A case that had potential to throw a wrench in sweepstakes casino operations can now be chalked up to another win, or at least no contest, for sweeps operator VGW and sweepstakes payment providers.
Knapp vs. VGW Holdings Limited et al was officially dismissed on Feb. 6 and remaining disputes transferred to the District of Delaware for closing on Feb. 7.
The involvement of payment processors Worldpay and Fidelity Information Services, Inc. (FIS) posed a potential issue for sweeps operators. If payment providers start pulling out or blocking purchases at sweepstakes gaming sites, it could have a devastating effect on the industry.
But that won’t be happening just yet at least.
Two clauses that worked in favor of VGW in the Florida case in question were forum selection and choice of law clauses, which dictate that any disputes fall in the jurisdiction of the state of Delaware. As a result, Knapp’s attempt to remand the case back to Florida state court where the case was filed was denied.
Case jurisdiction details
Knapp was seeking to bring the case back to Florida state court, where he may have better chances of a favorable ruling. But Judge Carlos Mendoza of the U.S. District Court for the Middle District of Florida, Orlando Division, denied that motion, finding federal jurisdiction was proper in this case.
From the the ruling: “Because the amount in controversy and the numerosity requirements are clearly stated in the notice of removal and supporting declaration … the Court finds that it has subject matter jurisdiction over this action.”
Knapp and attorneys also argued that the case should be remanded based on “local controversy” and “home state” exceptions.
The court denied the local controversy claim as it stipulates that in the three years preceding the current case filing, no other class action “asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons” has been filed. But there was another similar suit brought against VGW in that timeframe, Middle District of Florida case Doe v. VGW Malta Ltd., which was dismissed without prejudice.
The home state exception, which requires that the primary defendant is a citizen of Florida, was also rejected based on the grounds that VGW is an Australian citizen (headquartered in Australia) and has no Florida stakeholders.
Ruling favors VGW (and payment providers)
The court ruled in favor of VGW, Worldpay, and FIS, granting all entities’ motions to transfer and otherwise dismiss. The ruling also dismissed the claims against those parties without prejudice, and Judge Mendoza ordered the clerk “to transfer the claims against VGW Holdings Limited, VGW Luckyland Inc, Fidelity Information Services, Inc., and Worldpay, LLC to the United States District Court for the District of Delaware for all further proceedings and to close this file.”
The transfer of claims was based on two clauses in VGW’s terms and conditions, which the plaintiff technically agreed to in order to register an account on the site.
The forum selection and choice of law clauses work to protect VGW (and other sweepstakes operators), and so far they have had a great deal of success in doing so.
A previous ruling declared that “Forum-selection clauses are presumptively valid and enforceable unless the plaintiff makes a ‘strong showing’ that enforcement would be unfair or unreasonable under the circumstances.” In this case, the plaintiff failed to prove the latter.
Legal protections and upholding of sweepstakes clauses
VGW’s forum selection clause states:
Subject to clause 23, the parties agree that any dispute, controversy or claim arising out of or in connection with these Terms of Service, or the breach, termination or invalidity of these Terms of Service, will be submitted exclusively to the courts in the State of Delaware in the United States, and you and we consent to the venue and personal jurisdiction of those courts. Notwithstanding the foregoing, the parties agree that either party may move to compel arbitration or to enforce an arbitral award issued hereunder before any court of competent jurisdiction.
VGW’s choice of law clause states:
These Terms and Conditions, your use of the Platform and our entire relationship will be governed, and interpreted in accordance with the laws of the State of Delaware in the United States, without regard for its choice of conflict of law principles.
The plaintiff made some arguments as to why those clauses shouldn’t be upheld in this case, but none of them were accepted by the court.
One such argument was that the forum selection and choice of law provisions should not be enforced “because the Defendants fraudulently induced Plaintiff into agreeing to the Terms” which “falsely state that VGW Group does not offer real money gambling and that VGW Group operates legally in Florida and Delaware.”
Indeed, the court cites a previous ruling that the “court will invalidate a choice clause only if ‘the inclusion of that clause in the contract was the product of fraud or coercion.’” However, the ruling noted there was no indication to substantiate that the forum selection and choice of law clauses were formed by fraud.
Knapp also argued that “the forum selection and choice of law clauses should not be enforced because the underlying contracts are void against public policy as illegal gambling contracts.”
The ruling said this claim fails thanks to a previous court ruling that rejected the same argument, stating: “A forum selection clause is viewed as a separate contract that is severable from the agreement in which it is contained.”
What did we learn?
What this case and several others have demonstrated is that sweepstakes casinos in general have solid legal protections baked into their terms and conditions, which every customer must agree to before signing up.
These binding agreements serve to help companies like VGW avoid expensive trials and merits-based judgments when civil cases do arise.
One such legal fine print deals with arbitration clauses, which require disputes to be settled via arbitration rather than having their day in court. This legal clause has worked in favor of sweeps gaming sites.
Similar technicalities played in favor of the defendant in another case brought against VGW by Fair Gaming Advocates Georgia Inc., which was dismissed in Georgia back in December due to lack of jurisdiction.
After that ruling, US gambling attorney Daniel Wallach noted on LinkedIn: “From arbitration clauses to jurisdictional defenses, there are procedural challenges every step of the way (in sweepstakes lawsuits).”
VGW is also facing litigation in New York and New Jersey under the federal Racketeer Influenced and Corrupt Organizations Act (RICO). The plaintiffs in those cases allege VGW is running illegal gambling operations under the guise of social casinos.
According to Wallach, it’s highly unlikely that any of the cases launched against VGW or other sweeps operators will have definitive impact.
“No class action lawsuit will be transformative or bring industry-wide change because they will either get dismissed on a procedural motion or take years before ever reaching trial, only to ultimately be settled,” he told Next.io.
Perhaps that is why so far in 2025 we’ve seen a flurry of alternative approaches to countering sweeps operators. Those include more cease-and-desist letters and a number of anti-sweepstakes bill proposals, which stand to be more effective in the eyes of the law.