Evolution AB was among the suppliers named in a lawsuit that’s focused on the legality of Stake.us’ sweepstakes operation in California.
The Los Angeles City Attorney, Hydee Feldstein Soto, has sued Stake.us, a sweepstakes casino operator, on behalf of the people of California for operating what the suit describes as “one of the largest and most profitable illegal gambling enterprises in California’s history”.
Evolution AB, alongside other suppliers such as Red Tiger Gaming, NetEnt, No Limit City and Hacksaw Gaming, have also been included over allegations of aiding and abetting the running of the same enterprise.
The action has been brought under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL) – which allow the state to pursue those it believes run illegal businesses, as well as those who aid and abet them.
The suit states: “[The] defendants’ misconduct has inflicted and continues to inflict severe harm on Californians, especially individuals prone to gambling addiction and consumers targeted by false and misleading advertising.”
If the suit is successful, consequences for those named could include civil penalties of up to $2,500 per violation. Given the scale of sweepstakes operations, legal expert Daniel Wallach suggested any financial penalties “could easily tally hundreds of millions for an operator like Stake”.
This year, individual plaintiffs have already filed against Stake.us in Alabama, California and Illinois, alleging that the operator is offering online wagering that is falsely marketed as free-to-play gaming.
California gets tough on sweepstakes
Stake.us is not the only sweepstakes operator to be facing legal action in California.
VGW has been named in a lawsuit filed in the Northern California District Court, challenging the legality of its portfolio of sites, which includes Chumba Casino, LuckyLand Casino and Global Poker.
A law firm involved on behalf of the plaintiffs in both cases is Susman Godfrey, and Wallach suggested the firm’s involvement could lead to wider action throughout California.
He said on X: “[California] law generally bars private civil lawsuits to recover gambling losses, but governmental officials can sue on behalf of the people for injunctive relief, restitution, and mandatory civil penalties of up to $2,500 per violation.
“If Susman Godfrey is doing some of the heavy lifting, we may begin to see similar lawsuits from other city and county attorneys throughout California (co-counseled with Susman Godfrey).”
Alongside legal action, legislators in California are also currently considering AB 831, a bill that seeks to criminalise sweepstakes gaming.
Implications for Evolution
Although suppliers have been named in similar cases against sweepstakes, the inclusion of Evolution is significant considering the developers standing as one of the largest suppliers of online casino content worldwide.
Although named separately, NetEnt, Red Tiger, Big Time Gaming and Nolimit City have been named collectively as Evolution defendants, given they are part of Evolution.
Collectively, Evolution’s defendants are accused of supplying 232 slots, as well as providing casino games like roulette, baccarat and race track, which the court documents state are advertised as created by Evolution.
In addition, the documents state that Evolution released “at least 14 live casino games” on Stake.us, such as Fireball Roulette, Crazy Coin Flip and Marble Race, all of which were also advertised as created by Evolution.
Given that the US currently only has nine regulated iGaming states, the suit also accuses the game developers, like Evolution, of using Stake.us to “access otherwise unreachable US markets like the California market”.
It adds: “Stake.us opens up the market to new customers—like Californians—for the game developer defendants. The game developer defendants understand this dynamic and have chosen to take advantage of it, in violation of California law.”
Given the firm has been accused of knowingly licensing its products for an online casino that is alleged to be illegal, Evolution risks not only financial consequences if the suit is successful but also the reputational damage that comes with this.
Michael Schmitt, Managing Director of Trider.UK, wrote in an article posted on LinkedIn: “Even if Evolution argues that it sold its content under the understanding that Stake.us was a social casino rather than a real-money gambling operator the court documents present evidence that the dual-currency system was a thinly disguised mechanism for wagering.
“For a company valued primarily on growth into North America, the optics of being accused of enabling illegal gambling in California are deeply damaging. Institutional investors and regulators alike may reassess whether Evolution can credibly expand in the United States while carrying such allegations.”
These latest allegations quickly follow legal evidence submitted in New Jersey that allege Evolution operates games in illicit markets such as Iran, Sudan and China.
The allegations were made by the private investigation service, Black Cube, which in an affidavit filed by its Director, Avi Yanus, claims that it has recorded former and current Evolution employees describing how its games were operated in a myriad of countries.
The submission forms part of an ongoing defamation case against the law firm Calcagni & Kanefsky LLP and an unnamed competitor. Evolution has described the allegations as “false and defamatory”.
However, although Evolution continues to deny the claims, any signs of improper practice may impact the company as it seeks to expand in the US.
Evolution is currently working through a deal to buy the casino table game maker Galaxy Gaming, which is pending regulatory approval in every state Galaxy holds a licence.
Some US regulators have rules restricting companies’ operations in international markets where gambling is illegal, therefore, any claims made as part of legal action may complicate the approval process.
Slotbeats has reached out to Stake.us and Evolution for comment.