Stake.us, a Sweepstakes casino operator recorded a win in a California federal court that will see it head to adjudication.
Dennis Boyle sued Stake.us in September last year, seeking public injunctive relief to stop the website from operating in California. The complaint alleges that Stake.us utilizes the concept of free social gaming as a pretext to offer real-money gambling. This is in spite of the fact gambling remains an illegal activity within the state.
Boyles is suing over the alleged violations of California’s Unfair Competition Law, as well as California’s Consumer Legal Remedies Act. He has not requested damages, as well as primarily wanting to see the site shut down.
Sweepstakes casinos are under the spotlight in numerous ways. These include civil suits, as well as potential restrictions at the state level. Montana became the first state to restrict sweepstakes casinos in May.
The court handed Boyle a defeat by granting Stake.us’s motion to compel arbitration.
Judges review the following gateway issues to decide whether to compel arbitration: (1) whether a valid agreement to arbitrate exists between the parties, and (2) whether the agreement covers the dispute at issue.
First, Boyle attempted to argue that the deal to arbitrate was invalid for two main reasons.
First, Stake.us operates an illegal gambling website. This makes their gambling-related contract, Terms and Conditions and Arbitration Agreement, invalid. Second, the operator is unregistered or not licensed to conduct business in California.
The court disagreed. It stated that under California law, determining whether someone offered a contract for an unlawful purpose concerns enforceability, not whether the parties validly formed the contract. In result to this, 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.”
