The Legal Crosshairs on Sweepstakes Casinos

The Legal Crosshairs on Sweepstakes Casinos: A State-by-State Look at Pending Lawsuits

From class actions to state tax suits, the sweepstakes casino industry is facing mounting legal pressure across the U.S. This article summarizes the key pending lawsuits, focusing on the states, the defendants, and the charges at issue.

The sweepstakes and “social casino” model has boomed over the past five years, marketing itself as a legal way to simulate casino play without violating state gambling laws. Operators such as VGW Holdings (behind Chumba Casino, LuckyLand Slots, Global Poker) and MW Services Ltd. (WOW Vegas) have leveraged a dual-currency system—where “Gold Coins” are sold for entertainment, and “Sweeps Coins” can be won and redeemed for cash—to reach millions of U.S. players.

But this model has drawn lawsuits from multiple angles: state tax collectors, consumer class actions, and regulatory agencies. Below is a comprehensive summary of the pending lawsuits that currently define the legal battlefield.

Louisiana: Tax Collection Suits Against VGW and WOW Vegas

State: Louisiana

Defendants: VGW Holdings; MW Services Ltd. (WOW Vegas)

Allegations: Failure to pay state sales and use taxes on virtual coin sales, totaling about $44.4 million in back taxes, interest, and penalties.

The Louisiana Department of Revenue (LDR) has filed suits arguing that sweepstakes operators must collect and remit taxes on virtual currency bundles purchased by state residents. The cases represent one of the first aggressive state-level attempts to target the economics of sweepstakes casinos rather than their legality per se. The state’s Attorney General has also issued opinions that online sweepstakes casinos violate Louisiana law, providing political cover for the tax enforcement actions.

Massachusetts: Class Action Over “Deceptive Practices”

State: Massachusetts

Defendants: VGW Holdings US and affiliates

Allegations: Illegal gambling, unjust enrichment, deceptive business practices.

Filed in Suffolk County Superior Court in January 2025, the Massachusetts class action contends that VGW misrepresents its sweepstakes casinos as harmless entertainment while actually operating unlicensed online casinos. Plaintiffs argue that the use of “Gold Coins” and “Sweeps Coins” disguises what is in fact real-money gambling. The complaint also accuses VGW of “whitewashing” the word gambling from its marketing while still profiting from it.

The plaintiffs seek restitution, damages, and equitable relief under state consumer-protection law.

Georgia: Federal Class Action Targeting VGW’s Core Brands

State: Georgia

Defendants: VGW Holdings Limited, VGW Malta Limited, VGW LuckyLand Inc., VGW GP Limited

Allegations: Operation of illegal gambling in violation of Georgia law; false advertising; fraud.

Filed in federal court (Northern District of Georgia) in May 2024, the Kennedy v. VGW lawsuit targets the company’s major brands (Chumba Casino, LuckyLand Slots, Global Poker). The plaintiffs argue that “Gold Coins” purchases are merely a smokescreen to facilitate gambling with cash-redeemable Sweeps Coins.

Georgia courts have already dismissed some earlier sweepstakes suits on procedural grounds (such as jurisdiction and arbitration clauses), but the Kennedy case remains active and could set a precedent for future enforcement.

Montana: Spouses Sue for Gambling Loss Recovery

State: Montana (federal case anchored in D. Mont.)

Defendants: VGW entities

Allegations: Recovery of gambling losses under state “loss recovery statutes” in Montana, Illinois, Kentucky, Ohio, and Tennessee.

Filed in April 2025, this novel case is led not by players but by their spouses, who invoke century-old loss-recovery laws allowing family members to reclaim gambling losses. Plaintiffs argue that sweepstakes casinos are illegal gambling houses and that family members have standing to demand repayment of losses—sometimes up to triple damages, depending on the statute.

This approach sidesteps common defenses such as arbitration agreements and lack of standing, making it one of the most closely watched cases in the sector.

Delaware: Private Civil Action and Regulatory Fallout

State: Delaware (federal court, post-transfer from Florida)

Defendants: VGW Holdings Limited, affiliates, and payment processors (including Worldpay)

Allegations: Contractual and statutory claims tied to alleged unlawful gambling operations.

The Knapp v. VGW case, currently pending in the District of Delaware, includes not only the operator but also payment processors that facilitated transactions. While details remain under seal in some filings, the lawsuit is understood to challenge contractual obligations in light of alleged illegal gambling.

Separately, Delaware regulators issued a cease-and-desist order in 2023 (enforced in 2025), leading VGW to withdraw from the state. Though the C&D is regulatory, not a lawsuit, its timing alongside the federal litigation underscores Delaware’s increasingly hostile stance toward sweepstakes casinos.

Broader Trends: From Class Actions to State Enforcement

Taken together, these cases reveal two parallel enforcement tracks:

1. Private class actions (Massachusetts, Georgia, Montana, Delaware) that frame sweepstakes casinos as illegal gambling operations under state law, often combined with unjust enrichment or deceptive-practice claims.
2. State-initiated suits and regulatory actions (Louisiana, Delaware, Michigan, others) that use tax law, cease-and-desist orders, or attorney-general opinions to disrupt the business model without waiting for class actions to resolve.

So far, VGW Holdings has been the primary defendant in nearly all cases. Smaller operators like WOW Vegas are also being pulled into the spotlight, particularly where states pursue tax liability.

Quick Reference: Pending Litigation Snapshot

The sweepstakes casino industry sits in a precarious legal position. While operators argue that their dual-currency models comply with U.S. law, states and plaintiffs are increasingly unconvinced. The Louisiana tax suits target the industry’s revenue model directly, while class actions in Massachusetts, Georgia, and Montana aim to redefine sweepstakes casinos as illegal gambling.

With Delaware adding both regulatory and litigation pressure, the sweepstakes industry faces a fragmented but escalating wave of challenges. For operators, the risk is not just multimillion-dollar settlements but also the loss of entire state markets. For regulators and plaintiffs, these suits represent a chance to align law with technology and perhaps reshape the future of online gambling in the U.S.