would actually escalate the question to the federal level seems unlikely in the short-term …

But not out of the question.

Proposed NJ Bill Would Regulate, Tax, Help Legitimize Sweepstakes Casinos

Written By:   Author Thumbnail Valerie Cross
Author Thumbnail Valerie Cross
Valerie Cross, Ph.D., is a skilled editor, writer, and content strategist with over seven years in the iGaming, poker, and sports betting industry. She has led content teams, managed regional gambling sites, and covered ...
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The bill would treat sweepstakes casinos with the same legitimacy and oversight as New Jersey's current iGaming sites.

A bill filed in the New Jersey legislature on Jan. 16 seeks to regulate and include sweepstakes casino sites within New Jersey’s existing internet gaming framework. 

Assembly Bill 5196 proposes details for licensing, oversight, and taxation for sweeps gaming sites that currently operate outside of the state’s extensive regulated iGaming market. If passed, the NJ bill would be the first to integrate sweepstakes casinos alongside regulated internet casinos under a state’s regulated gaming enforcement. 

The bill’s sponsor is Assemblyman Clinton Calabrese, Vice Chair of the NJ Assembly Tourism, Gaming and the Arts Committee.  

Key details of proposed sweeps gaming regulation in NJ

Major critiques launched against social and sweeps casinos of late have centered on lack of regulatory oversight, including taxation and player protections. The proposed NJ amendment addresses both by requiring sweepstakes sites to follow the same processes and requirements as regulated gaming sites in NJ. 

Like their currently regulated iGaming counterparts, the sweeps casinos would have to: 

  • Partner with an Atlantic City casino
  • Apply for and obtain an internet gaming permit and pay license and permit fees
  • Pay the same internet casino taxes on gross gaming revenue. 
  • Follow requirements to ensure 21-plus age verification of customers 
  • Submit to employee background checks

The bill also requires approved sites to pass independent third-party audits of their operations and financial standing every six months.

Definition and enforcement of sweepstakes casinos 

The legislation refers to sweepstakes casinos as “casino service industry enterprises” and defines them as a site which:

  • “Provides participants with an opportunity to play authorized gambling games … ” but “does not require any initial monetary investment on behalf of the participants to play and instead is played primarily with free currency”; and
  • “Awards to participants at random, as a bundle with the purchase of free currency, or upon the completion of certain specified tasks, currency or promotional gaming credits which can be wagered on games and are redeemable for cash, prizes, or other things of value.” 

Along with regulating any sweepstakes casinos that are approved to operate within New Jersey, the proposed bill grants authority to the NJ Division of Gaming Enforcement to work with law enforcement and telecommunications providers to investigate and limit unauthorized operators. 

As per current law, unregulated sweeps operators would be subject to fines of $1,000 per player per day for offering internet casino gaming and $10,000 per violation for advertising its platform in NJ.

Support for sweeps casino regulation 

During December’s National Council of Legislators from Gaming States (NCLGS) conference, Bill Gantz (Trials, Gaming, and Intellectual Property Partner at Duane Morris), advised during a sweepstakes gaming panel

“If you want to regulate or prohibit (sweepstakes casinos), then you should change the law and change the regulations.”

The proposed NJ bill seeks to do just that.

The Social & Promotional Games Association (SPGA), a recently organized sweepstakes gaming trade organization, has also spoken in favor of regulatory frameworks for social and sweeps gaming sites. They put out a statement on LinkedIn supporting the proposed NJ bill:

“The SPGA welcomes Assemblyman Calabrese’s New Jersey bill. The SPGA and its members are advocates for clear regulations that enable transparent, innovative, and responsible social and promotional gaming experiences.

The bill aligns with our core objective of reinforcing the well-established legality and legitimacy of social sweepstakes games, which millions of American adults enjoy.”

The NJ bill passing could work to lend more legitimacy to the sweepstakes gaming industry, which has been the target of regulated gaming trade organizations’ critiques and an increasing number of lawsuits in recent months. 

On the flipside, it’s likely that the well-established regulated casino industry and gambling operators in NJ will use their lobbying power to at least try to prevent this bill from passing.

Inside The ‘Ironclad Arbitration Agreements’ Sweeps Operators Use To Squash Lawsuits

Notice most of the lawsuits against sweepstakes operators go nowhere? There's a reason for that. And it boils down to a specific aspect of their terms and conditions.

It may feel like we’re reading tons of headlines about lawsuits against sweepstakes operators and their dual-currency gaming model.

But have you noticed that … nothing is really happening as a result of those lawsuits?

That’s largely due to very intentional series of clauses in the terms and conditions that (most) players absently sign off on during registration.

It all comes down to arbitration.

Arbitration is a legal process in which an independent third party listens to both sides of a case and then decides what should happen. It happens in private — not in a court — and it’s often less expensive than a lawsuit that’s tried in court. Sometimes it’s even required to be kept confidential.

Sweepstakes operators include in their terms and conditions language that requires legal disputes from players to be resolved by arbitration.

As a result, many lawsuits get bogged down in debates over whether the case should be tried via arbitration … instead of actually debating the legality of the dual-currency model. A recent sweepstakes lawsuit in Georgia bounced back and forth over the issue of whether the player suing VGW Holdings had opted out of arbitration, for instance.

Examples of arbitration clauses

This clause is right at the top of Chumba Casino’s terms and conditions:

“Please note that these terms and conditions include a provision waiving the right to pursue any class, group, or representative claim and requiring you to pursue past, pending, and future disputes between you and us through individual arbitration unless you opt out within the specified time frame.”

Later, in more detail, the terms and conditions state:

“By agreeing to these Terms and Conditions, and to the extent permitted by applicable law, you and VGW Group each and both agree to resolve any Disputes – including any Dispute concerning the enforceability, validity, scope or severability of this agreement to arbitrate – through final and binding arbitration as discussed herein.”

High 5 Casino’s terms and conditions highlight that any arbitration proceedings must be kept private:

“You and H5C shall maintain the confidential nature of the arbitration proceedings and the arbitration award, including the arbitration hearing, except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as may be necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision.”

High 5 even specifically mentions a class action lawsuit it currently faces in Washington and that “if you accept the terms of use and do not opt out of the dispute resolution by binding arbitration provision, you cannot participate in this lawsuit.”

Look up any sweepstakes site’s terms and conditions, and then search for the word “arbitration” — you’ll find it early and often. And, again, these are the same terms and conditions most players don’t spend a millisecond reading as they check all the boxes during the sign-up process.

This gives sweepstakes operators a leg up in any legal proceeding. They’re “ironclad arbitration agreements,” New Jersey resident Julian Bargo wrote in his RICO lawsuit against sweepstakes operators and Apple and Google in late 2024.

Or, as US legal gaming attorney Daniel Wallach noted on LinkedIn

“From arbitration clauses to jurisdictional defenses, there are procedural challenges every step of the way (in sweepstakes lawsuits),” Wallach wrote after a Georgia court dismissed a class action lawsuit against VGW.

The US Supreme Court weighs in …

These arbitration agreements are certainly ironclad. But they aren’t invincible.

Players may not be subject to an arbitration agreement — even if they signed the terms and conditions — if any subsequent agreement they sign stipulates legal conflicts will be resolved in the courts.

The US Supreme Court heard arguments on this topic last May in Coinbase, Inc. v. Suski

Coinbase, a digital currency exchange platform, ran a sweepstakes promotion where users entered for a chance to win Dogecoin. The initial user agreement Coinbase users sign includes an arbitration clause.

However, the official rules for the Dogecoin sweepstakes stated that California courts “shall have sole jurisdiction of any controversies regarding (the sweepstakes).”

After the sweepstakes, users filed a class action lawsuit that the sweepstakes violated California’s unfair competition laws. Coinbase argued any legal dispute should be resolved in arbitration due to the clause in the user agreement.

The Supreme Court deemed the official rules for the sweepstakes took precedent over the user agreement and that the California courts had jurisdiction to decide if the case should go to arbitration or not.

In other words: Any agreement a player signs after they’ve signed the terms and conditions will have the legal high ground. So, if a sweepstakes operator includes an arbitration agreement in its terms and conditions but later says legal disputes will be resolved in Florida courts in the official rules for a promotion, that Florida courts stipulation will take precedence — at least for that promotion.

“Therefore, check your User Agreement when drafting Official Rules,” Robert Laplaca, a partner at Verrill, wrote in a May 2024 blog advising sweepstakes operators following the Supreme Court decision. “And either be consistent or understand that you may be changing the terms of the User Agreement by having inconsistent provisions in your Official Rules.”

The opt-out option

Also: Players do have the option to opt out of the arbitration clauses.

From Chumba Casino’s terms and conditions:

“You may decline this agreement to arbitrate by contacting [email protected] within 30 days of first accepting these Terms and Conditions and stating that you (include your first and last name, email address and postal address) decline this arbitration agreement.”

Chumba’s terms go on to say that opting out won’t prevent you from playing any games. You’ll still get the exact same platform access as any other player.

However, if an operator updates its terms and conditions at any time, a player would need to re-opt out of the arbitration clause in those new terms and conditions. That’s an important distinction to note.

Greene County Sheriff Sues Alabama Attorney General Over ‘Electronic Bingo’ Regulation

Written By:   Author Thumbnail Valerie Cross
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Valerie Cross, Ph.D., is a skilled editor, writer, and content strategist with over seven years in the iGaming, poker, and sports betting industry. She has led content teams, managed regional gambling sites, and covered ...
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Greene County Sheriff Jonathan Benison has filed a lawsuit against Alabama Attorney General Steven T. Marshall, alleging discriminatory enforcement of the state's anti-gambling laws.

The Greene County Sheriff has sued the Alabama Attorney General in US District Court, alleging discriminatory enforcement of state’s anti-gambling laws, Daniel Wallach first reported via LinkedIn.   

The complaint, filed on Jan. 3, claims that Alabama Attorney General Steven T. Marshall exercises discriminatory practice in regulating electronic bingo, targeting predominantly black counties while demonstrating leniency toward predominantly white counties. 

Greene County Sheriff Jonathan Benison also filed a motion requesting the court to prohibit Marshall from interfering with the Sheriff’s lawful regulation of electronic bingo in his county. 

Alabama gambling law allows for local amendments

Alabama is among the country’s most restrictive states when it comes to regulated gambling. It’s also one of just a handful of US states without a state lottery. Apart from a few Native American-operated casinos, legal and regulated gambling options are largely absent. 

The Alabama Constitution (Section 65) explicitly bans lotteries and games of chance, but allows for local amendments to authorize some forms of gambling. In 2003, voters approved one such amendment to allow nonprofit bingo operations in Greene County

That same amendment also authorized the County Sheriff to regulate licenses, permits and operations of bingo establishments. As part of his authority, Sheriff Benison mandates monthly assessment fees that nonprofit bingo halls must pay directly to the Sheriff’s Department. 

Greene County ‘electronic bingo’ in the courts

This isn’t the first time electronic bingo has been at the center of lawsuits in the state of Alabama, and particularly in Greene County. 

On Oct. 4, 2017, the state of Alabama (led by Attorney General Steve Marshall) filed a complaint against several business entities and Jonathan Benison, seeking injunctive relief “to abate a public nuisance of unlawful gambling” in the form of electronic bingo machines. 

In the complaint, the State alleged that the defendants “provide hundreds of slot machines and gambling devices in open, continuous, and notorious use” across five casinos in Greene County. The complaint also alleged that bingo cannot be played on the machines in question, which constitute gambling devices that are illegal in the state of Alabama.  

During the same period, the State initiated the same legal actions against similar alleged illegal gambling activities deemed as “public nuisances” in Macon County and Lowndes County. In each of those, the circuit courts dismissed the case on the grounds the court lacked subject-matter jurisdiction to rule on the claims for injunctive and declaratory relief the State sought. 

According to an Oct. 7, 2020 circuit court order dismissing the State’s complaint in Greene County:

“The adjudication of the State’s Complaint for injunctive and declaratory relief would require this Court to make a determination as to whether the Defendants’ actions in Greene County are criminal. Alabama law is clear that a civil court does not have subject matter jurisdiction to adjudicate a legal issue that would be the basis of a criminal action.”

It went on to say: “…The state statute which declared gaming as a common nuisance, Ala. Code 13-7-90 was repealed in 1977 and has not been replaced by the Legislature.”

An appeal to the Supreme Court of Alabama was also dismissed in May 2021.

A state gaming enforcement agency could help

On a national scale, the latest Greene County electronic bingo case is unique with a Sheriff suing an Attorney General over regulation and enforcement of local gambling amendments. The lack of a state-wide gambling enforcement body in Alabama doesn’t help with clarity on the matter. 

This could change, though it might take a while. The Alabama House showed appetite for passing expanded gambling legislation during its 2024 session, including casino gambling, sports betting, and a state lottery. It also called for the state’s first gambling commission and stricter penalties for illegal gambling operations in the state.

A stripped-down version of the bill didn’t make it to the November ballot for a number of reasons, including an obscure procedural voting rule and debate over where regulated gambling taxes should go. 

That bill included a state lottery, up to seven casinos with slots, and a compact between the state governor and the Poarch Band of Creek Indians, the federally recognized tribe operating casinos in three Alabama towns. Until the Alabama legislature passes updated gambling legislation and establishes a state-wide gaming board, it will have to rely on the courts to sort out local enforcement disputes.

High 5 Casino Faces Lawsuit in San Francisco Superior Court

Written By:   Author Thumbnail Geoff Fisk
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Geoff Fisk is a writer, analyst, and SEO specialist working in the U.S. iGaming industry. Geoff began his career as a sports journalist in Southern California, covering high school and college sports, as well as minor le...
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A lawsuit filed in the San Francisco Superior Court named High 5 Entertainment (parent company of High 5 Casino) as the defendant.

One of the more prominent brands in the sweepstakes casino space is now facing a lawsuit in California.

A lawsuit filed in the San Francisco Superior Court named High 5 Entertainment (parent company of High 5 Casino) as the defendant. The suit alleges that High 5 Entertainment “has scaled up, on a massive scale, an illegal tactic that criminals once attempted to use to evade state gambling laws.”

The lawsuit goes on to expand on the “illegal tactic” it refers to by comparing it to tactics used by internet cafes in California in the early 2000s. 

Calling it the “Internet Cafe Gambling Scam,” the suit brings up internet cafes that would offer sweepstakes entries to customers who purchased internet time or other services. Those sweepstakes entries would come in the form of “sweepstakes points,” which customers could use to play casino-style slot games and potentially win cash prizes at computer terminals located within the internet cafe.

Gambling industry analyst Daniel Wallach first reported the lawsuit against High 5 Entertainment, which names Thomas Portugal as the plaintiff and Smith Krivoshey, PC as the plaintiff’s legal representation.

Comparing Sweepstakes Casinos to Internet Cafes

Sweepstakes casinos are legal in California under the larger umbrella of sweepstakes gaming. The sweeps casino industry is booming across the U.S., with more than 45 states allowing access to platforms like High 5 Casino and its competitors.

Sweeps casino sites like High 5 Casino offer games that award “Sweeps Coins,” which are sweepstakes credits that can be redeemed for cash prizes. While only a few U.S. states offer access to real-money online casinos, sweepstakes casinos offer access to “casino-style games” in nearly every state.

These online sweeps casino platforms adhere to sweepstakes gaming laws by offering various ways to obtain Sweeps Coins for free, with no purchase necessary. 

Players can also get Sweeps Coins as a “free gift” or “purchase bonus” when they buy “Gold Coins” play money credits. Players can’t directly purchase Sweeps Coins at a sweepstakes casino.

The lawsuit against High 5 Entertainment compares the Sweeps Coins gaming model to the model used by the internet cafes of yesteryear. 

“Many states’ gambling and/or sweepstakes laws require three elements: prize, chance, and consideration (i.e., payment),” the lawsuit states. “By artificially separating the consideration from the chance to win real money, operators of internet cafes believed they could evade state gambling laws, while claiming that the activities were no different from the kinds of sweepstakes promotions occasionally offered by Publisher’s Clearing House and McDonald’s.”

The suit goes on to cite California Business and Professions Code 17539.1(a)(12), which outlaws sweepstakes that “simulate gambling” or involve “gambling-themed games.”

According to Wallach, the lawsuit is the first to compare the sweeps casinos business model to the internet cafe model.

High 5 Entertainment was named as a defendant in a different suit filed in New Jersey in early December. Plaintiff Julian Bargo is a New Jersey resident who alleges that High 5 Casino, McLuck, Wow Vegas, and CrownCoins are illegal gambling operations.

That suit also names Apple, Apple Pay, Google, and Google Pay as supporting illegal gambling operations under the Racketeer Influenced and Corrupt Organizations Act (aka RICO Act).

Florida Attorney General Files Civil RICO Case Against Jacksonville Illegal Gambling Ring

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Valerie Cross, Ph.D., is a skilled editor, writer, and content strategist with over seven years in the iGaming, poker, and sports betting industry. She has led content teams, managed regional gambling sites, and covered ...
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Florida Attorney General files RICO case against 17 entities for illegal gambling operation involving 10 Jacksonville internet cafes.

An illegal Florida gambling operation involving 10 internet sweepstakes gambling cafes in Jacksonville is the target of a recent racketeering-related (RICO) civil case filed by the Florida Attorney General’s office. RICO refers to the Racketeer Influenced and Corrupt Organizations Act, originally put in place in 1970 to combat organized crime. 

The civil RICO case filed in Duval County Circuit Court on Dec. 11 alleges that 17 individuals and entities were part of an illegal gambling operation that offered casino-style slots, arcade-style “fish games,” and also internet gambling games. 

The case is a change of pace from most recent sweepstakes-related lawsuits, which have mostly involved civil suits against online sweeps gaming operators, filed by individual customers rather than Attorney Generals.

Details of the complaint and racketeering raids

The complaint alleges money laundering involving millions of dollars across 10 gaming facilities operating at different times since Sept. 2021. The AG’s office seeks injunctive relief, dissolution of implicated businesses, forfeiture of assets, and treble damages. 

According to the Jacksonville Florida Times-Union, the Jacksonville Sheriff’s Office (JSO) seized $2.5 million in ‘illegally-sourced’ cash and arrested 12 people during the racketeering raids. Also seized were 263 illegal gambling devices and 52 guns. Police say they’ve been investigating the illegal gambling ring since March 2023.

Sheriff T.K. Waters warned during a news conference that illegal gambling establishments attract violent crime. He noted that the gaming centers in question were the sites of two reported murders, eight robberies and 26 aggravated assaults since police investigations of the establishments began.  

“Where there’s illegal money, other crime exists,” said Waters.

Among the “high-level members” named in the case were: Jerry Bass, 74; George Azzam, 72; Robin Rukab Azzam, 65; Ryan Strickland, 41; and Majd Dabbas, 34.

Unregulated gambling operations are nothing new to Jacksonville, but it is a jurisdiction where the internet gambling cafe model is explicitly outlawed. The Jacksonville City Council voted in Oct. 2019 to enforce a previously established ban on “simulated gambling devices” operating at an estimated 140-160 internet gambling cafes at the time. 

Significance for Sweeps Casino Industry  

Daniel Wallach, a Florida-based U.S. gaming law and sports betting attorney, pointed out on LinkedIn that sweepstakes-related cases in Florida are usually dealt with by local law enforcement in conjunction with the Florida Gaming Control Commission, making this complaint unique.

“Maybe the multiple asset transfers and money laundering component are the impetus behind the filing of the lawsuit,” Wallach stated.  

Wallach also pointed out that along with Florida Attorney General Ashley Moody, AGs in California and New York “are vested with among the most powerful civil enforcement remedies in the country,” putting them in unique positions that could make these states “hotspots on the sweepstakes issue.” 

As we head into 2025, we could see the internet cafe sweepstakes model enter into more discussions related to the legal footing of online sweeps gaming sites. A complaint just filed in the San Francisco Superior Court (Thomas Portugal v. High 5 Entertainment) makes explicit connections between online social gaming sites and internet sweepstakes cafes of the early 2000s that were considered by some California courts of law to be fronts for illegal gambling operations.

What VGW’s Legal Win In Georgia Means For Sweepstakes Lawsuits Moving Forward

A federal judge in Georgia dismissed a class action lawsuit against VGW Holdings, a prominent sweepstakes casino operator, due to lack of jurisdiction.

A federal judge in Georgia issued a ruling this week that could have lasting ramifications in the quickly growing — and debate-stirring — US sweepstakes casino industry.

That judge sided with VGW Holdings, the world’s most prominent sweepstakes operator that owns sites like Chumba Casino and LuckyLand Slots, in a Georgia class action lawsuit where the plaintiffs wanted to recover gambling losses from VGW sites over the past four years.

The verdict? The US District Court for the Northern District of Georgia dismissed the lawsuit due to a lack of jurisdiction. In other words: There isn’t enough about VGW that concretely and directly ties it to Georgia (other than two remote employees living there) for VGW to be reasonably seen as “transacting business” in Georgia. Thus, a Georgia court does not have the proper jurisdiction to decide whether VGW sites’ sweepstakes models of gaming duped Georgia residents into gambling away their earnings.

“While the Defendants casino gaming websites were certainly accessible by Georgia users and the Defendants accepted payments from Georgia users in order to play the games,” the ruling read, “the Court finds this limited interaction, without more, insufficient to satisfy the transacting business prong in O.C.G.A § 9-10-91(1).

So, what does this win for VGW mean for sweepstakes operators moving forward?

‘Procedural challenges every step of the way’

First of all, we all know how much US courts love their precedents. Heck, this country’s whole judicial system is built with a backbone of following precedents. Did this court from back in the day hear a similar case?? OK what the heck did they do?

And this VGW victory sets a major precedent for the many lawsuits facing sweepstakes operators right now.

That precedent: If the operator is not physically based in a state, or you can’t make a reasonable argument it has a legitimate retail presence in that state, it’s going to be hard for residents of that state to sue for a gaming structure that they believe cheated them of their money — especially if the plaintiffs can’t prove the sweepstakes site performed any targeted advertising in their state, which the Georgia court ruled VGW did not do in Georgia

In a LinkedIn post discussing this verdict, Daniel Wallach, a US gaming law and sports betting attorney, said VGW’s win in Georgia is indicative of the long road any of these sweepstakes lawsuits have toward reaching any meaningful or needle-moving resolution.

“From arbitration clauses to jurisdictional defenses, there are procedural challenges every step of the way,” Wallach wrote. “And those cases that do survive the gauntlet will either take years to litigate or inevitably get settled (see Kentucky). VGW will not want to risk going to trial, where the possibility of an adverse judgment could have national impacts.”

Wallach wrote that he believes the only sweepstakes lawsuits that will actually lead to decisions regarding the legality of these sites’ Sweeps Coins/Gold Coins two-currency gaming structure — in which Sweeps Coins can be redeemed for real money — will have to stem from lawmaking bodies and organizations, not from private citizens banding together for a class action bid.

“The cases that will ultimately decide the legality of the ‘dual-currency’ sweepstakes model — if it ever gets decided — will be those instituted by governmental bodies, such as State AGs and gaming regulatory agencies,” Wallach wrote, “and likely only after a cease-and-desist order that goes unheeded. Coming in 2025.”

Could VGW win in Georgia have immediate impact in other states?

VGW is currently facing lawsuits in Tennessee, New York, California, Mississippi, and Connecticut.

All the cases are quite similar — in almost every way — to the Georgia case.

And as Wallach alluded to, VGW recently settled a class action lawsuit in Kentucky for around $11 million at the end of 2022.

These types of lawsuits center around the legality of the sweepstakes gaming model. Sweepstakes sites let players play with two forms of digital currency. One kind, often called Gold Coins, has no real-world value. The other kind, often called Sweeps Coins, can be redeemed for real money. Players can purchase Gold Coin packages that come with Sweeps Coins, but the sites try to clearly communicate the actual purchase is only for the in-game-currency Gold Coins.

There are all types of sweepstakes sites, from online casinos to online poker to even online sports betting, where Fliff leads the market.

VGW’s victory in Georgia now sets a precedent that will make lawsuits against these sweeps operators even more unlikely to reach any meaningful resolution other than a settlement or a dismissal. In other words: Don’t expect these class action lawsuits to actually change the laws of the sweepstakes gaming industry.

Or, as Wallach wrote:

“This case exemplifies how difficult it is for private civil litigation to serve as the vehicle for testing the legality of the sweepstakes casino business model.”