The Golden State is seeking to legally exterminate sweepstakes casinos by presenting new legislation and lawsuits against sweepstakes operators.
Most notable is the state’s legal action against Stake.us – a sweepstakes online betting platform accused of providing real-money gambling under the guise of being free-to-play.
At the same time, California lawmakers are pushing to confirm a new anti-sweepstakes bill, AB 831, into law.
In this state-focused deep dive, we explore what these changes may mean for Californian players.
The state vs Stake.us – operator accused of false advertising
First on the docket is California’s lawsuit against Stake.us.
Specifically, the lawsuit reads: “The people are filing this case to stop the illegal gambling scheme by Stake.us from exploiting Californians, recover all funds lost by them, and impose penalties to prevent future wrongdoings.”
Brought forth by the Los Angeles City attorney, this action argues that Stake.us illegally operates as a real-money betting website while advertising as a free-to-play platform.
Stake.us utilizes a dual-currency system (Gold Coins and Sweepstakes Coins), with free and purchasable tokens available to all players.
- Gold Coins: Purchasable tokens used for entertainment purposes only; these coins cannot be redeemed for cash.
- Sweepstakes Coins/Stake Cash: Not available for direct purchase, but may be exchanged for real cash. Often included in Gold Coins bundles.
California’s argument stems from the fact that although Stake.us is promoted as a free, entertainment-only platform, players may purchase coins, participate in casino games and achieve cash rewards.
Stake.us partners targeted as lawsuit uproots industry
Whilst this is not the first complaint presented within the region, one key element sets this accusation apart: lawmakers are targeting Stake.us’ partners as well as the website itself.
Software developers, like Pragmatic Play and Evolution Gaming, have been noted as “knowingly and intentionally” supporting illegal online gambling by publishing games on Stake.us.
In a stunning move, both studios have now departed the Californian sweepstakes market – with Pragmatic Play citing “regulatory developments and evolving legislation” as driving factors behind the sudden exit.
Those maneuvers follow accusations that Pragmatic Play and similar teams were purported to be “accomplices” in encouraging a “dangerous gambling environment“.
Additionally, streaming platform Kick and identity-verification entity Veriff have each been named as accessories to Stake.us’ alleged crimes.
According to the action, Kick is deemed to have knowingly promoted illegal gambling activity to users. Similar is true for Veriff – a company that allowed Stake.us to verify the identity of its player base.
These entities are not simply considered negligent business partners, but willing participants in a controversial industry.
Lawsuit plots to personally punish Stake.us owners
Stake.us company heads, Ed Craven and Bijan Tehrani, are at the center of California’s crosshairs as the state schemes to “pierce the corporate veil” by punishing platform owners who are guilty of profiting from illegal business practices.
The pair are blamed for being “knowingly and personally” responsible for the group’s supposed misdemeanours.
Should the courts agree with California’s complaint, both individuals may be liable for any verifiable damages incurred by the state and its citizens.
However, California’s ability to hold Stake.us affiliates and their respective overseers guilty for organisational transgressions could be impeded by the subjective nature of the law under which this facet of the case seeks to benefit from.
Lawyers acting on behalf of California must prove that “the corporate form is being used by the individuals to escape personal liability, sanction a fraud, or promote injustice“.
In simple terms, courts must accept that Craven and Tehrani used Stake.us to deliberately gain fraudulent profit.
How this case impacts Stake.us players…
At such an early stage, much remains unknown.
Yet, one tangible possibility in the immediate future is that Stake.us may be barred from operating or promoting its services in California until a verdict is achieved. This interim measure would have major ramifications for players – as such a stipulation would limit all site functionality.
That means no access to games and promotions previously available on the social casino.
In the event that Stake.us is precluded from serving Californian registrants, this case may set the precedent for future anti-sweepstakes actions.
It is worth weighing the seriousness of such a preemptive measure. For one, some operators could depart certain regions before similar suits enter their constituency. Others may use this guilty-until-proven-innocent mandate as a weapon with which to do battle in the courtroom.
Players represent significant non-beneficiaries in this ordeal – with the potential to lose online casino content and gain little to nothing in the event of a successful anti-sweepstakes lawsuit.
California’s ploy to end all sweepstakes – not just Stake.us
Although the LA City attorney’s office has filed an injunction against Stake.us, the state’s negative sentiment toward sweepstakes platforms is not solely limited to the Craven-Tehrani-owned organization.
This is proven by Assembly Bill 831, a bill that plans to ban all sweepstakes casinos from the state. The motion was most recently amended on September 3 to include specific, inarguable anti-sweepstakes language.
Of particular relevance is a new section, titled 337o, which, if passed, would bar all sweepstakes operators from setting up shop in California.
The passage reads: “It is unlawful for any person or entity to operate, conduct, or offer an online sweepstakes game in this state.”
Section 17539.1 was also edited, and now directly outlines sweepstakes platforms with a “dual-currency system” as illegal.
Will California’s AB 831 pass?
All California bills are subject to three Senate readings before being voted on and signed into law. This proposal has endured a tumultuous period since its inception – with its current design virtually unrecognizable compared to its original format.
The aforementioned changes took place after the second reading of AB 831, and a vote was due to take place during the subsequent Senate evaluation.
However, these changes mean that AB 831 will head back to second reading – leaving room for additional augmentation in the interval between reading and voting.
Time is of the essence, though, and lawmakers must vote on the bill before the end of this legislative session, which ends on September 12.
So, while Stake.us is heralded by some as an unfaithful and willing bad actor, AB 831 demonstrates that California’s powers hold deep resentment for the holistic sweepstakes scene.
