Tech giants Google and Apple are under legal scrutiny in New Jersey, facing allegations of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act. The lawsuit, filed on November 27, implicates their roles in hosting and processing payments for sweepstakes casino apps—a controversial sector blending social gaming with gambling-like features. Julian Bargo, the lead plaintiff, claims losses exceeding $1,000 while engaging with these platforms, which he asserts operate as illegal gambling enterprises.
Sweepstakes Casino Operations Under Fire
Sweepstakes casinos function by allowing players to use virtual currency purchased with real money to access gambling-like games, including slots, blackjack, and roulette. Some platforms add sweepstakes mechanics, offering real-money prizes to further entice users. While popular for their accessibility and entertainment value, these platforms have sparked criticism for allegedly turning smartphones into unregulated gambling devices.
Unlike traditional casinos, sweepstakes operators are not subject to U.S. licensing or regulatory oversight. This lack of regulation enables them to avoid gaming taxes, despite primarily targeting American consumers. Many major operators, such as Australia-based Virtual Gaming Worlds (VGW), are headquartered offshore. VGW, which runs platforms like Chumba Casino, LuckyLand Slots, and Global Poker, exemplifies the sector’s financial success, reporting $4 billion in revenue and $322 million in net earnings in 2023.
Critics argue that the regulatory gap disadvantages licensed operators who comply with strict U.S. laws. Additionally, the accessibility of these apps raises concerns about problem gambling, particularly among younger users drawn to their casual gaming format.
Legal Implications for Google and Apple
The lawsuit accuses Google and Apple of enabling these platforms by hosting their apps on the Google Play Store and Apple App Store. It further alleges that their payment systems, Google Pay and Apple Pay, facilitate transactions for purchasing virtual currency, effectively supporting and profiting from the alleged illegal activities.
According to the suit, “The sweepstakes casino enterprise is an association-in-fact composed of the App Defendants and the Gaming Defendants who are engaged in, and whose activities affect, interstate commerce, and which have affected and damaged interstate commercial activity.” The plaintiff asserts that both companies’ involvement constitutes a violation of RICO statutes, which are traditionally used to combat organized crime. By leveraging RICO’s provisions, the case remains in civil court, bypassing arbitration procedures that often apply to disputes involving app platforms.
Broader Industry and Regulatory Challenges
The rapid growth of sweepstakes casinos has drawn attention from the regulated gaming industry. Licensed online casinos operating in just seven U.S. states generated $6.1 billion in gross revenue in 2022, according to the American Gaming Association (AGA). In contrast, legal sports betting, available in over 30 states, brought in $11 billion during the same period. Stakeholders in the regulated market view sweepstakes platforms as a competitive threat operating outside traditional oversight mechanisms.
The lawsuit against Google and Apple underscores calls for stricter regulatory oversight of sweepstakes casinos. Advocates for regulation argue that aligning these platforms with traditional gambling laws would enhance consumer protections, ensure tax contributions, and level the competitive landscape. However, the offshore nature of many operators presents significant enforcement challenges.
As the case unfolds, it marks the first instance where Google Pay and Apple Pay have been named in legal action concerning sweepstakes casinos. Previously, similar lawsuits, such as one in Florida against VGW, included payment processors like Worldpay as co-defendants. This New Jersey lawsuit could set a precedent, reshaping how tech giants manage app platforms and payment systems linked to controversial gaming models.
Source:
“Google Pay and Apple Pay named in US sweepstake casino lawsuit“, paymentexpert.com, December 3, 2024.