Sweepstakes casino operator Stake.us recorded a win in a California federal court that will see it head to arbitration.
Dennis Boyle sued Stake.us (Dennis Boyle v. Sweepsteaks Ltd.) in September 2024, seeking public injunctive relief to prevent the website from continuing to operate in California. The complaint alleges that Stake.us utilizes the concept of free social gaming as a pretext to offer real-money gambling, despite the fact gambling remains an illegal activity within the state.
Boyles is suing over the alleged violations of California’s Unfair Competition Law and California’s Consumer Legal Remedies Act. He has not requested damages and primarily wants to see the site shut down.
Sweepstakes casinos are under the spotlight in multiple ways, including civil suits and potential bans at the state level. Last month, Montana became the first state to ban sweepstakes casinos.
Legality of Stake.us will go to arbitration
Boyle was handed a defeat with the court granting Stake.us’ motion to compel arbitration.
The following ‘gateway’ issues are reviewed to determine whether to compel arbitration: (1) does a valid agreement to arbitrate exists between the parties, and (2) does the agreement cover the dispute at issue.
Boyle first attempted to argue that the agreement to arbitrate was invalid for two main reasons.
First, Stake.us “operates an illegal gambling website, making their gambling-related contract, Terms and Conditions and Arbitration Agreement, void.” Second, the operator is not registered or licensed to conduct business in California.
District Court disagreed
The court disagreed and stated that, under California law, the question of illegality and/or whether a contract is provided for an unlawful purpose is an issue of “enforceability,” and not a matter relating to whether the contract was validly formed. As a result, the court held:
“Accordingly, the Court denies to rule on the issue of illegality as it should be given to the arbitrator in the first instance. The Court denies to address the illegality of the contract due to [Stake.us’] corporate status on similar grounds. Whether the contract is void for illegality is a question for the arbitrator.”
Stake.us terms and conditions deemed valid
Boyle’s remaining argument that the agreement to arbitrate is invalid based upon unconscionability was also summarily struck down by the court.
California law requires that both procedural unconscionability – i.e. lack of options and/or meaningful choice regarding whether to agree to a contract – and substantive unconscionability – i.e. contract terms so unfair/one-sided that it “shocks the conscience” – be shown in order for a court to refuse enforcement of an arbitration agreement.
Boyle failed to address whether his consenting to Stake.us’ terms and conditions and arbitration agreement when initially registering an account on the platform was procedurally unconscionable. Notwithstanding, because Stake.us provides users the ability to opt-out of arbitration, any argument that Boyle was deprived of meaningful choice regarding whether or not to agree to arbitrate would have likely been futile.
Due to failing to meet his burden to prove any defense to the validity of the agreement to arbitrate, the court determined that Boyle “must arbitrate his claims” with Stake.us and stayed the case pending the outcome of binding arbitration.
Ruling could impact another sweepstakes case
The pursuit of public injunctive relief was originally viewed as a method that could be used to override mandatory arbitration provisions contained in an operators’ terms of use. However, based on the ruling provided in Boyle, such does not appear to be the case.
Boyle has a similarly-filed case against the operator of social casino platform Pulsz also pending in the United States District Court Central District of California. Per an agreement entered into between the parties, this case has been stayed until late summer, with Pulsz’ response to Boyle’s First Amended Complaint not being due until July 14, 2025.
Based on the recent outcome regarding Boyle’s case against Stake.us, it would not be surprising if Boyle elected to voluntarily dismiss his action against to Pulsz in order to pursue arbitration absent court order.
Stake.us moved the case to federal court
Boyle’s complaint was originally filed in Orange County Superior Court, but later removed by Stake.us to the United States District Court for the Central District of California in February 2025. Boyle attempted to have the case sent back to state court on the basis that he lacked Article III standing to have his case heard in federal court.
However, Boyle’s motion was denied, with the court stating that he met the test to have his case heard before it due to his allegations demonstrating “actual and imminent threat of future harm.”
Could outcome have changed if Boyle closed his sweepstakes account?
In a separate case in which social casino operator Modo.us is also being sued by a California plaintiff seeking public injunctive relief (Dinslage v. ARB Gaming, LLC), the plaintiff was successful in defeating Modo.us’ attempt to remove the case to the Northern District of California because Modo.us was unable to prove that the plaintiff faced future potential harm.
In Dinslage, the plaintiff’s account had already been terminated on the website at the time the action was filed. As a result, the only way the plaintiff could suffer additional harm would be if he opened a new account in violation of the platform’s rules – a speculative assumption that the district court was not willing to make.
Unlike Dinslage, Boyle failed to show that he had closed his account or taken any other steps that would prevent him from continuing to use the platform, thus allowing Stake.us to maintain the action in federal court.
