The smiling faces of Paris Hilton and Ryan Seacrest made surprise looks before the Louisiana Senate for Friday's hearing on illegal sports betting.
No, they weren't personally in attendance, but the world-famous celebs were conspicuously consisted of in a slide presentation on social and sweepstakes gambling establishments - the questionable sites offering both complimentary casino-style video games and rewarding prizes, such as cash, gift cards or cryptocurrency. In one ad, the fist-pumping Seacrest is seen plugging Chumba Casino, where anyone can 'bet free,' while a crop-topped Hilton holds a chip for sweepstakes operator, Wow Vegas, in the other.
The websites are simply two cogs in the multibillion-dollar industry that now finds itself besieged by claims. In the eyes of numerous video gaming corporations, not to point out claim complainants and state regulators, sweepstakes casinos function as traditional casinos, just without the oversight, consumer defenses and tax laws. So not only can they prevent the steep 24-percent federal gambling levy, however sweepstakes operators aren't based on regulatory hurdles like anti-money laundering and responsible-gaming securities.
One operator, Australia-based Virtual Gaming Worlds (VGW), reported $4 billion in profits last year alone. Now the company deals with allegations of prohibited sports betting in a New York suit that claims VGW utilizes celebrity endorsers to 'create a veneer of authenticity' around its product. (See VGW's declaration below)
'I'm not sure" if you don't trust us, you can rely on Paris Hilton" is a winning message for companies running multibillion-dollar illegal operations out of locations like Malta, Isle of Man, or US mail drops,' Friday's presenter, Howard Glaser of gaming corporation Light & Wonder, told DailyMail.com.
Sweepstakes endorsers consist of a series of celebs from sports betting lovers Drake and DJ Khaled to swimmer Michael Phelps, along with NBA stars Karl-Anthony Towns and Paul George - none of whom offer any distinctions between standard gaming and sweepstakes play.
Paris Hilton is seen plugging Wow Vegas, one of many sweepstakes casinos found online
Ryan Seacrest prompts fans to play at Chumba Casino, where many - however not all - games are free
Drake has a handle social sweeps casino, Stake, that he frequently promotes on social media
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Instead, ads typically center around the social aspect of the gambling establishments, while omitting the potential for actual gaming losses.
Others lure clients with guarantees of rewards. One such operator, Stake, ran a social media advertisement flaunting Drake's cars, aircrafts and mansions before pivoting to footage of the rap artist playing online casino-style video games.
'Daddy, why do we have a lot cash?' check out the very first caption on the screen.
Another caption described: 'Because I never gave up.'
The discrepancy between sports betting sites and social or sweepstakes gambling establishments is a bit intricate, however operators of the latter insist they're not included with the former.
A spokesperson for a market trade group, the Social and Promotional Gaming Association (SPGA), discussed its members are not in direct competitors with online gambling establishments and sportsbooks. Furthermore, according to SPGA information, most of the players on social-sweepstakes gambling establishments are sports betting complimentary.
'Most social sweeps consumers never ever purchase,' the SPGA representative told DailyMail.com. 'The minority of customers who make purchases do so in quantities far smaller than the normal deposit or bet size at real-money online gambling sites.'
Social casinos offer customers an opportunity to play casino-style games with pals. Players have the choice to buy worthless currency typically described as 'gold coins,' which can not be exchanged for real cash, however can be used to unlock various functions within the games.
But within the world of social casinos exists sweepstakes gaming, allowing clients to get other currency called 'sweeps coins' that can be exchanged for cash or other rewards.
And therein lies the potential for monetary losses, like the ones declared by plaintiffs in Florida, Georgia, New Jersey and New York City. One player told the Washington Post he lost more than $100,000 on sweepstakes gambling establishments in the previous year after continuing to purchase more coins in pursuit of cash and other things of value.
The Philadelphia 76ers' Paul George is seen promoting a Worldwide Poker occasion
Social sweeps gambling establishment Stake ran an ad displaying Drake's vehicles, airplanes and estates
Karl-Anthony Towns of the New York City Knicks is another NBA star plugging VGW's Global Poker
Traditional online casinos are banned in all but seven states, which has assisted to sustain the popularity of sweepstakes gambling establishments.
Anyone over the age of 18 can access the sweepstakes websites, which do not need generally require identification. However, websites like Chumba will ask for IDs from players trying to withdraw any funds.
Many sites, like the crypto-compatible Stake, permit customers to submit mail-in requests for complimentary sweeps coins, offered the gamers follow painfully specific guidelines. What's more, players are often rewarded with sweeps coins merely for registering, thus offering them a reason to try their hands at any variety of gambling establishment games for a chance to win - or lose - genuine cash.
So why are sweepstakes sites allowed to run in 48 states, while online casinos are prohibited in all however 7?
According to the stakeholders, their product is the complimentary casino-style video gaming, and the real-stakes competitors is simply a way of promoting their support.
'Social sweepstakes games are just a kind of online entertainment,' an SPGA representative told DailyMail.com by e-mail. 'No purchase is required to dip into social casinos with sweepstakes prizes. Consumers never have to spend for an opportunity to win prizes. That absence of a purchase requirement - or" factor to consider" - is a crucial difference between social sweeps and standard online sports betting websites like gambling establishments.'
Think of the manner in which McDonald's uses its annual Monopoly game to promote its food: Customers aren't paying to bet, but rather they're purchasing hamburgers and french fries that use them the opportunity to win lucrative prizes, such as a $1 million jackpot.
And without a purchase requirement, or 'consideration', the video game itself doesn't fulfill the definition of gaming in the US.
'Sweepstakes are an enduring technique for promoting all type of daily businesses in the United States, whatever from hamburgers to publication memberships to coffee and home improvement stores,' the SPGA representative told DailyMail.com. 'Sweepstakes promotions are routinely used by a who's who of family names like AT&T, Chase, Home Depot, Marriott, Starbucks, and Wal-Mart.'
But to many betting industry experts, that argument doesn't cut it.
For starters, video gaming attorney Daniel Wallach explains, McDonald's Monopoly game doesn't run forever. Rather, it has a distinct start and end, thereby recommending the sweepstakes is not the fast-food giant's primary product. Instead, the sweepstakes is being utilized to promote genuine items like french fries, shakes, and the Filet-O-Fish.
'They do not last forever and they're normally not connected to casino-style video games of chance,' Wallach informed DailyMail.com. 'They're simply cash free gifts.
'The sweepstakes [casinos] possess none of the qualities typically related to McDonald's-design sweepstakes promos,' Wallach continued. 'Besides running in all time, the sweepstakes gambling establishments use" casino-like" payments, usually 80 percent or more of incomes, whereas the normal payout percentage for a short-lived marketing sweepstakes is a trivial share of the revenue made by the business [typically less than one percent]'
Wallach fasts to liken the online social sweeps casinos to the web cafes that emerged in Florida, offering consumers the opportunity to play casino-style games for real rewards. Many of those brick-and-mortar establishments have since been shuttered over claims of illegal sports betting.
DJ Khaled is amongst a number of celeb spokespeople for VGW's Global Poker brand
Now, Wallach argues, social sweeps gambling establishments need to deal with similar examination.
'These distinctions are not approximate,' Wallach said of social sweeps gambling establishments. 'They have repeatedly been mentioned by courts and state lawyer generals as essential factors in determining that a sweepstakes promotion was in truth a guise for prohibited sports betting.'
Among the gambling establishment market's leading trade organizations, the American Gaming Association, is now pushing lawmakers to investigate sweepstakes operators and, in some cases, enact brand-new legislation on the issue.
'Consumers are being deprived of defenses and states are giving up considerable tax and income chances as this sports betting replaces that carried out through regulated channels,' checked out a well-circulated AGA memo.
And then there are the complainants who have taken legal action against social gambling establishments in more than a lots states.
Sweepstakes gambling establishment operators paid a combined $14.2 million in 4 different cases in Kentucky without confessing any misbehavior, according to the Washington Post. Meanwhile VGW concurred to pay $11.75 million in one class-action claim, saying the settlement was made to avoid legal costs and continued lawsuits.
Michael Phelps has actually signed a handle the VGW Group, which owns Global Poker
In the most recent lawsuit, which is largely similar to its predecessors, New York state residents Lamar Prater and Rebecca Pratt both declare to have lost well over $1,000 to VGW, which is described in the filing as an 'illegal gaming enterprise. '
Apple and Google have actually likewise been named as defendants in suits for hosting the sweepstakes websites. But unlike VGW, neither tech company reacted to DailyMail.com's request for comment.
'We normally do not discuss matters before the courts,' a VGW spokesperson told DailyMail.com through email. 'However, we note that this claim has only simply been filed with the court and VGW has not been officially served.
'We have full self-confidence in our compliance with all laws and policies where we run, and stay confident about the future,' the spokesperson continued. 'We continue to use our free-to-play video games across most of North America, as we have for more than a years, developing not just terrific games, user experiences and entertainment, but likewise guaranteeing this is done safely, responsibly and at the greatest level of requirements.
'More broadly, we 'd repeat that class actions and other lawsuits and arbitrations are relatively common across the online social video games market (and the US more broadly), and our standard practice is that we mean to intensely defend any claim which may be brought against us.'
The issues between standard online gambling and sweepstakes gambling establishments could prove bothersome for some celebrity endorsers.
Towns, a star center with the Knicks, and the 76ers' George both back VGW's Global Poker brand while the NBA is partnered with conventional video gaming titans like FanDuel and DraftKings.
'It's ironic that expert athletes are hawking prohibited sports betting wagering 'sweeps' websites while at the same time the leagues desire to predict a strong stance against prohibited sports betting - especially when trying to tamp down the occasional sports betting scandal,' Glaser told DailyMail.com.
It was simply 8 months ago that Toronto Raptors forward Jontay Porter got a lifetime ban from the NBA over accusations he conspired with gamblers. However, to be clear, Porter's scandal is unrelated to anything involving social or sweepstakes gambling establishments.
Along with VGW, Apple and Google are being taken legal action against for hosting supposedly prohibited sports betting websites
Regardless, Glaser sees sweepstakes casinos as a significant concern for leagues such as the NBA.
'I 'd anticipate that a league crackdown on athletes endorsing sweepstakes websites refers when, not if,' Glaser added.
Neither an NBA representative nor the players' agents reacted to DailyMail.com's ask for comment. For that matter, spokespeople for Drake, DJ Khaled, Hilton, Seacrest and Phelps also neglected to respond to DailyMail.com e-mails.
Asked if their star endorsers have an obligation to describe to customers the differences and resemblances between iGaming and sweepstakes gambling establishments, VGW insisted there is nothing more that requires to be done.
'We have full self-confidence in our influencer and ambassadorial partnerships, and our company practices more broadly,' the spokesperson stated. 'Some of our worths are" our players come first" and" we do what's right", and we put our values at the core of whatever we do.'
Glaser, an outspoken challenger of sweepstakes websites, sees things differently.
'Celebrities who lend their names to dubious illegal sports betting sites are, at a minimum, putting their track records at risk in addition to courting civil and class actions by customers who declare harm,' Glaser said. 'There is also some risk that state regulators and state attorney generals of the United States rope celebrity endorsers into enforcement efforts for helping with unlawful gaming.'
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