In El Dorado County, California, three men have pleaded guilty to running an illegal gambling operation at internet cafes across the state and beyond. Two of the men are El Dorado Hills residents, while one is from Utah.
According to the Department of Justice, James Mecham, 57, of Orem, Utah, Kurt Stocks, 49, and Heidi Edwards, 58, of El Dorado Hills, helped set up sweepstakes casinos at various internet cafes for their business SweepsCoach.
The DOJ said that the three men had received payments of $14 million between 2012 to 2017, $11 million of which were from operations in California and Arizona.
The three defendants face up to five years in prison and a $250,000 fine. The case was brought by a joint investigation by the IRS, FBI, California Franchise Tax Board, California Department of Justice Bureau of Gambling Control, along with the U.S. Attorney’s Office.
SweepsCoach brought casino games to cafes
A SweepsCoach YouTube video advertises the company as opening hundreds of sweepstakes internet cafes since entering the market in 2005. The YouTube video was posted in 2010 and has over 8,000 views.
In the video, the presenter comments that the company has “recently devised sweepstakes games to emulate poker, keno, and slot machines to increase sales of internet time, long-distance phone time, music files, and just about any other product.”
The video goes on to say, “It may look like gambling, but it isn’t,” but the DOJ has deemed otherwise.
In 2012, the California Bureau of Gambling Control issued an advisory declaring internet sweepstakes cafes illegal gambling operations under state law. This position was reinforced by a 2015 California Supreme Court ruling, which affirmed that computerized sweepstakes games offered at these cafes are equivalent to slot machines and thus illegal.
Internet sweepstakes cafes a multi-billion dollar industry
The American Gaming Association published a white paper on Internet Sweepstakes Cafes back in 2018, noting that “Internet sweepstakes cafes are estimated to earn more than $10 billion a year with games that closely mimic the experience of traditional slot and video poker machines.”
Some states have made moves to regulate the industry, with some cities in Ohio requiring cafe owners to pay license fees and undergo background checks.
California online sweepstakes remain a legal gray area
California law bans any entry fee or purchase requirement for sweepstakes and prohibits paid-entry schemes. Operators must clearly offer a free-to-enter alternative to any paid contest.
California online casinos continue to operate, mainly by offering players free-to-play games. Sweepstakes operators have faced legal scrutiny, but a judge this week ruled in Stake’s favor to allow the company to continue operating.
A California resident had filed a lawsuit against Stake, claiming they were operating an illegal gambling site, but the judge ruled that it was not a matter for the courts and sent the case to private arbitration.
The Social and Promotional Gaming Association (SPGA) celebrated the decision, emphasizing that sweepstakes offer free-to-play games, which keeps them inside the law.
An SPGA spokesperson commented, “They are free-to-play games enjoyed responsibly by millions of American adults, and no purchase is ever necessary to play or have a chance to win prizes.”
Unfortunately for the three men facing charges, the DOJ ruled differently in this case, and they will be sentenced in October.
Adam is an experienced writer with years of experience in the gambling industry. He has worked as a content writer and editor for five years on sites such as Oddschecker, CoinTelegraph and Gambling Industry News, bringing excellent knowledge of the world of sports betting and online gambling. Adam focuses on emerging stories in the ever changing landscape of betting in the US. Read the latest on prediction markets, changing legislation, and sweepstakes.
