A new class action lawsuit has been filed in Jackson County, Missouri, that seeks to not only permanently shut down Stake.us from operating in the state but also seeks injunctive relief and monetary damages against the platform’s two biggest promoters – world-renowned artist, Drake, and online streamer, Adin Ross.
Similar to previous cases filed against the platform, the class action complaint alleges that Stake.us offers online gambling in violation of Missouri law under the misleading guise of providing a free-to-play social casino.
A similar lawsuit naming the same parties was also filed in Bernalillo County, New Mexico.
Complaint alleges deception from Stake.us
The complaint specifically calls out Stake.us’ representation that the “PLATFORM AND GAMES DO NOT OFFER REAL MONEY GAMBLING.”
Stake.us, like other sweepstakes platforms, offers two types virtual currency, Gold Coins and Stake Cash, with Stake Cash giving players the chance to win real prizes. Since Stake Cash can be redeemed at a fixed 1:1 ratio with USD, “Stake Cash functions as real currency by directly linking virtual wagers to actual monetary value, allowing players to seamlessly convert their virtual gambling winnings into real-world money,” the suit says.
As such, the complaint contends that Stake.us’ offering of Gold Coins serves as a subterfuge to induce players to play games with Stake Cash.
The complaint alleges that Stake.us spreads its deceptive messaging through sponsorships, social media marketing, and celebrity endorsements – the most prominent being Drake and Adin Ross, each of whom host livestreams of their gaming activity on Kick.com (a streaming platform created by Stake.us’ founders for the purpose of promoting Stake.us). The complaint mentions other Stake.us sponsorships – namely, “Everton FC in the English Premier League, the Formula One racing team Kick Sauber and multiple MMA and UFC fighters including Israel Adesanya” – yet does not include them as specific proponents of Stake.us’ “targeted and misleading marketing.”
Three arguments for relief
In sum, the class action complaint seeks relief based on the following causes of action:
- Violation of Missouri’s Merchandising Practices Act, based on “use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce” stemming from: (1) Stake.us’ unfair and deceptive labeling of its platform as a “social casino” as opposed to a “real one,” and (2) Drake and Ross deceptively misrepresenting “that they only gamble with their money on Stake,” despite it believed that Stake.us actually provides them free credit to do so.
- Unjust Enrichment, based on Stake.us, Drake, and Ross knowingly engaging in the aforementioned deceptive practices for the purpose of taking money from Missourians.
- Violation of Missouri Law Governing Contracts Against Public Policy, which provides that “Any person who shall lose any money or property at any game, gambling device or by any bet or wager whatever, may recover the same by a civil action.”
Drake potentially shielded from liability?
The introduction of influencers as named defendants presents an interesting, yet not new, wrinkle to the litigation. The complaint specifically mentions that Stake.us prominently features Drake on its website for the purpose of “using his celebrity influence to encourage impressionable users” to access the platform’s services.
Thus, it can be assumed that Drake executed a brand ambassador/endorsement agreement for the purpose of granting Stake.us endorsement rights in connection with its services.
Possible Stake.us contract terms that could prevent liability
Such contracts typically include the following terms:
- Grant of Endorsement Rights – “Endorsement Rights” refer to the right to use the influencer’s name, image, and likeness (including, autograph, signature, voice, performance, photographs, quotations, biographical details, attributes, and any other approved means or identifying attributes) in connection with the promotion, advertising, and marketing of a company’s services in various media formats. Such use is generally rendered via materials created (and owned) by the company.
- Influencer Services – In addition to granting Endorsement Rights for the duration of the relationship, the influencer may also be required to perform public-facing services promoting the company, such as: (i) appearing on a certain amount of shows/streams, (ii) providing a certain number of social media posts/interactions, (iii) participating in photo/video shoots, and/or (iv) engaging in other promotional activities and appearances. Such services are generally provided in accordance with company guidelines and/or otherwise subject to company approval.
- Compensation/Free Credits – In exchange for the grant of rights and performance of services, the influencer may receive consideration in the form of: (i) cash payment, (ii) company equity, (iii) referral bonuses for each new customer signed up using the influencer’s promo code, and/or (iv) percentage of sponsorship revenue. The influencer may also receive a specified amount of free gaming credits to use on the company’s website that may not be redeemed, refunded, or withdrawn for real-money.
- Indemnification – For the influencer’s protection due to lack of control over the company’s operations, language is usually provided to indemnify, defend, and hold harmless the influencer from any third party claim for injury or damages relating to the use of the company’s products or services.
Assuming such indemnification provision is in place, the inclusion of Drake and/or Ross as defendants likely will not result in any actual relief being obtained directly from either party.
