Google And Apple Face RICO Lawsuit Over Sweepstakes Casino Apps

Tech giants Google and Apple are facing new legal scrutiny in New Jersey, named in a lawsuit accusing them of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act. The lawsuit targets their involvement in hosting sweepstakes casino apps, a growing sector that has stirred significant controversy due to its unique operating model and regulatory ambiguities.

Social casinos allow users to play for free or to spend money on virtual currency, which can unlock features in games often associated with gambling, such as slot machines, blackjack, and roulette. Some social casinos have gone further to add sweepstakes components, such as real-money prizing.

While these platforms are popular for their accessibility and entertainment value, and appear to comport with current applicable laws, though they vary by state, critics argue that they essentially turn smartphones into unregulated gambling devices.

Unlike traditional casinos, sweepstakes operators are not licensed or regulated in the U.S. and avoid paying gaming taxes, despite primarily targeting American consumers. In addition, most of the major sweepstakes casino operators are based offshore.

Australia-based Virtual Gaming Worlds (VGW), which runs Chumba Casino, LuckyLand Slots, and Global Poker, exemplifies the industry’s success. In 2023, it reported $4 billion in revenue, including $322 million in net earnings.

As recently pointed out in The Washington Post, its financial success has allowed it to sponsor Ferrari’s Formula One team and collaborate with high-profile celebrities like Ryan Seacrest, Michael Phelps, and DJ Khaled to promote its platforms.

Impact on the regulated gaming industry

The rise of sweepstakes casinos has not gone unnoticed by the regulated gaming industry.

Expressly legal and regulated online casinos, operational in just seven states, generated $6.1 billion in gross revenue in 2022, according to the American Gaming Association (AGA).

By comparison, legal sports betting — available in over 30 states — brought in $11 billion in the same year. The AGA and other stakeholders in the regulated sector view the sweepstakes model as a challenge, both from a competitive standpoint and because it operates outside traditional oversight mechanisms.

The lawsuit in New Jersey highlights growing tensions between the regulated and unregulated gaming sectors. It accuses Google and Apple of facilitating the proliferation of sweepstakes casinos by allowing their apps on the Google Play Store and Apple App Store, respectively.

By hosting these platforms, the lawsuit claims, the tech companies allegedly are enabling an industry to skirts U.S. gambling laws while potentially exposing consumers to financial and psychological risks.

Calls for greater oversight

The lack of regulation in the sweepstakes casino market has fueled calls for stricter oversight. Critics argue that the absence of licensing and tax obligations creates an uneven playing field, disadvantaging legal operators who comply with stringent regulatory standards.

Moreover, the accessibility of sweepstakes apps raises concerns about problem gambling, particularly among younger demographics drawn to the casual gaming experience.

Proponents of regulation argue that bringing sweepstakes casinos under the same legal framework as traditional gambling would provide better consumer protections, generate tax revenue, and level the competitive landscape. However, efforts to close regulatory loopholes face challenges, particularly given the offshore nature of many operators.