Social casino games remain incredibly popular and profitable. This success has drawn attacks from plaintiffs’ class action lawyers in the form of gambling loss recovery lawsuits and other consumer-based actions. Some have been successful, mostly in Washington state, netting plaintiffs hundreds of millions of dollars. This has created an incentive for more lawsuits. Some social casino game companies have evolved their business model to include a dual currency, sweepstakes model. This model has also drawn a substantial number of lawsuits and a call to action by the American Gaming Association (AGA). Last August, the AGA published a position paper imploring gaming regulators and state Attorneys General to investigate companies or platforms that offer games under the “sweepstakes” model to determine whether or not these operators are in compliance with their respective laws and regulations, and to take appropriate action if not. Some regulators have responded by initiating actions against both the game companies and payment processors. Numerous private lawsuits have also been filed against game companies, and some have even included payment processors and app stores. In response, some social casino game operators have ceased operations in certain states. As many legal misconceptions exist with this model, game companies, payment processors and app store operators need to understand the evolving legal risks associated with this social casino sweepstakes model, and the steps they can take to mitigate such risks. This post addresses those issues.
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