Stake.us dodged a California lawsuit this week and will continue to operate in the state for now.
A federal judge declined to rule on a lawsuit against the company by California resident Dennis Boyle, who alleged that the sweeps casino operates in California illegally. Boyle, reportedly a self-described problem gambler, has filed lawsuits against other sweeps casinos as well.
Stake.us argued that its terms of service required the issue to go to arbitration, noting that Boyle agreed to the T&C and had not opted out of arbitration. The court agreed, offering a small win for sweeps operators in the state and beyond.
Stake.us T&C to Be Followed
Boyle’s lawsuit is being watched by the sweepstakes industry in the U.S. Sweeps casinos are not regulated by state law, but they are not formally banned in the vast majority of U.S. states. The industry has boomed in recent years because states have been slow to legalize online gaming.
Stake.us had argued that Boyle’s grievance did not belong in front of a judge because Boyle agreed to arbitrate such issues via the site’s terms of service. The court agreed, writing:
“Accordingly, the Court denies to rule on the issue of illegality as it should be given to the arbitrator in the first instance. The Court denies to address the illegality of the contract due to [Stake.us’] corporate status on similar grounds. Whether the contract is void for illegality is a question for the arbitrator.”
Industry Group Applauds Decision
The Social & Promotional Games Association, an industry group that advocates for social and sweeps casinos, celebrated the win and called it a “landmark case.”
“This ruling affirms what we’ve long said: Social sweepstakes sites are not gambling,” the SPGA said in a statement. “They are free-to-play games enjoyed responsibly by millions of American adults, and no purchase is ever necessary to play or have a chance to win prizes.”
“Anyone can file a lawsuit making any claims they like. This ruling is a reminder that facts – and the law – still matter.”
Other Sweepstakes Cases Could Follow Same Logic
Boyle filed a similar case in California against social casino platform Pulsz. That case had been stayed until later this summer but could result in the same outcome.
A lawyer writing for LegalSportsReport.com suggested that Boyle might even be inclined to give up on the effort to shut down Pulsz on similar grounds.
“Based on the recent outcome regarding Boyle’s case against Stake.us, it would not be surprising if Boyle elected to voluntarily dismiss his action against to Pulsz in order to pursue arbitration absent court order,” Alan Wilmot wrote.
Lawmakers Likely to Decide Sweeps Legality, Not Courts
For now, social and sweeps operators can feel a certain level of confidence in their T&Cs holding up against customers feeling aggrieved. But the industry is still not out of the water when it comes to operating in the U.S.
Just last month, Montana became the first U.S. state to formally ban sweepstakes casinos. Gov. Greg Gianforte in May signed SB 555 into law. It is set to take effect on Oct. 1.
State Sen. Vince Ricci, who presented the bill in April, said the new law will give the Department of Justice additional tools to go after illegally operating online casinos. Popular platforms Chumba and Luckyland Slots have already shut down their operations in the state.
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