Missouri lawsuit targets Stake.us alongside Drake and Adin Ross

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2025/05/06: Lawsuit filed in Alabama Federal Court against Stake.us 2025/09/03: Legal case filed against Stake.us in California court over sweepstakes model 2025/04/30: Michigan Gaming Control Board targets Panama-based operators with cease-and-desist orders 2025/05/13: Michigan regulator targets another four online operators with cease-and-desists

The Backstory

Why the pressure on sweepstakes gambling keeps rising

The Missouri complaint lands amid a broader reckoning over sweepstakes-style gambling, a model that claims to avoid traditional wagering rules by using dual in-game currencies. That construct is at the heart of multiple recent actions that argue these sites function like online casinos without licenses, consumer protections or state oversight. Regulators and plaintiffs’ lawyers are now testing whether sweepstakes mechanics are a workaround or a violation, a question surfacing in courts from California to Alabama and in enforcement drives by state regulators such as Michigan’s gaming board.

At issue is how these platforms blend entertainment and exchangeable value. Plaintiffs in several jurisdictions contend that two-coin systems still deliver consideration, chance and prize, the core elements of gambling, even if one coin is pitched as free or nonredeemable. The friction is growing as sweepstakes operators expand their game libraries and marketing while states move faster to draw lines around what is legal. Taken together, the lawsuits and regulator orders form a test case for how far states can extend gambling law to internet products designed to look like promotions.

California moved first to challenge the sweepstakes model

California officials put the legal theory on paper when Los Angeles’ city attorney filed a case targeting Sweepstakes Ltd, operator of Stake.us, accusing it of running an illegal online casino disguised as a sweepstakes. The complaint seeks to halt operations in the state and to return player losses, arguing the site uses a one-to-one, redeemable virtual currency that “skirts” anti-gambling laws. In the filing, the city lays out why labeling coins as free or nonredeemable does not strip them of value when they are intertwined with gameplay and redemption. For details of the California action and the state’s reasoning, see the Los Angeles case against Stake.us over its sweepstakes model.

That case matters beyond California. If a court accepts the argument that sweepstakes coins operate like casino chips, it could ripple to other states where plaintiffs make similar claims. It would also set a benchmark for how prosecutors frame value and consideration in digital environments. The company’s parent has said it rejects the allegations and would defend against such claims, underscoring the stakes of a ruling that could reshape a segment of the online gambling market that grew by leaning on promotional frameworks rather than gaming licenses.

Alabama’s stricter laws give opponents a new venue

Opponents of the sweepstakes model are testing a tougher venue in Alabama, where a class action filed in federal court argues the model violates one of the country’s stricter gambling regimes. The suit contends that Stake.us offers casino-style games played with virtual coins that can be exchanged for cash or prizes, which plaintiffs say meets the definition of illegal gambling. Plaintiffs are asking the court to recognize that the two-tier coin system merges consideration and chance despite the sweepstakes branding. For the complaint’s contours and why Alabama could be pivotal, read the Alabama federal class action challenging Stake.us.

Alabama allows few forms of gambling. There is no statewide sports betting, unlike nearby states. That constraint may give plaintiffs a clearer path, at least on the legal question, because there is less room to argue that sweepstakes mechanics are akin to an already permitted product. A win for the plaintiffs there could embolden suits elsewhere, while an early defense victory could chill some copycat filings.

Regulators in Michigan broaden the crackdown on unlicensed sites

While courts debate sweepstakes, regulators are using established laws to push unlicensed operators out of the gray market. The Michigan Gaming Control Board has served multiple cease-and-desist orders to offshore sites that accept wagers without state licenses, part of a steady escalation against unregulated gambling. The agency targeted Panama-based SportsBetting.ag and BetOnline for taking sports and casino bets, including through cryptocurrency, in violation of state law. Details of those actions are in the board’s notice against SportsBetting.ag and BetOnline.

The board also ordered four additional operators — You Wager, Bet Pop Casino, Wager 7 and Discount Wager — to quit the state, citing risks to consumers from absent dispute processes and weak responsible gaming controls. Read more about that sweep in the Michigan regulator’s actions against another four online operators. In a further round, Michigan moved against six offshore casino sites, sending what it called a clear message that the state will not tolerate illegal providers. The latest list and the board’s warning to residents are outlined in the notice that targets six unlicensed operators.

Michigan’s campaign does not single out sweepstakes providers, but it underscores a broader posture: tighten the perimeter around legal iGaming and sports betting by leaning on licensing regimes and consumer protection language. That posture boosts the argument that if a site acts like a casino — by offering slots and table games, accepting funds and enabling cashout — it should meet the same standards and oversight.

The playbook: dual currencies, casino-style games and influencer reach

Across these cases, plaintiffs focus on mechanics and marketing. The dual-currency design is central. One coin is framed as having no cash value, while the other can be redeemed for money or prizes. Plaintiffs say the pairing lets operators claim the experience is a sweepstakes while delivering the substance of wagering. California’s filing highlights a one-to-one coin-to-dollar relationship in practice. Alabama’s complaint zeroes in on how both coins function “like casino chips.”

The product mix is also influential. Lawsuits cite slots and other casino-style games, not just casual or promotional play, which makes the experience look and feel like an online casino. That alignment invites comparisons to regulated platforms that pay licensing fees, fund responsible gambling programs and submit to audits. The marketing channel matters, too. As social media creators and celebrities stream gameplay, they broaden reach in states where regulated operators may be shut out or constrained. That visibility can draw more scrutiny when the underlying model faces legal questions.

What to watch next

The early legal milestones will come from procedural rulings and motions that test the core theory: whether sweepstakes coins, in context, create illegal gambling. California’s case could yield the first substantive read on how a large state views redeemable digital currencies. Alabama may offer a clean statutory test because of its limited legal gambling. Parallel enforcement in states like Michigan will continue to close space for unlicensed operators, even if they are not sweepstakes brands, by shrinking the market for gray-area products and nudging users toward licensed sites.

For sweepstakes operators, the risk is twofold. A court loss could force changes to currency design, redemption rules and marketing, or trigger restitution. A regulatory wave, even without litigation, could deter payment partners and affiliates, raising operating costs. For state officials, the question is how to protect consumers without conflating legitimate promotions with de facto casinos. However it resolves, the outcome will shape where the line is drawn between marketing and gambling in the U.S. internet economy.