Related Federal Cases
Capital Sweepstakes Systems Inc, Operating an Illegal Gambling Business, California 2022
SACRAMENTO, Calif. — Capital Sweepstakes Systems Inc., a corporation headquartered in Loomis, and Kevin Freels, 41, of Loomis, pleaded guilty today to conducting an illegal gambling business related to Internet sweepstakes cafés, United States Attorney Benjamin B. Wagner announced.
According to court documents, from January 2013 to September 2014, Capital Sweepstakes provided software and hardware systems for Internet sweepstakes cafés throughout California. Freels had an office at the Capital Sweepstakes headquarters, was the president of the software company that provided the sweepstakes software, and received a significant portion of the revenues generated by Capital Sweepstakes.
At Internet sweepstakes cafés, customers purchased sweepstakes entries, which were often loaded onto plastic cards with magnetic strips. The customers could then swipe the cards at specially programmed computer terminals inside the cafes and play a variety of gambling-themed games, with names such as Hot Luck Keno, Tropical Treasures, Dreamcatcher, Lucky Puppy, and Luck of the Irish. These games looked and sounded like casino-styled slot machines, and the results of the games revealed whether or not the customer “won” the sweepstakes. Customers were eligible to win cash prizes from the sweepstakes, which were paid at the location of play. The sweepstakes results were not actually dependent upon the outcome of the games, but were predetermined through the Capital Sweepstakes software. Capital Sweepstakes would later send an invoice to the location to receive a previously agreed upon percentage of its profits. Capital Sweepstakes was able to do this because it tracked the sweepstakes activity on its servers remotely. This type of online gaming was conducted entirely outside the state gambling regulatory scheme. In a decision issued last month, the California Supreme Court confirmed that such games are illegal.
“California and the federal government have enacted laws intended to regulate the gambling industry and protect the public,” said U.S. Attorney Wagner. “Today’s pleas are the result of Capital Sweepstakes’ attempt to avoid those laws while building a sprawling and lucrative enterprise based upon a purported sweepstakes game that was in fact the functional equivalent of a slot machine.”
As part of its plea agreement, Capital Sweepstakes agreed to forfeit over $1.5 million in profits generated through its illegal gambling business. These funds were previously seized by the United States in a related proceeding.
This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Agents from the California Bureau of Gambling Control also provided assistance.
Defendant/respondent: Capital Sweepstakes Systems Inc.
Criminal charges: Conducting an illegal gambling business
City and state: Loomis, California
Exact date: Undisclosed / Undated
Sentence or outcome: Capital Sweepstakes Systems Inc. forfeits $1.5 million in profits
Dollar amounts: $1.5 million
Key Facts
- State: California
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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