Sweepstakes Casino Controversy - And Celebrities' All-important Role

The smiling faces of Paris Hilton and Ryan Seacrest made surprise looks before the Louisiana Senate for Friday's hearing on illegal gaming.

No, they weren't personally in participation, but the world-famous stars were conspicuously consisted of in a slide presentation on social and sweepstakes gambling establishments - the questionable websites offering both totally free casino-style games and profitable prizes, such as money, gift cards or cryptocurrency. In one advertisement, the fist-pumping Seacrest is seen plugging Chumba Casino, where anybody can 'play for totally free,' while a crop-topped Hilton holds a chip for sweepstakes operator, Wow Vegas, in the other.

The sites are just 2 cogs in the multibillion-dollar market that now discovers itself besieged by lawsuits. In the eyes of numerous gaming corporations, not to point out claim plaintiffs and state regulators, sweepstakes gambling establishments act as conventional gambling establishments, just without the oversight, consumer securities and tax laws. So not only can they avoid the high 24-percent federal gambling levy, but sweepstakes operators aren't based on regulatory obstacles like anti-money laundering and responsible-gaming protections.

One operator, Australia-based Virtual Gaming Worlds (VGW), reported $4 billion in profits in 2015 alone. Now the business deals with accusations of illegal gaming in a New York suit that declares VGW uses star endorsers to 'create a veneer of legitimacy' around its product. (See VGW's declaration below)

'I'm not exactly sure" if you don't trust us, you can rely on Paris Hilton" is a winning message for companies running multibillion-dollar unlawful operations out of locations like Malta, Isle of Man, or US mail drops,' Friday's speaker, Howard Glaser of gaming corporation Light & Wonder, informed DailyMail.com.

Sweepstakes endorsers include a variety of celebrities from sports betting lovers Drake and DJ Khaled to swimmer Michael Phelps, along with NBA stars Karl-Anthony Towns and Paul George - none of whom offer any differences in between and sweepstakes play.

Paris Hilton is seen plugging Wow Vegas, one of lots of sweepstakes casinos discovered online

Ryan Seacrest prompts fans to play at Chumba Casino, where lots of - but not all - games are totally free

Drake has a deal with social sweeps casino, Stake, that he regularly promotes on social networks

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Instead, ads normally center around the social aspect of the gambling establishments, while leaving out the potential for real gambling losses.

Others lure consumers with pledges of rewards. One such operator, Stake, ran a social media ad showing off Drake's automobiles, airplanes and mansions before pivoting to video footage of the rapper playing online casino-style games.

'Daddy, why do we have so much cash?' read the very first caption on the screen.

Another caption explained: 'Because I never ever offered up.'

The disparity between sports betting sites and social or sweepstakes casinos is a bit complex, but operators of the latter insist they're not involved with the previous.

A representative for a market trade group, the Social and Promotional Gaming Association (SPGA), described its members are not in direct competitors with online gambling establishments and sportsbooks. Furthermore, according to SPGA data, the majority of the gamers on social-sweepstakes gambling establishments are sports betting free.

'Most social sweeps customers never ever buy,' the SPGA spokesperson informed DailyMail.com. 'The minority of clients who make purchases do so in amounts far smaller sized than the common deposit or bet size at real-money online sports betting sites.'

Social casinos offer customers a chance to play casino-style video games with buddies. Players have the option to buy valueless currency often described as 'gold coins,' which can not be exchanged genuine cash, but can be used to unlock different features within the video games.

But within the world of social casinos exists sweepstakes gaming, permitting customers to acquire other currency known as 'sweeps coins' that can be exchanged for cash or other rewards.

And therein lies the capacity for monetary losses, like the ones claimed by plaintiffs in Florida, Georgia, New Jersey and New York City. One gamer told the Washington Post he lost more than $100,000 on sweepstakes gambling establishments in the previous year after continuing to buy more coins in pursuit of money and other things of value.

The Philadelphia 76ers' Paul George is seen promoting a Worldwide Poker event

Social sweeps casino Stake ran an advertisement displaying Drake's automobiles, aircrafts and mansions

Karl-Anthony Towns of the New York City Knicks is another NBA star plugging VGW's Global Poker

Traditional online gambling establishments are prohibited in all however seven states, which has actually helped to sustain the appeal of sweepstakes gambling establishments.

Anyone over the age of 18 can access the sweepstakes websites, which don't require typically need recognition. However, sites like Chumba will ask for IDs from players attempting to withdraw any funds.

Many websites, like the crypto-compatible Stake, enable consumers to send mail-in ask for totally free sweeps coins, provided the players follow painfully particular guidelines. What's more, players are typically rewarded with sweeps coins simply for signing up, thereby providing a reason to try their hands at any variety of casino games for a possibility to win - or lose - real cash.

So why are sweepstakes sites allowed to operate in 48 states, while online casinos are banned in all however 7?

According to the stakeholders, their item is the totally free casino-style video gaming, and the real-stakes competition is merely a method of promoting their bread and butter.

'Social sweepstakes video games are just a kind of online home entertainment,' an SPGA representative informed DailyMail.com by email. 'No purchase is needed to play at social gambling establishments with sweepstakes prizes. Consumers never ever have to pay for a chance to win prizes. That lack of a purchase requirement - or" factor to consider" - is an essential difference in between social sweeps and standard online sports betting websites like casinos.'

Consider the manner in which McDonald's utilizes its annual Monopoly game to promote its food: Customers aren't paying to bet, but rather they're buying hamburgers and french fries that use them the opportunity to win rewarding prizes, such as a $1 million prize.

And without a purchase requirement, or 'consideration', the game itself does not fulfill the meaning of sports betting in the US.

'Sweepstakes are a long-standing technique for promoting all sort of daily services in the United States, whatever from burgers to publication memberships to coffee and home improvement shops,' the SPGA representative told DailyMail.com. 'Sweepstakes promotions are regularly used by a who's who of family names like AT&T, Chase, Home Depot, Marriott, Starbucks, and Wal-Mart.'

But to many gambling industry experts, that argument does not cut it.

For starters, video gaming lawyer Daniel Wallach explains, McDonald's Monopoly game doesn't run forever. Rather, it has a distinct start and end, thereby recommending the sweepstakes is not the fast-food giant's main item. Instead, the sweepstakes is being used to promote real products like french fries, shakes, and the Filet-O-Fish.

'They don't last permanently and they're typically not tied to casino-style video games of opportunity,' Wallach informed DailyMail.com. 'They're simply cash free gifts.

'The sweepstakes [casinos] have none of the characteristics typically related to McDonald's-design sweepstakes promos,' Wallach continued. 'Besides running in eternity, the sweepstakes gambling establishments provide" casino-like" payouts, typically 80 percent or more of incomes, whereas the normal payment portion for a short-term marketing sweepstakes is a trivial share of the income earned by the business [typically less than one percent]'

Wallach fasts to compare the online social sweeps gambling establishments to the web coffee shops that emerged in Florida, providing consumers the possibility to play casino-style games for real prizes. A lot of those brick-and-mortar facilities have because been shuttered over allegations of prohibited gaming.

DJ Khaled is among a number of celeb spokespeople for VGW's Global Poker brand name

Now, Wallach argues, social sweeps gambling establishments must deal with similar scrutiny.

'These differences are not arbitrary,' Wallach said of social sweeps casinos. 'They have consistently been mentioned by courts and state chief law officer as essential consider determining that a sweepstakes promotion remained in fact a guise for illegal gaming.'

Among the gambling establishment industry's leading trade organizations, the American Gaming Association, is now pressing lawmakers to investigate sweepstakes operators and, in some cases, enact new legislation on the problem.

'Consumers are being denied of protections and states are giving up significant tax and profits chances as this gambling changes that conducted through regulated channels,' read a well-circulated AGA memo.

And after that there are the plaintiffs who have taken legal action against social casinos in more than a dozen states.

Sweepstakes gambling establishment operators paid a combined $14.2 million in four separate cases in Kentucky without confessing any misdeed, according to the Washington Post. Meanwhile VGW consented to pay $11.75 million in one class-action suit, stating the settlement was made to prevent legal expenses and continued litigation.

Michael Phelps has signed a handle the VGW Group, which owns Global Poker

In the latest lawsuit, which is largely similar to its predecessors, New York state homeowners Lamar Prater and Rebecca Pratt both declare to have lost well over $1,000 to VGW, which is explained in the filing as an 'prohibited gambling enterprise. '

Apple and Google have likewise been named as accuseds in lawsuits for hosting the sweepstakes websites. But unlike VGW, neither tech company reacted to DailyMail.com's demand for remark.

'We generally do not talk about matters before the courts,' a VGW representative informed DailyMail.com through e-mail. 'However, we keep in mind that this claim has only just been submitted with the court and VGW has actually not been officially served.

'We have complete self-confidence in our compliance with all laws and guidelines where we operate, and stay positive about the future,' the spokesperson continued. 'We continue to provide our free-to-play video games across many of North America, as we have for more than a decade, producing not only fantastic video games, user experiences and home entertainment, but likewise guaranteeing this is done safely, properly and at the greatest level of standards.

'More broadly, we 'd reiterate that class actions and other litigations and arbitrations are relatively typical across the online social video games market (and the US more broadly), and our standard practice is that we mean to vigorously defend any claim which may be brought versus us.'

The concerns in between traditional online gaming and sweepstakes casinos could show bothersome for some celebrity endorsers.

Towns, a star center with the Knicks, and the 76ers' George both endorse VGW's Global Poker brand name while the NBA is partnered with traditional gaming titans like FanDuel and DraftKings.

'It's paradoxical that professional athletes are hawking prohibited sports betting wagering 'sweeps' websites while at the very same time the leagues desire to forecast a strong position against unlawful sports betting - especially when attempting to tamp down the periodic sports betting scandal,' Glaser told DailyMail.com.

It was just 8 months ago that Toronto Raptors forward Jontay Porter got a life time restriction from the NBA over claims he conspired with bettors. However, to be clear, Porter's scandal is unassociated to anything involving social or sweepstakes casinos.

Along with VGW, Apple and Google are being sued for hosting presumably unlawful gambling websites

Regardless, Glaser sees sweepstakes casinos as a major issue for leagues such as the NBA.

'I 'd anticipate that a league crackdown on professional athletes backing sweepstakes sites is a matter of when, not if,' Glaser included.

Neither an NBA spokesperson nor the players' representatives reacted to DailyMail.com's requests for remark. For that matter, spokespeople for Drake, DJ Khaled, Hilton, Seacrest and Phelps likewise overlooked to react to DailyMail.com e-mails.

Asked if their star endorsers have a responsibility to describe to clients the differences and similarities between iGaming and sweepstakes gambling establishments, VGW insisted there is absolutely nothing more that needs to be done.

'We have full confidence in our influencer and ambassadorial collaborations, and our organization practices more broadly,' the representative said. 'Some of our worths are" our players precede" and" we do what's right", and we put our values at the core of everything we do.'

Glaser, an outspoken opponent of sweepstakes sites, sees things in a different way.

'Celebrities who lend their names to shady unlawful gaming websites are, at a minimum, putting their reputations at danger as well as courting civil and class actions by consumers who declare harm,' Glaser stated. 'There is likewise some danger that state regulators and state chief law officers rope celebrity endorsers into enforcement efforts for helping with unlawful sports betting.'

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