Sweepstakes casino operators face racketeering charges in Virginia federal court

• A federal lawsuit filed in Virginia alleges sweepstakes casino operators and celebrity promoters violated racketeering statutes.
• Louisiana has introduced legislation classifying sweepstakes operations as racketeering offences carrying up to 50 years imprisonment.
• Legal experts suggest the dual-currency model used by platforms may constitute illegal gambling under federal and state laws.

Sweepstakes casino operators face growing legal threats as prosecutors and lawmakers explore racketeering charges against platforms that critics argue operate as illegal gambling enterprises disguised as social gaming.

A class action lawsuit filed on 31 December 2025 in the US District Court for the Eastern District of Virginia marks the first time federal racketeering allegations have been levelled at sweepstakes operators and their celebrity endorsers, potentially reshaping legal strategy against the industry.

RICO allegations and legal framework

The Virginia lawsuit, representing plaintiffs LaShawnna Ridley and Tiffany Hines, alleges that sweepstakes platform Stake.us, rapper Drake, streamer Adin Ross and Australian social media figure George Nguyen violated the Racketeer Influenced and Corrupt Organizations (RICO) Act by operating and promoting an illegal gambling scheme.

The 22-page complaint argues that Stake.us functions as a “vehicle for real-money gambling” that misleads consumers by branding itself as a legal social casino.

RICO violations, if proven, allow for treble damages — three times actual damages awarded — plus attorney fees. The plaintiffs seek at least $5 million in damages, which could balloon to $15 million if racketeering charges succeed.

Louisiana’s legislative approach

Louisiana has taken the most aggressive legislative stance against sweepstakes casinos. Representative Bryan Fontenot pre-filed House Bill 53 for the 2026 legislative session, which would classify sweepstakes gambling as a predicate offence for racketeering charges.

Under Louisiana law, racketeering convictions carry fines up to $1 million and imprisonment of up to 50 years involving hard labour, according to SBC Americas. If racketeering activity exceeds $10,000, offenders become ineligible for parole or probation for part of their sentence.

The bill follows Governor Jeff Landry’s veto of legislation that would have banned dual-currency platforms outright. Landry argued existing laws already prohibited such operations, prompting the Louisiana Gaming Control Board to issue cease-and-desist orders against multiple operators.

Louisiana Attorney General Liz Murrill issued a legal opinion in July 2025 declaring dual-currency sweepstakes platforms violations of state law.

Industry-wide scrutiny intensifies

The legal developments reflect broader regulatory crackdowns across multiple jurisdictions. Nearly 10 US states passed legislation in 2025 explicitly or implicitly banning sweepstakes-style gaming, according to SBC Americas.

California Governor Gavin Newsom signed sweepstakes legislation in late 2025 addressing loopholes that platforms exploit. California Assemblymember Avelino Valencia, who introduced the bill, stated:

“We cannot look the other way whilst these platforms exploit legal grey areas.”

New York Governor Kathy Hochul signed a sweepstakes ban in December imposing fines between $10,000 and $100,000 per violation. Montana’s ban carries felony charges and potential 10-year prison sentences for violators.

The sweepstakes model allows users to purchase virtual currency packages that include promotional “sweeps coins” for casino-style games, with prizes redeemable for cash. Operators maintain free entry options make the model legal under sweepstakes exemptions.

Legal vulnerabilities and compliance questions

Legal experts note that if courts determine free entry mechanisms are inadequate or illusory, the paid entry pathway could constitute illegal consideration, exposing operators to criminal and civil liability.

The Virginia RICO case includes novel allegations that defendants used Stake.us’s “tipping” function to route money to bot farms that artificially inflated streaming numbers on music platforms, demonstrating prosecutors’ willingness to pursue complex conspiracy theories.

Drake allegedly receives $100 million annually from Stake to promote the platform, according to the Financial Times. Similar litigation against television host Ryan Seacrest for promoting Chumba Casino was dismissed, though the legal landscape has shifted significantly since.

What’s next for sweepstakes

The potential application of RICO statutes represents escalated legal risk compared to standard gambling law violations, as racketeering charges carry severe penalties and allow prosecutors broader investigative tools.

Several states have sent cease-and-desist letters to operators or implemented outright bans. The combination of criminal racketeering exposure and civil class actions could fundamentally alter the sweepstakes business model or drive operators from regulated jurisdictions entirely.

Connecticut’s ban subjects offenders to Class A misdemeanour charges for professional gambling. New Jersey imposes fines up to $25,000 per violation with requirements to return illicit funds. Nevada’s ban on unlicensed operators can result in felony charges with maximum 10-year sentences and fines reaching $50,000.

Industry stakeholders acknowledge that sweepstakes casinos operate in regulatory grey areas with minimal oversight in most jurisdictions. Any significant prosecutorial success using RICO statutes would likely accelerate calls for comprehensive federal regulation of the social casino industry.