Legal efforts to curtail the growing sweeps-based gambling industry continue to appear in state after state across the US. One of the most recent actions -- and also, potentially, one of the most dangerous to the interests of sweeps-based operators -- has emerged this week in Massachusetts, where a new class action has been filed against VGW Holdings US, the States-facing parent entity of Chumba Casino, Luckyland Slots, and Global Poker.
The eye-opening action was filed on Tuesday and docketed on Wednesday in the Superior Court of Suffolk County, Massachusetts, on behalf of a plaintiff identified only as "M.M." for the time being.
Site accused of real money gambling
Filed by attorney Joel D. Smith of the Boston law firm Smith Krivoshey PC, the action claims several causes and claims for relief, alleging violations of Massachusetts's gambling laws, unjust enrichment, and other deceptive practices including the whitewashing of the word "gambling" from the VGW sites in question, despite plaintiff's assertions that the sites are, indeed, real-money gambling.
For the time being, the lawsuit references only the Chumba Casino and Luckyland Slots sites along with several VGW corporate entities. Global Poker is not mentioned, possibly because the lead plaintiff, M.M., did not gamble on Global Poker. However, if certified as a class action and other plaintiffs are added, Global Poker could be added as an additional defendant, since it employs the identical dual-currency sweeps model and also offers many of the same slots and other casino table games as the othertwo VGW sites.
Targeting US's 'real-money gaming market' for over a decade
VGW, or Virtual Gaming Worlds, as it's more fully known, is the largest sweeps-based online operator on the planet. Founded way back in 2011, when the online poker world's "Black Friday" crackdown changed the online gambling world, it has since grown into a multi-billion-dollar concern headed by its Australian founder Laurence Escalante.
As alleged as part of the complaint, VGW has acknowledged all along to certain parties that it is offering a form of online gambling, despite its claims to the contrary. The cover sheet submitted to the case offers this:
"Although Defendants deny that their websites involve gambling (despite the obvious purpose of the websites), they admitted to investors that the websites are intended to target the 'real-money gaming market' in the United States. Defendants also admitted to investors that the websites are modeled on 'Internet cafe sweepstakes', which was a widespread practice during the early 2000s that criminals tried to use to evade state gambling laws.
"The Massachusetts Attorney General and courts across the US consistently determined that Internet cafe sweepstakes are a form of unlawful gambling, and Massachusetts law directly prohibits the use of fake 'sweepstakes' as a pretext for gambling."
Text in the body of the complaint details further that the use of the word 'sweepstakes' in association with sites such as VGW's offerings is a misnomer in itself. As with the old Internet cafes, the complaint asserts, the 'sweepstakes' element of the VGW sites -- the 'sweeps' coins, which can be redeemed -- is ever-present, ongoing, and is the dominant gaming mechanism, whereas legitimate and legal sweepstakes as defined under US law are short-term promotional vehicles used only occasionally within a business's long-term marketing efforts. (The complaint cites McDonalds as an example of a company offering a legitimate sweepstakes promotion.
Old prospectus resurfaces as appendix to complaint
Lawyers might tell an interested party that there's a legal difference between "everyone knows what's going on" and actually having the evidence to support one's allegations. This Massachusetts action may put a large crack in that wall, since the plaintiff's attorneys have obtained a financial prospectus for potential investors that was created for VGW and its precursor company, Synergy Plus Limited, in 2015, along with an executive summary of the market created in early 2016.
The documents were created for Synergy/VGW by an established gambling-market research firm, UK-based H2 Gambling Capital, and they are just sampled within the Massachusetts complaint's appendices. One section from the executive summary touts the purported legality of the sweepstakes model. "'Sweepstakes' are a unique concept and not classed at gambling within the sector because they are free to enter," the report boldly asserted.
The prospectus makes it clear that VGW's offerings and mechanisms are modeled on the old Internet cafe scheme, again by creating an artificial separation between the consideration given (the wager) and the chances or odds involved. And there's no doubt that for potential investors, it was disclosed as gambling and not as the more ephemeral "gaming", since the word "gambling", according to the complaint, appeared 79 times.
Widespread actions against VGW across the US
VGW's Global Poker site has not updated its terms and conditions page since mid-September. At that time, there were five US states where VGW's sites were unavailable: Connecticut, Idaho, Michigan, Montana, and Washington. Since then, Nevada has been added to the no-go list, and a few other states have served notice to VGW.
It's not clear how many actions Virtual Gaming Worlds and its sites face across the US. At least a dozen cases from about 10 states have been docketed into the US's federal PACER system, which includes information from many, but not all, US state-court systems. While one earlier case in Massachusetts filed against VGW appears on PACER, at least two others don't, and that could hold true for other states as well.
Add in the pressure being brought against sweepstakes sites by lobbying groups such as the AGA, and the battle is well-engaged.
