Sweepstakes Casino Firm VGW Faces Class Action Lawsuit in California

^{Legal pressure is mounting on VGW, the operator of Chumba Casino, as class-action lawsuits target their business model. (Photo: Contributor: Sergey Tolmachev / Alamy)}

A 129-page class action lawsuit was filed in the Northern California District Court last week targeting not only sweepstakes casino firm VGW, but also its founder, Laurence Escalante, and vendors who work with the company’s sites.

VGW operates multiple sweepstakes casinos in California and other states, including Chumba Casino and Global Poker.

Lawsuit Seeks to Establish Jurisdiction in California

The lawsuit challenges not only the legality of the operations of VGW’s sites in California, but also the supportive operations of payment processors like Yodlee and Trustly and geolocation firm Jumio.

“VGW’s illegal gambling enterprise is not, and cannot be, operated by VGW alone,” the lawsuit reads. “The illegal enterprise is only possible with the aid and assistance of multiple partners. VGW runs much or all of its operation through California and has partnered with certain California-based individuals and companies, which provide essential gambling services to the VGW Casinos.”

The clear presence of those services in California helps explain why the filing was made in the Northern California District Court. Previous class action lawsuits against VGW have been dismissed or delayed due to jurisdictional issues, such as one in Georgia that was thrown out based on the fact that the company has very little presence in the state. Another, filed in Florida, was moved to Delaware courts due to the forum selection clause in user contracts at VGW sites. 

In this case, the lawsuit makes clear and specific allegations of wrongdoing in California. However, it is not solely based in California law, and seeks to make sub-classes representing VGW users in many other states. 

VGW’s sites use the standard format that defines the sweepstakes casino industry. This includes a dual currency format: gold coins, which allow for free play and cannot be redeemed for prizes, as well as sweeps coins, which can be redeemed for cash or other rewards. 

Lawsuit: Player Behavior Shows Sweepstakes Casinos are Gambling Sites

Sweepstakes casinos contend that they are not gambling sites and operate under sweepstakes laws because players can get sweeps coins (SC) for free. However, the California lawsuit points out that purchases of gold coins (GC) always provide an amount of SC as a bonus that just so happens to correspond to the purchase price.

“Whenever a gambler purchases GC, the gambler also receives at least the amount they paid in SC,” the filing reads. “For example, if a gambler deposits $300 at Chumba, they will receive millions of unredeemable GC and $315 worth of cash-redeemable SC as a purported “free gift.” Chumba even adds a dollar sign to the left of the “free” sweepstakes coins to remind gamblers that they will get at least the value of their cash deposit in cash-redeemable SC.”

The lawsuit also notes that players often purchase more packages of gold coins even though they have “hundreds of millions to billions of GC” when they run low on sweeps coins, suggesting that the sweeps coins are the real draw of the purchases. 

Whether or not those arguments prove successful in court, they may add weight to the idea that users know they are gambling when they visit sweepstakes sites. A recent study by the American Gaming Association found that 90 percent of users considered playing as sweepstakes casinos to be gambling, and that 68 percent of users said their primary reason for playing at the sites was to win real money. 

Sweepstakes casinos have faced increasing pressure from lawmakers in multiple states, most recently being banned from New Jersey.