Apple and Google face lawsuits accusing them of profiting from illegal gambling. This article discusses the growth of sweepstakes casinos in the online casino industry and the challenges they face.
Unlike traditional casinos, sweepstakes casinos are not licensed in the US because they are not considered to offer gambling services—we delve into this loophole in more detail in our Sweepstakes Casinos Guide. This means they offer access to casino games while avoiding gambling taxes and other market restrictions.
Sweepstakes casino apps are a significantly growing sector that has aroused interest and some controversy surrounding their unique operating model and regulatory ambiguities.
Social casinos allow users to play for free or to purchase virtual currency, which can then be used to unlock features in games often associated with gambling, such as slot machines, roulette and poker.
Some social casino platforms have added sweepstakes components, such as cash prizes.
Sweepstakes casinos are legal in most US states including California, New York and Florida, but some exceptions exist, such as Washington and Michigan.
These casinos operate under a “no purchase necessary” model, meaning you can play for free using Cold Coins and Sweeps Coins. However, Sweeps Coins can be redeemed for real prizes.
Tech icons Apple and Google have been accused of knowingly assisting, promoting and profiting from illegal gambling relating to sweepstakes casino games on their platforms.
The lawsuit was brought by New Jersey resident Julian Bargo, who alleged he lost over $1,000 across several sweepstakes casinos. The lawsuit named High 5 Casino, McLuck, Wow Vegas, and CrownCoins Casino as defendants for allegedly operating illegal gambling sites.
The plaintiff also targeted Apple Pay and Google Pay. The New Jersey resident claimed violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, accusing them of enabling and supporting these platforms.
The RICO Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organisation and has traditionally been used to prosecute high-profile organised crime cases.
Although RICO charges are traditionally associated with combatting organised crime, Bargo’s filing argues that they are applicable in this context, stating:
“The gaming defendants have succeeded in misleading regulators about the true nature of their operations for far too long.”
The lawsuit brought by Julian Bargo alleges that Apple and Google unlawfully profit from sweepstakes casino activity.
It states that both tech giants benefit financially through the commissions they collect from apps hosted on their platforms, including social casino apps, and by integrating their payment systems into these sweepstake casino sites, they make themselves complicit in the alleged misconduct.
Social casinos and sweepstakes casinos are unregulated and do not require licensing. However, certain regulators, such as those in Washington, where these operations are illegal, have taken a firm stance against social casinos and other unregulated gambling practices, issuing cease-and-desist proclamations to operators such as those named in this class action suit.
While this is the first lawsuit to specify Apple and Google as defendants, it is not the first sweepstakes lawsuit to include payment processors as defendants.
These platforms are popular for their accessibility and entertainment value and appear to fall within the bounds of current applicable laws, which vary by state. Still, critics contend that they essentially turn smartphones into gambling devices.
In recent years, sweepstakes casinos have experienced a substantial rise in popularity across the US, mainly due to their ability to replicate the thrill of real-money online casino entertainment without involving direct financial stakes.
The market for social casino gaming is projected to exceed $7 billion in 2024, a notable portion of which originates with US consumers. According to industry reports, player participation has risen 30% year over year.
Sweepstakes casinos have become a fertile ground for innovation in the US online casino gaming industry. They allow for the testing of new game formats and mechanics that might otherwise face lengthy regulatory hurdles.
By using virtual currencies, these platforms provide a legal space for experimentation with novel game designs and interactive elements that aren’t fully regulated in the traditional online casino gaming market.
Sweepstakes casinos have emerged as a dynamic and vibrant testing ground, allowing developers to trial new ideas and concepts while offering players an engaging and entertaining risk-free casino experience.
With the rise in popularity of these platforms, there has been a heightened focus on responsible gambling practices, with many implementing measures designed to promote healthy gaming habits.
By offering tools such as self-exclusion or measures to help players set limits on their gameplay, free play casinos are taking proactive steps to ensure their platforms are used responsibly, and this commitment is essential to the long-term sustainability of this sector of the market.
The sweepstakes casino industry faces a variety of challenges, particularly in maintaining legal and regulatory compliance as the definition of “gambling” comes under scrutiny. An example is the recent class action lawsuit against VGW Holdings.
The company was accused of violating Kentucky’s gambling laws, highlighting the potential risks sweepstakes casinos face.
Despite such challenges and notwithstanding the outcome of the legal battles between Apple and Google, the future of sweepstakes casinos looks positive.
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