On Wednesday (29 January), series hosts Victor Rocha and Jason Giles – IGA’s conference chair and executive director, respectively – were joined by James Meggesto and Samir Patel, gaming attorneys from the firm Holland & Knight LLP.
The discussion centred around the legal pathways for fighting back against sweepstakes. In recent months, Rocha and Giles have interviewed several industry figures about the topic. These range from lobbyists to regulators to fellow tribal leaders.
Central to the discussion was an ongoing lawsuit in the US District Court for the Middle District of Florida, Knapp vs VGW Holdings. Meggesto and Patel said it is unique from other suits brought against sweeps operators. The two men authored an article on the suit on 21 January and its potential implications for the industry.
On the webinar, Patel asserted that sweepstakes “have percolated to the top” of issues currently impacting operators. Meggesto said he’s “been a little bit surprised by the lack of urgency” in fighting their proliferation.
Florida could be key battleground for sweepstakes
The lawsuit in Florida is interesting, the duo said, for two reasons. First, as Patel explained, Florida is “one of the few” states with “concrete” sweepstakes laws on the books. This was noted by the attorneys in their article:
Chapter 849 of the Florida Statutes governs gambling in the state and prohibits various forms of gambling unless expressly licenced or authorised. Specifically, Section 849.08 of the Florida Statutes prohibits unlicensed lotteries, while Section 849.14 makes it illegal to engage in any game of chance in which money or something of value is wagered.
The blurred lines between the various forms of online casino sites have made it difficult for legal operators to effectively argue that sweepstakes sites constitute illegal gambling. They employ, as the attorneys wrote, a “two-coin freemium model” whereby players earn both virtual and “sweeps” coins. The virtual coins hold no monetary value but the sweeps coins can be exchanged for cash.
Operators argue this cash exchange is what constitutes illegal gambling. But sweeps sites argue that players are purchasing entertainment while receiving entry into a sweepstakes, which have an established legal history in the US.
Follow the money
Another reason why the Knapp suit is interesting, they said, is that it includes payment processors as defendants, namely WorldPay. The company was denied a motion to dismiss on 25 November 2024. In their article, Patel and Meggesto said the company’s “failure to withdraw from the case may serve as a warning to other payment processors working with sweepstakes casinos”.
Cutting off payment processors might be the most effective route yet to help curb the spread of sweepstakes. Lawyers are taught in school to “sue everyone”, Patel joked, in hopes of hooking companies with the biggest coffers. He referenced a suit from New Jersey that named Apple and Google as defendants.
Moving forward, discovery in the case is due on 4 October, with a trial set for that month. However, mediation is scheduled for 18 April and panelists said they are hopeful it will go to a full trial. This would allow the court system to really sink its teeth into the issue and provide transparency for the industry.
“Keep on settling, keep on operating”
From a tactical perspective, Patel lamented that it’s possible VGW and other sweeps operators may just make Godfather offers to avoid trials as lawsuits pile up.
“It might make sense for them to just keep on settling, keep on operating,” he surmised.
He explained that sweeps operators often put arbitration clauses in their terms and conditions. This was discovered in a previous suit in California against Fliff, a social sportsbook site. “[Sweeps] operators have been skating ever since,” Patel said.
The attorneys said that overall, the best way for states to fight this problem would be to change existing laws or enact new ones. As Meggesto said, though, it’s difficult for the industry to make this a priority for lawmakers. The model igaming legislation from the National Council of Legislators from Gaming States features language banning sweepstakes, but there’s no guarantee that it will be adopted by future legalising states.
Given sweepstakes’ meteoric rise, the best and simplest argument is likely to be the billions in lost tax revenue. “Money talks, and that’s when it starts to hit home,” Meggesto said.
Original article: https://igamingbusiness.com/legal-compliance/sweepstakes-fight-florida-lawsuit/
