Los Angeles City Attorney files landmark lawsuit against Stake.us and partners

Key points:

– The Los Angeles City Attorney has sued Stake.us, Kick Streaming and founders Ed Craven and Bijan Tehrani for allegedly running an illegal online gambling business

– The lawsuit seeks an injunction, restitution of Californian player losses and civil penalties of up to $7,500 per violation

– Third-party gaming suppliers are also named as defendants for aiding the alleged scheme

– The case marks the first governmental civil enforcement action against a sweepstakes casino in the US, and could set the stage for wider legal actions across California

The Los Angeles City Attorney’s Office has launched a major civil enforcement action against Stake.us, its affiliated streaming platform Kick, co-founders Ed Craven and Bijan Tehrani, and more than a dozen gaming suppliers.

The lawsuit, filed in California Superior Court this week, alleges the operation of an illegal online gambling enterprise in violation of California’s Unfair Competition Law (UCL) and False Advertising Law (FAL).

The complaint seeks a permanent injunction to halt Stake.us’s operations in California, restitution of all funds lost by state residents and mandatory civil penalties of up to $2,500 for each violation of the UCL and FAL.

For violations involving senior citizens or disabled persons, the penalties could rise to $7,500 per instance. Given Stake’s scale, the potential exposure runs into the hundreds of millions – if not billions – of dollars.

City Attorney Hydee Feldstein Soto, the first woman and Latina to hold the post, is the first government official in the US to bring a civil enforcement action against an online sweepstakes casino.

Her office is joined in the case by Susman Godfrey LLP, the litigation firm that recently filed a nationwide class action against Virtual Gaming World (VGW), operator of sweepstakes platforms Chumba Casino and Luckyland Slots.

Observers suggest the partnership may signal a wider wave of similar suits across California.

According to the complaint filings, Stake.us was created as a “mirror” version of Stake.com, the company’s international casino and sportsbook, which is blocked in most US jurisdictions.

Prosecutors allege that Stake.us was deliberately designed to circumvent California’s anti-gambling laws, offering a nearly identical interface, catalogue of slot and table games and promotional features.

Players purchase “Gold Coins,” which have no cash value, but receive “Sweeps Coins” (or “Stake Cash”) as a bonus, which can be redeemed for gift cards or cryptocurrency. Regulators contend this dual-currency system masks real-money gambling under the guise of a sweepstakes promotion.

Alongside Stake and its founders, the complaint names a long list of suppliers and partners, including Evolution, NetEnt, Red Tiger, Big Time Gaming, Hacksaw Gaming and others.

Good to know: Additionally, Kick Streaming, the live-streaming platform associated with Stake’s founders, is accused of promoting the alleged gambling scheme to Californians

The lawsuit underscores California’s growing crackdown on sweepstakes casinos, a sector that state regulators have long compared to the now-banned “internet sweepstakes cafes” of the early 2000s.

Those storefront operations offered customers telephone minutes or internet time bundled with sweepstakes entries to play slot-style games for cash prizes. Courts across the US eventually ruled that such schemes constituted illegal gambling.

California law has prohibited sweepstakes cafes since 2015, but their online successors continue to operate in a legal grey area. Assembly Bill 831, currently under debate in the state legislature, seeks to explicitly extend the prohibition to online sweepstakes casinos.

Industry leaders, including VGW and trade groups such as the Social Gaming Leadership Alliance, oppose the bill, arguing their platforms comply with consumer protection standards and offer free ways to play. Regulators, however, argue that the business model is effectively indistinguishable from traditional gambling.

The Los Angeles lawsuit is notable not only for its scope but also for its potential to establish a roadmap for enforcement. Because California law generally prevents private individuals from suing to recover gambling losses, only Government officials can bring actions of this nature on behalf of the public.

By partnering with Susman Godfrey, a firm already active in sweepstakes litigation, Feldstein Soto may be opening the door for other city or county attorneys in California to pursue similar cases.

Whether the lawsuit marks the beginning of a coordinated statewide strategy remains to be seen. But for Stake.us, its partners and the broader sweepstakes casino industry, the filing appears to represent the most serious legal challenge yet.