A class action lawsuit was filed last week in federal court in Alabama against Stake.US, a sweepstakes-based online casino, alleging that the platform operates as an illegal gambling enterprise accessible to residents of Alabama. The suit claims that Stake.US, which markets itself as a legal alternative to traditional online casinos by using a sweepstakes model, is in violation of Alabama’s rigid gambling laws. This legal action has the potential to significantly impact the burgeoning sweepstakes casino industry, raising serious questions about regulatory loopholes, consumer protection, and the evolving interpretation of online gambling laws in states with strict prohibitions.
According to the lawsuit, plaintiffs allege that Stake.US engaged in deceptive practices by presenting itself as a legal gaming option, even though its operations may fall under the definition of unlawful gambling under Alabama law. The platform uses a system in which users can purchase “Gold Coins,” which come with free “Sweepstakes Coins.” These Sweepstakes Coins can be used to play casino-style games and potentially win prizes redeemable for cash. While this model is designed to comply with sweepstakes laws in the U.S., plaintiffs argue that the setup closely resembles traditional gambling and should therefore be subject to the same legal restrictions.
The case, filed by a group of Alabama residents, seeks damages for money lost through the site, the return of player funds, and injunctive relief to prevent Stake.US from continuing operations in the state. Legal experts have noted that this case could set a precedent for how sweepstakes-based platforms are treated in jurisdictions that outlaw most forms of gambling. Alabama, known for having some of the strictest anti-gambling laws in the country, may prove to be a formidable battleground for this kind of litigation.
Stake.US is a U.S.-facing version of the global crypto casino Stake.com, which has garnered significant attention for its celebrity partnerships and fast-growing online presence. While Stake.com allows users to bet with cryptocurrencies and is licensed in jurisdictions such as Curaçao, Stake.US is marketed as a fully legal alternative for U.S. players, offering games that ostensibly comply with federal and state sweepstakes laws. However, critics argue that the distinction between a sweepstakes and an actual gambling operation has become increasingly blurred, especially when real money is involved, even indirectly.
Alabama law defines gambling broadly and prohibits almost all forms of it, with few exceptions. The state has no commercial casinos and does not permit traditional online gambling. Even charitable bingo and raffles face significant regulation. The plaintiffs argue that by allowing players to purchase virtual currency and win cash prizes, Stake.US is effectively enabling real-money gambling in disguise. They contend that the so-called sweepstakes model is a “legal fiction” designed to bypass regulations while providing the same addictive experience and financial risk associated with traditional gambling.
One of the central issues in the case is the nature of consideration, a key element in determining whether a game qualifies as gambling. Under Alabama law, a game becomes illegal gambling if it involves consideration (something of value given to participate), chance, and a prize. The plaintiffs argue that the purchase of Gold Coins with real money constitutes consideration, and that the outcomes of the games are based on chance, with the possibility of winning real-world prizes—thereby meeting all the criteria for illegal gambling. Stake.US maintains that its model is legal because users can obtain Sweepstakes Coins for free via mail-in entries and that purchases are not required to play.
The legality of such sweepstakes-based models has long existed in a gray area. Companies like Stake.US rely on a legal precedent known as the “sweepstakes loophole,” which allows for certain types of promotional contests as long as there is a free method of entry and prizes are awarded based on chance. This is similar to models used by social casinos and other sweepstakes-based gaming apps. However, as the lawsuit highlights, the widespread use of real-money transactions and the structure of the games themselves often push the boundaries of what constitutes a legal sweepstakes versus an illegal gambling operation.
The plaintiffs allege that Stake.US’s marketing was intentionally misleading, targeting users with promises of legal and risk-free entertainment while failing to properly disclose the gambling-like nature of its games. The complaint also claims that Stake.US profited off the losses of players who believed they were engaging in a harmless sweepstakes promotion. In particular, the suit emphasizes the vulnerability of certain users, including individuals with addictive behaviors, who may be drawn to the platform under the false impression that it does not constitute real gambling.
Consumer advocates have expressed concern over the growing popularity of these sweepstakes platforms, especially in states where residents have limited access to regulated gambling options. They argue that platforms like Stake.US may be exploiting legal ambiguities to attract players in states where gambling is otherwise illegal, putting consumers at risk without adequate oversight or protections. Unlike licensed casinos, which are subject to stringent regulation, background checks, and responsible gaming protocols, sweepstakes sites often operate with minimal transparency or accountability.
Legal experts suggest that the outcome of this lawsuit could have ripple effects across the industry. If the court finds that Stake.US is operating an illegal gambling platform under Alabama law, it could prompt similar suits in other states with strict gambling regulations. Additionally, the case may spur lawmakers to revisit and potentially tighten the laws governing sweepstakes casinos, particularly in the context of online gaming. As state and federal authorities continue to grapple with the rapid evolution of online gambling technologies, cases like this one may help define the legal boundaries for years to come.
The lawsuit also raises broader questions about the role of technology in circumventing state laws. With the rise of online and mobile platforms, geographic borders are increasingly difficult to enforce, and platforms like Stake.US can potentially reach users in states where their operations may be illegal. Geolocation technologies are often used by legitimate gambling operators to prevent users from accessing services in restricted jurisdictions, but the effectiveness of these measures varies widely. Plaintiffs in this case claim that Stake.US did not do enough to block Alabama residents from participating, thereby knowingly violating the law.
While Stake.US has yet to file a formal response to the complaint, a spokesperson for the company has stated that the platform is confident in its legal compliance and will vigorously defend itself in court. The company maintains that it operates within the bounds of U.S. sweepstakes laws and offers a legitimate alternative to online gambling. Nevertheless, the growing scrutiny from regulators, lawmakers, and the courts suggests that the sweepstakes casino model may soon face a reckoning.
For now, the lawsuit serves as a cautionary tale for companies operating in the legal gray zone of sweepstakes-based gaming. As public awareness and legal challenges increase, platforms may find it more difficult to rely on technicalities to justify their business models. For consumers, the case underscores the importance of understanding the legal status of online gaming platforms, especially in states with restrictive gambling laws.
The legal process may take months or even years to play out, but the implications are already being felt. Other sweepstakes-based platforms may begin reevaluating their compliance strategies, particularly in states like Alabama where the legal landscape leaves little room for ambiguity. Meanwhile, the plaintiffs in this case hope to hold Stake.US accountable for what they describe as a calculated effort to exploit legal loopholes at the expense of vulnerable users.
As the debate over online gambling continues to evolve, the Stake.US lawsuit may mark a turning point in how the law is interpreted and enforced in the digital age. Whether the courts ultimately side with the plaintiffs or the defense, the case highlights a pressing need for clearer regulations and greater consumer protections in the rapidly expanding world of online gaming.
