Stake.us Scores Legal Win in California

Stake.us has secured a substantial procedural victory in California court as a judge ruled that a lawsuit challenging the legality of its sweepstakes casino business must proceed via private arbitration. While this development allows Stake to continue its operations in California for the time being, the company also faces similar legal woes in Alabama and Illinois.

The Plaintiff Argues That Stake.us Offers Real Money Gambling

The decision, handed down late last week, effectively halts a lawsuit brought by California resident Dennis Boyle, who alleged that the company operated an illegal online gambling platform in violation of state law. The court’s refusal to determine the legality of Stake.us’ model could set a precedent for future legal action revolving around sweepstakes-based gaming platforms.

Boyle’s suit compared Stake’s operations to early-2000s “internet sweepstakes cafés,” claiming they obscured real-money gambling under the guise of promotional offers. Boyle also drew attention to the challenging and obscure withdrawal requirements, as well as the substantial sums circulating through the platform. His complaint requested that the site be blocked in California.

Stake.us operates on a sweepstakes model, where customers have a chance to win prizes by using virtual currency that can be obtained without a real-money purchase. The company remains adamant that its business model strictly aligns with sweepstakes laws and does not constitute gambling according to US federal or most state laws.

The Ruling Could Influence Other Similar Lawsuits

Stake.us’ parent company, Sweepsteaks Ltd., defended its right to arbitration, arguing that the plaintiff had agreed to the platform’s terms of service at sign-up. These explicitly mandate arbitration for resolving any disputes. The company also noted that users could opt out of arbitration, which Boyle never did. This argument was sound enough for the court to side with Stake.

In her ruling, US District Judge Marsha L. Byrne noted that the arbitration clause “clearly and unmistakably” delegated disputes like the one levied by the plaintiff to the arbitrator rather than the court. She dismissed Boyle’s argument that the agreement was unconscionable, drawing attention to the opt-out feature and lack of coercion.

While this ruling marks a clear victory for Stake, the company faces similar legal action in Alabama and Illinois. The two other lawsuits levy similar accusations, alleging that the sweepstakes operator uses elaborate schemes to obscure a real-money gambling model. It is yet unclear whether Judge Byrne’s verdict will affect the other two cases. However, Stake.us appears to have the upper hand for now.