Sweepstakes Casino Controversy - And Celebrities' All-important Role

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

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


No, they weren't personally in participation, however the world-famous celebs were conspicuously included in a slide discussion on social and sweepstakes gambling establishments - the questionable sites using both complimentary casino-style video games and profitable rewards, such as cash, present cards or cryptocurrency. In one ad, the fist-pumping Seacrest is seen plugging Chumba Casino, where anyone can 'play for complimentary,' while a crop-topped Hilton holds a chip for sweepstakes operator, Wow Vegas, in the other.


The websites are simply two cogs in the multibillion-dollar industry that now discovers itself besieged by suits. In the eyes of lots of gaming corporations, not to discuss suit complainants and state regulators, sweepstakes casinos serve as standard casinos, just without the oversight, consumer securities and tax laws. So not only can they prevent the high 24-percent federal gambling levy, however sweepstakes operators aren't based on regulative difficulties like anti-money laundering and responsible-gaming defenses.


One operator, Australia-based Virtual Gaming Worlds (VGW), reported $4 billion in earnings in 2015 alone. Now the company deals with accusations of illegal gaming in a New york city claim that claims VGW utilizes celeb endorsers to 'create a veneer of legitimacy' around its item. (See VGW's declaration listed below)


'I'm unsure" if you don't trust us, you can rely on Paris Hilton" is a winning message for business running multibillion-dollar illegal operations out of locations like Malta, Isle of Man, or US mail drops,' Friday's presenter, Howard Glaser of video gaming corporation Light & Wonder, told DailyMail.com.


Sweepstakes endorsers include a variety of celebrities from gambling enthusiasts Drake and DJ Khaled to swimmer Michael Phelps, as well as NBA stars Karl-Anthony Towns and Paul George - none of whom use any differences between traditional gambling and sweepstakes play.


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


Ryan Seacrest urges fans to dip into Chumba Casino, where many - however not all - video games are free


Drake has a handle social sweeps gambling establishment, Stake, that he regularly promotes on social networks


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Instead, advertisements generally center around the social element of the casinos, while leaving out the capacity for actual gambling losses.


Others tempt customers with promises of rewards. One such operator, Stake, ran a social media advertisement revealing off Drake's vehicles, aircrafts and estates before rotating to video of the rapper playing online casino-style video games.

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'Daddy, why do we have a lot money?' read the first caption on the screen.


Another caption described: 'Because I never ever quit.'


The discrepancy between gambling sites and social or sweepstakes gambling establishments is a bit intricate, but operators of the latter insist they're not involved with the previous.


A spokesperson for an industry trade group, the Social and Promotional Gaming Association (SPGA), explained its members are not in direct competition with online casinos and sportsbooks. Furthermore, according to SPGA data, the majority of the gamers on social-sweepstakes casinos are playing for free.


'Most social sweeps consumers never ever make a purchase,' the SPGA representative told DailyMail.com. 'The minority of consumers who make purchases do so in quantities far smaller sized than the common deposit or wager size at real-money online sports betting websites.'


Social gambling establishments use customers a possibility to play casino-style games with pals. Players have the choice to purchase valueless currency frequently described as 'gold coins,' which can not be exchanged for real money, but can be used to unlock different features within the video games.


But within the world of social casinos exists sweepstakes gaming, enabling consumers to obtain other currency called 'sweeps coins' that can be exchanged for money or other prizes.


And therein lies the potential for monetary losses, like the ones declared by plaintiffs in Florida, Georgia, New Jersey and New York City. One player informed 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 cash and other things of value.


The Philadelphia 76ers' Paul George is seen promoting an International Poker event


Social sweeps gambling establishment Stake ran an advertisement displaying Drake's cars and trucks, airplanes and estates


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


Traditional online casinos are banned in all however 7 states, which has actually assisted to fuel the popularity of sweepstakes casinos.


Anyone over the age of 18 can access the sweepstakes sites, which do not require normally require identification. However, sites like Chumba will request for IDs from players trying to withdraw any funds.


Many sites, like the crypto-compatible Stake, allow customers to submit mail-in ask for totally free sweeps coins, offered the players follow painfully particular directions. What's more, players are often rewarded with sweeps coins merely for registering, thus giving them a factor to try their hands at any number of gambling establishment video games for an opportunity to win - or lose - real cash.


So why are sweepstakes websites enabled to run in 48 states, while online casinos are prohibited in all however 7?


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


'Social sweepstakes games are simply a form of online home entertainment,' an SPGA spokesperson told DailyMail.com by email. 'No purchase is required to dip into social gambling establishments with sweepstakes rewards. Consumers never ever have to pay for an opportunity to win prizes. That lack of a purchase requirement - or" consideration" - is a crucial distinction between social sweeps and conventional online gaming websites like gambling establishments.'


Think about the way that McDonald's utilizes its yearly Monopoly game to promote its food: Customers aren't paying to gamble, but rather they're purchasing hamburgers and fries that provide them the chance to win lucrative prizes, such as a $1 million jackpot.


And without a purchase requirement, or 'factor to consider', the game itself doesn't satisfy the meaning of gaming in the US.


'Sweepstakes are a long-standing method for promoting all type of daily services in the United States, everything from hamburgers to magazine memberships to coffee and home improvement stores,' the SPGA representative informed DailyMail.com. 'Sweepstakes promotions are frequently used by a who's who of family names like AT&T, Chase, Home Depot, Marriott, Starbucks, and Wal-Mart.'


But to numerous sports betting market experts, that argument doesn't cut it.

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For starters, gaming lawyer Daniel Wallach mentions, McDonald's Monopoly video game doesn't run forever. Rather, it has a well-defined start and end, thus recommending the sweepstakes is not the fast-food giant's primary product. Instead, the sweepstakes is being utilized to promote real items like fries, shakes, and the Filet-O-Fish.


'They do not last permanently and they're normally not tied to casino-style games of chance,' Wallach told DailyMail.com. 'They're simply money free gifts.


'The sweepstakes [gambling establishments] have none of the qualities typically related to McDonald's-style sweepstakes promos,' Wallach continued. 'Besides running in perpetuity, the sweepstakes gambling establishments offer" casino-like" payouts, usually 80 percent or more of earnings, whereas the normal payout portion for a temporary promotional sweepstakes is an insignificant share of the income earned by the company [usually less than one percent]'


Wallach is quick to liken the online social sweeps gambling establishments to the internet coffee shops that emerged in Florida, offering clients the chance to play casino-style games for genuine prizes. A number of those brick-and-mortar establishments have actually given that been shuttered over claims of unlawful gambling.


DJ Khaled is amongst numerous celeb spokespeople for VGW's Global Poker brand


Now, Wallach argues, social sweeps gambling establishments ought to deal with comparable analysis.


'These distinctions are not arbitrary,' Wallach stated of social sweeps gambling establishments. 'They have repeatedly been mentioned by courts and state lawyer generals as crucial factors in determining that a sweepstakes promo was in truth a guise for unlawful sports betting.'

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One of the casino market's leading trade organizations, the American Gaming Association, is now pressing legislators to investigate sweepstakes operators and, in many cases, enact brand-new legislation on the concern.


'Consumers are being denied of defenses and states are giving up considerable tax and revenue opportunities as this sports betting replaces that carried out through regulated channels,' checked out a well-circulated AGA memo.


And then there are the plaintiffs who have sued social casinos in more than a lots states.


Sweepstakes casino operators paid a combined $14.2 million in four different cases in Kentucky without admitting any wrongdoing, according to the Washington Post. Meanwhile VGW agreed to pay $11.75 million in one class-action lawsuit, stating the settlement was made to avoid legal expenses and continued lawsuits.


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


In the current claim, which is mainly comparable to its predecessors, New york city state residents Lamar Prater and Rebecca Pratt both declare to have lost well over $1,000 to VGW, which is explained in the filing as an 'illegal sports betting enterprise. '


Apple and Google have actually also been called as accuseds in suits for hosting the sweepstakes sites. But unlike VGW, neither tech company reacted to DailyMail.com's ask for remark.

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'We normally don't comment on matters before the courts,' a VGW spokesperson told DailyMail.com by means of e-mail. 'However, we note that this claim has only simply been submitted with the court and VGW has not been formally served.


'We have complete self-confidence in our compliance with all laws and policies where we run, and stay positive about the future,' the representative continued. 'We continue to use our free-to-play games across most of The United States and Canada, as we have for more than a decade, producing not only fantastic video games, user experiences and home entertainment, however likewise ensuring this is done securely, responsibly and at the greatest level of standards.


'More broadly, we 'd reiterate that class actions and other litigations and arbitrations are fairly common throughout the online social video games industry (and the US more broadly), and our standard practice is that we intend to intensely safeguard any claim which might be brought versus us.'


The concerns in between conventional online gambling and sweepstakes casinos could prove bothersome for some star endorsers.


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


'It's ironic that professional athletes are hawking illegal sports betting 'sweeps' websites while at the same time the leagues wish to predict a strong position versus prohibited gambling - especially when trying to tamp down the periodic gambling scandal,' Glaser informed DailyMail.com.

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It was just eight months ago that Toronto Raptors forward Jontay Porter got a lifetime ban from the NBA over allegations he conspired with gamblers. However, to be clear, Porter's scandal is unassociated to anything involving social or sweepstakes gambling establishments.


In addition to VGW, Apple and Google are being sued for hosting supposedly unlawful sports betting sites


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


'I 'd expect that a league crackdown on athletes endorsing sweepstakes websites is a matter of when, not if,' Glaser included.


Neither an NBA spokesperson nor the players' agents reacted to DailyMail.com's ask for comment. For that matter, spokespeople for Drake, DJ Khaled, Hilton, Seacrest and Phelps likewise ignored to react to DailyMail.com emails.


Asked if their celebrity endorsers have a duty to explain to consumers the differences and resemblances in between iGaming and sweepstakes casinos, VGW insisted there is absolutely nothing more that requires to be done.


'We have complete self-confidence in our influencer and ambassadorial partnerships, and our service practices more broadly,' the spokesperson stated. 'A few of our worths are" our gamers precede" and" we do what's right", and we put our values at the core of everything we do.'


Glaser, an outspoken challenger of sweepstakes websites, sees things in a different way.


'Celebrities who lend their names to shady illegal sports betting sites are, at a minimum, putting their track records at risk along with courting civil and class actions by customers who declare damage,' Glaser said. 'There is also some threat that state regulators and state attorneys basic rope celeb endorsers into enforcement efforts for facilitating illegal sports betting.'


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