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The rise of new variants of fantasy sports and sweepstakes has been perhaps the story of 2024 in U.S. gambling regulation, but a string of class-action lawsuits threaten to stall these new offerings in 2025.
Within sports, pick'em-style fantasy games offer a product that supporters see as an enhanced form of daily fantasy and opponents see as unlicensed prop bets, and on the casino side, sweepstakes casinos sparked debate on the line between social and real-money gaming.
Some state authorities have already taken direct action against operators of pick'em-style fantasy sports and sweepstakes casino games, but in other states, civil litigation could be another threat to the new business models.
Many of the biggest operators within these new spaces are already defendants in civil lawsuits, usually filed by former customers seeking damages for money lost on their platforms. The plaintiffs’ argument generally goes that these games were never legal gambling, and so any takings from player losses are illegitimate.
Are these lawsuits an existential threat to sweeps and pick'em operators?
“The answer, in good lawyerly fashion, is ‘it depends, and maybe’,” Brian Schaller, a partner at Info Law Group, said.
Although a ruling in one state would not have an impact elsewhere, it is possible that it will still have a less direct influence on other cases.
“They wouldn’t serve as precedent,” Schaller said. “That being said, people in the industry and attorneys will read the other cases and you can get some themes or good arguments that could be applied.”
The recent civil suits against pick'em or sweepstakes operators cross a range of different states, cite different statutes and precedents, and sit before different judges. So it may be an oversimplification to lump them all together.
Dan Wallach, founder of Wallach Legal, noted that in the sweepstakes sector, there is a significant amount of variety between the different suits filed, but the “sheer number” of cases filed in this vertical alone gives them relevance.
“Plaintiff’s counsel would not be pursuing cases in this number if they weren’t confident,” he said, suggesting the lawyers involved are likely to be compensated based on a percentage of a future settlement or judgment in their clients’ favor. “I would be shocked if any of these plaintiffs' counsels were working on an hourly basis.”
He said this effect may be especially true given the number, more than a dozen, that name the same business as a defendant: market leader VGW, which operates the Chumba Casino and LuckyLand Slots sweepstakes offerings.
“We don’t comment on legal actions or matters before the courts,” a VGW spokesperson told Vixio GamblingCompliance. “As a general statement and as we’ve said for some time, class actions and other litigations and arbitrations are common across the online social games industry (and the U.S. legal landscape more broadly).
“We have full confidence in our compliance with all laws and regulations where we operate, and remain confident about the medium- to long-term opportunities for our business.”
The broader gaming industry is, of course, no stranger to class-action and loss-recovery litigation.
Major social casino operators including DoubleDown Interactive have had to pay nine-figure settlements as a result of successful class-action lawsuits that claimed their social gaming platforms violated the anti-gambling laws of Washington State.
In Kentucky, where state laws allow third parties, including the state itself, to sue to recover illegal gambling losses, VGW already has settled a class-action lawsuit for $11.75m.
Among the differences between the many civil suits involving fantasy sports and sweepstakes is that those specific verticals often have their own rules written into law. In addition, pick'em operators hold fantasy sports licenses in many states where they operate.
Meanwhile, Wallach said that statutes written in some states to address brick-and-mortar “internet sweepstakes cafes”, which sprung up in the 2000s, also can be used by plaintiffs against online sweepstakes operators.
“The internet cafe was sort of the precursor to the online sweepstakes casino,” Wallach said.
“California and Florida dealt with that with both legislation and judicial rulings. And the size of those states is relevant because in both states there are clawback provisions. The size of the market will obviously go hand-in-hand with the size of the recovery.”
But in terms of a practical impact on sweepstakes and fantasy operators, legal experts view it as unlikely that civil action will play out quickly in what could be a fast-moving regulatory landscape.
“I think the actions by state governments would accelerate action much more than civil litigation would,” Wallach said. “The private lawsuits are going to take time. The time horizon on a civil lawsuit is much longer than the time horizon on a cease-and-desist.”
John Allaire, a counsel at Info Law, expressed a similar sentiment.
“I think that one thing I see in the immediate future is that state regulator actions are likely to be more effective in the short term,” Allaire said. “Class actions take time. There’s a lot of delays.”
But his colleague Schaller noted that there can be some coordination across those two legal fronts, pointing out how plaintiffs filed a civil suit against VGW in Connecticut soon after state authorities issued a cease-and-desist against the company.
“Those in the know will be very aware of what’s happening at the [attorney general] level. And an AG is aware of what is happening at the plaintiff’s bar,” he said.
Wallach said the class-action case in Florida that now names payments business WorldPay as a co-defendant could be one exception to the notion that these cases will move too slowly to be truly impactful.
“The one case that could be a game-changer is the one that names the payment processor,” he said. “The lawyers named WorldPay as a defendant based on their status as a facilitator of these transactions. It’s certainly a lot easier to enforce a monetary judgment against a domestic U.S. company than against one that has its assets overseas.”
But even still, it would take time for any decision to be made. In the meantime, Schaller said the wave of civil actions is unlikely to have ended.
“This is an area that we’re seeing is going to get more attention from plaintiffs, both sweepstakes and DFS,” he said. “There could be more class actions.”
