The smiling faces of Paris Hilton and Ryan Seacrest made surprise appearances before the Louisiana Senate for Friday's hearing on unlawful gaming.

No, they weren't personally in attendance, however the world-famous celebrities were conspicuously consisted of in a slide discussion on social and sweepstakes gambling establishments - the controversial websites providing both totally free casino-style video games and financially rewarding prizes, such as money, present cards or cryptocurrency. In one advertisement, the fist-pumping Seacrest is seen plugging Chumba Casino, where anybody can 'bet free,' while a crop-topped Hilton holds a chip for sweepstakes operator, Wow Vegas, in the other.

The sites are just two cogs in the multibillion-dollar industry that now discovers itself besieged by claims. In the eyes of many gaming corporations, not to mention lawsuit complainants and state regulators, sweepstakes gambling establishments act as traditional gambling establishments, only without the oversight, consumer defenses and tax laws. So not only can they prevent the steep 24-percent federal gaming levy, however sweepstakes operators aren't subject to regulatory obstacles like anti-money laundering and responsible-gaming securities.

One operator, Australia-based Virtual Gaming Worlds (VGW), reported $4 billion in revenue in 2015 alone. Now the company faces accusations of illegal gaming in a New York suit that claims VGW uses celebrity endorsers to 'create a veneer of authenticity' around its item. (See VGW's declaration below)

'I'm not sure" if you do not trust us, you can trust Paris Hilton" is a winning message for companies running multibillion-dollar illegal operations out of locations like Malta, Isle of Man, or US mail drops,' Friday's speaker, Howard Glaser of video gaming corporation Light & Wonder, told DailyMail.com.

Sweepstakes endorsers consist of a series of celebrities from gambling lovers Drake and DJ Khaled to swimmer Michael Phelps, along with NBA stars Karl-Anthony Towns and Paul George - none of whom offer any differences in between traditional gaming and sweepstakes play.

Paris Hilton is seen plugging Wow Vegas, among numerous sweepstakes gambling establishments found online

Ryan Seacrest prompts fans to dip into Chumba Casino, where lots of - however not all - video games are totally free

Drake has an offer with social sweeps gambling establishment, Stake, that he regularly promotes on social networks

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Instead, ads usually center around the social aspect of the casinos, while leaving out the potential for actual gambling losses.

Others tempt consumers with pledges of prizes. One such operator, Stake, ran a social networks advertisement revealing off Drake's cars and trucks, planes and estates before pivoting to footage of the rapper playing online casino-style video games.

'Daddy, why do we have a lot money?' read the first caption on the screen.

Another caption described: 'Because I never ever quit.'

The disparity in between gaming websites and social or sweepstakes gambling establishments is a bit complex, but operators of the latter insist they're not involved with the former.

A representative for a market trade group, the Social and Promotional Gaming Association (SPGA), explained its members are not in direct competition with online gambling establishments and sportsbooks. Furthermore, according to SPGA information, many of the gamers on social-sweepstakes gambling establishments are playing for totally free.

'Most social sweeps consumers never buy,' the SPGA representative informed DailyMail.com. 'The minority of consumers who make purchases do so in quantities far smaller than the common deposit or bet size at real-money online sports betting websites.'

Social casinos use consumers an opportunity to play casino-style video games with friends. Players have the choice to purchase valueless currency frequently described as 'gold coins,' which can not be exchanged genuine money, but can be used to unlock numerous functions within the games.

But within the world of social gambling establishments exists sweepstakes video gaming, permitting consumers to acquire other currency called 'sweeps coins' that can be exchanged for cash or other prizes.

And therein lies the capacity for financial losses, like the ones claimed by plaintiffs in Florida, Georgia, New Jersey and New York. One gamer informed the Washington Post he lost more than $100,000 on sweepstakes casinos in the previous year after continuing to purchase more coins in pursuit of money and other things of value.

The Philadelphia 76ers' Paul George is seen promoting an International Poker occasion

Social sweeps casino Stake ran an advertisement flaunting Drake's automobiles, aircrafts and mansions

Karl-Anthony Towns of the New York City Knicks is another NBA star plugging VGW's Global Poker

Traditional online gambling establishments are prohibited in all however seven states, which has actually assisted to fuel the popularity of sweepstakes casinos.

Anyone over the age of 18 can access the sweepstakes sites, which don't need typically require identification. However, sites like Chumba will ask for IDs from players trying to withdraw any funds.

Many websites, like the crypto-compatible Stake, enable customers to submit mail-in demands for totally free sweeps coins, offered the players follow painfully particular guidelines. What's more, gamers are typically rewarded with sweeps coins simply for signing up, thus providing them a reason to try their hands at any variety of gambling establishment games for an opportunity to win - or lose - real money.

So why are sweepstakes sites enabled to operate in 48 states, while online casinos are banned in all but 7?

According to the stakeholders, their product is the free casino-style gaming, and the real-stakes competition is just a method of promoting their bread and butter.

'Social sweepstakes video games are simply a form of online entertainment,' an SPGA spokesperson told DailyMail.com by e-mail. 'No purchase is needed to dip into social casinos with sweepstakes rewards. Consumers never ever need to pay for an opportunity to win prizes. That lack of a purchase requirement - or" consideration" - is a vital distinction in between social sweeps and traditional online sports betting websites like gambling establishments.'

Think of the method that McDonald's utilizes its annual Monopoly video game to promote its food: Customers aren't paying to bet, however rather they're buying hamburgers and french fries that use them the chance to win lucrative rewards, such as a $1 million prize.

And without a purchase requirement, or 'factor to consider', the game itself doesn't fulfill the definition of gaming in the US.

'Sweepstakes are an enduring technique for promoting all kinds of everyday businesses in the United States, whatever from burgers to publication memberships to coffee and home improvement stores,' the SPGA spokesperson informed DailyMail.com. 'Sweepstakes promos are regularly utilized by a who's who of home names like AT&T, Chase, Home Depot, Marriott, Starbucks, and Wal-Mart.'

But to many sports betting industry insiders, that argument doesn't cut it.

For beginners, video gaming attorney Daniel Wallach explains, McDonald's Monopoly video game doesn't run indefinitely. Rather, it has a well-defined start and end, thus recommending the sweepstakes is not the fast-food giant's main product. Instead, the sweepstakes is being used to promote genuine products like french fries, shakes, and the Filet-O-Fish.

'They do not last forever and they're usually not tied to casino-style video games of possibility,' Wallach told DailyMail.com. 'They're just money giveaways.

'The sweepstakes [gambling establishments] have none of the characteristics commonly associated with McDonald's-style sweepstakes promotions,' Wallach continued. 'Besides running in all time, the sweepstakes gambling establishments use" casino-like" payouts, generally 80 percent or more of incomes, whereas the common payment percentage for a momentary promotional sweepstakes is an unimportant share of the profits made by the business [typically less than one percent]'

Wallach is quick to liken the online social sweeps gambling establishments to the internet coffee shops that sprang up in Florida, offering customers the chance to play casino-style games for real prizes. A number of those brick-and-mortar establishments have actually because been shuttered over accusations of prohibited gambling.

DJ Khaled is among a number of star spokespeople for VGW's Global Poker brand

Now, Wallach argues, social sweeps gambling establishments need to face comparable examination.

'These distinctions are not arbitrary,' Wallach said of social sweeps gambling establishments. 'They have actually repeatedly been cited by courts and state attorney general of the United States as crucial aspects in determining that a sweepstakes promo was in fact a guise for illegal sports betting.'

Among the gambling establishment market's leading trade organizations, the American Gaming Association, is now pressing lawmakers to investigate sweepstakes operators and, in many cases, enact new legislation on the problem.

'Consumers are being denied of protections and states are passing up considerable tax and revenue chances as this gambling replaces that performed through regulated channels,' checked out a well-circulated AGA memo.

And then there are the complainants who have actually taken legal action against social casinos in more than a dozen states.

Sweepstakes gambling establishment operators paid a combined $14.2 million in 4 different cases in Kentucky without confessing any wrongdoing, according to the Washington Post. Meanwhile VGW accepted pay $11.75 million in one class-action suit, stating the settlement was made to prevent legal costs and continued lawsuits.

Michael Phelps has actually signed a handle the VGW Group, which owns Global Poker

In the newest claim, which is mostly similar to its predecessors, New York state locals Lamar Prater and Rebecca Pratt both declare to have lost well over $1,000 to VGW, which is described in the filing as an 'illegal gambling business. '

Apple and Google have also been called as offenders in suits for hosting the sweepstakes sites. But unlike VGW, neither tech company reacted to DailyMail.com's demand for remark.

'We usually don't talk about matters before the courts,' a VGW spokesperson informed DailyMail.com by means of email. 'However, we note that this claim has actually only simply been submitted with the court and VGW has not been officially served.

'We have full confidence in our compliance with all laws and guidelines where we run, and remain positive about the future,' the representative continued. 'We continue to use our free-to-play games throughout the majority of The United States and Canada, as we have for more than a years, producing not only terrific games, user experiences and home entertainment, however likewise ensuring this is done securely, responsibly and at the highest level of standards.

'More broadly, we 'd repeat that class actions and other litigations and arbitrations are reasonably common across the online social video games industry (and the US more broadly), and our basic practice is that we intend to strongly defend any claim which might be brought against us.'

The concerns between traditional online gambling and sweepstakes gambling establishments might prove bothersome for some star endorsers.

Towns, a star center with the Knicks, and the 76ers' George both endorse VGW's Global Poker brand while the NBA is partnered with standard gaming titans like FanDuel and DraftKings.

'It's paradoxical that professional athletes are hawking prohibited sports betting 'sweeps' sites while at the same time the leagues want to project a strong position versus illegal gambling - especially when attempting to tamp down the occasional sports betting scandal,' Glaser told DailyMail.com.

It was just eight months ago that Toronto Raptors forward Jontay Porter got a life time ban from the NBA over accusations he conspired with bettors. However, to be clear, Porter's scandal is unrelated to anything involving social or sweepstakes gambling establishments.

Together with VGW, Apple and Google are being taken legal action against for hosting allegedly unlawful sports betting sites

Regardless, Glaser sees sweepstakes gambling establishments as a major issue for leagues such as the NBA.

'I 'd anticipate that a league crackdown on athletes endorsing sweepstakes websites is a matter of when, not if,' Glaser added.

Neither an NBA spokesman nor the players' agents responded to DailyMail.com's demands for remark. For that matter, spokespeople for Drake, DJ Khaled, Hilton, Seacrest and Phelps likewise neglected to react to DailyMail.com emails.

Asked if their celebrity endorsers have an obligation to discuss to customers the differences and resemblances in between iGaming and sweepstakes casinos, VGW insisted there is nothing more that requires to be done.

'We have full self-confidence in our influencer and ambassadorial collaborations, and our organization practices more broadly,' the spokesperson said. 'A few of our worths are" our gamers precede" and" we do what's right", and we put our values at the core of everything we do.'

Glaser, an outspoken challenger of sweepstakes websites, sees things differently.

'Celebrities who lend their names to shady unlawful sports betting sites are, at a minimum, putting their credibilities at threat as well as courting civil and class actions by consumers who allege harm,' Glaser said. 'There is likewise some risk that state regulators and state chief law officers rope celebrity endorsers into enforcement efforts for helping with illegal gambling.'

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