San Diego DA Part Of Sweepstakes Cafe Case That Ends In $3.5M Penalty For Illegal Gambling
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California Attorney General Rob Bonta has announced formal court approval of a multimillion-dollar judgment against an illegal gambling operation.
Under terms of the stipulated judgment, Pong Game Studios Corporation agreed to pay $3.5 million in civil penalties, costs and attorney fees, as well as permanently halt its gambling operations in the state.
"Under the guise of lawful sweepstakes, Pong knowingly used casino-style games to prey upon vulnerable Californians," Bonta said Thursday.
He added that the court's decision protects consumers and "the safety of our communities."
District attorney's offices in San Diego and Riverside joined the state case, along with the Los Angeles City Attorney's Office.
Based in Canada, Pong provided software to sweepstakes cafes throughout California. The cafes operate as mini-casinos, offering interactive gambling-themed games on computer devices, which are predominantly marketed to vulnerable, low-income consumers.
Lured by the interactive gameplay, patrons paid money for the opportunity to win cash prizes, Bonta said.
In California, the AG said, sweepstakes cafes have become synonymous with illegal local gambling dens that use lawful promotional sweepstakes to prey upon unsuspecting consumers.
The American Gaming Association estimates that the sweepstakes cafe "industry" earns more than $10 billion a year through unlawful gambling operations. Most are located in storefronts, strip malls and commercial districts across the U.S.
Under California law, the software offered on the sweepstakes systems is akin to unlawful slot machines or gambling devices.
Despite a ruling by the California Supreme Court in 2015 expressly declaring that the use of sweepstakes gambling systems was unlawful, Pong, undeterred by previous law enforcement efforts, continued its operations, Bonta said.
Working with law enforcement partners across the state, California filed suit against Pong in 2016 under the California Unfair Competition Law and False Advertising Law.
As part of the lawsuit, the state sought, among other things, to permanently halt Pong's illegal activities in the state and civil penalties for Pong's manufacture, distribution and use of illegal gambling devices.
Officials also alleged Pong engaged in deceptive acts or practices while marketing and licensing the devices.
As part of Thursday's resolution of the case, Pong also may be held liable for as much as $15 million if it fails to comply with the terms of the final judgment. In addition, Pong is required to relinquish all rights to seized assets described in the complaint.
The California Department of Justice is authorized by law to destroy all such seized equipment, Bonta said.
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