"Prettier Ponzi: Stake.us Faces Yet Another Legal Tussle"
Alabama Files Lawsuit Against Stake.us, Accusing Them of Disguising Real-Money Gaming Under Sweepstakes Regulations
Crypto-casino Stake.us, the so-called social version of Stake, finds itself in hot water once more. This time, it's the US District Court for the Northern District of Alabama that's hosting a lawsuit against the site, alleging it runs an unlawful gambling business. Plaintiffs Laura Hall and others have set their sights on Stake.us.
According to the complaint, Stake.us's in-game currencies, Gold Coins and Stake Cash, are more than just pixels — they're a problem. Stake.us claims to be legal because it's not a betting site, but rather a social casino offering sweepstakes, with no real-money value attached to the in-game currency. However, the lawsuit sharply disagrees, branding this sweepstakes argument as an "outdated trick" that crooks used in the early 2000s.
Stake has faced legal challenges before, in California and Illinois.
Gold Coins versus Stake Coins
To grasp the heart of this legal battle, first let's dive into Stake.us's modus operandi. At first glance, it looks like your average social casino. Players nab Gold Coins through registration, daily bonuses, and promotions, just like on any imaginary money site, with no tangible prizes on offer.
But here's the kicker: players can purchase Gold Coin bundles, and this is the bone of contention in the lawsuit. With these bundles, players may receive Stake Coins, the premium virtual cash of Stake.us. Players wager Stake Coins in games (which can also be earned via promotions), and once they meet specific conditions, they can trade them for cryptocurrency.
Stake Coins can be exchanged for something with real-world value
Although Gold Coins have no real-world value, Stake Coins can be converted into something that does. In essence, it's money with extra hoops to jump through, as players don't deposit actual currency onto Stake.us but can still buy cheap virtual money, gamble with it, and turn it into real, er, cryptocurrency (that, in turn, can be converted into real money).
According to the lawsuit, Stake "attempts to separate chance from consideration by offering a two-tiered system of virtual coins..., while calling the whole shebang a 'sweepstakes.'"
Recalling Internet Cafes
The "outdated trick" remark brings to mind the shady internet cafés that cropped up in the early 2000s. Before everyone had home internet and unlimited calling, internet cafés found themselves serving as a cover for illegal gambling dens. Players would shell out for internet time or pre-paid calling cards, receiving credits to play on gambling machines on the premises.
Similarly, Stake.us offers users the opportunity to purchase one thing (Gold Coin bundles) and effectively gain access to real-money gambling (Stake Coins, which can be exchanged for cryptocurrency, and then converted into real money).
Bottom line: Stake.us and its intricate currency system are reminiscent of those deceptive internet cafés that duped authorities and unsuspecting patrons with their gambling operations in disguise.
- The lawsuit against crypto-casino Stake.us in the US District Court for the Northern District of Alabama claims that Stake Coins, which can be exchanged for cryptocurrency, are a part of a problematic gambling system within the platform, contributing to the case being likened to the illegal gambling operations of the early 2000s internet cafes.
- The outdated sweepstakes argument used by Stake.us to legalize its games is sharply disagreed upon by the plaintiffs, as it mirrors the method used by internet cafes in the early 2000s for running unlawful gambling businesses, where users would purchase something to gain access to real-money gambling.
