Plaintiffs filed a lawsuit against cryptocurrency sweepstakes operator Stake.us in the State of Alabama, claiming the company offers unlicensed games.
Key takeaways
- The lawsuit cites internet gambling cafés as a precedent for Stake, which employed the same type of business strategy.
- The plaintiffs claim the company misled them, not listing Alabama as part of restricted states, leading them to believe it was legal there.
- The suit points out Stake used celebrities to promote its business, undermining the operator's claim it doesn't provide gambling.
The lawsuit was filed at the U.S. District Court for the Northern District of Alabama and names several Alabama residents. It also calls for a complete ban on Stake.us operating in the state and for restitution of financial losses users incurred. It's the third suit against the company in the last few months, following others in California and Illinois.
The internet café gambling precedent
The suit explicitly cites the example of internet café gambling venues, which were closed down across the U.S. over a decade ago. These establishments sold phone minutes or internet time but bundled these with sweepstakes entries, which customers used to play slot games to win cash prizes.
Sweepstakes sites typically offer two types of virtual coins, one with no value and another that can be exchanged for cash. In both cases, the suit describes them as ‘casino chips’.
“In short, Defendant is copying the internet café 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,” the suit states.
Jurisdiction disputes
Another key part of the suit is the claim that Stake.us avoided including Alabama in its list of restricted jurisdictions, leading users to assume the state approved the site.
Alabama has some of the United States' strictest gambling rules. The only forms of gambling currently legal in the Yellowhammer State are bingo, tribal casino gaming, and pari-mutuel bets on horse racing. Unlike neighboring states Mississippi, Tennessee, and Florida, Alabama is one of nine American states that doesn't allow sports betting.
Last year, the American Gaming Association, a self-governing body representing the U.S. casino sector, called for a full investigation into sweepstakes companies' operations and laws to outlaw the dual-currency social gaming business model.
Stake.us celebrity endorsements
The company also established several high-profile partnerships, including with rapper Drake. The suit argues the use of the phrase, ‘a chance to win big alongside Drake’ on the brand’s website undermines the claim that Stake.us doesn't provide gambling.
Stake.us operates under the Sweepsteaks Limited Company and provides more than 200 games from well-known casino developers, including slots, table games, and poker.
