SAN FRANCISCO (CN) – A “sweepstakes” software company pleaded guilty to felony gambling charges and will pay $2.3 million for it, $700,000 to California.
Capital Sweepstakes Systems admitted it violated state and federal gambling laws, California Attorney General Kamala Harris and federal prosecutors said.
The company and its president, Kevin Freels, agreed to forfeit $1.6 million the federal government seized, and to pay a $700,000 fine to California.
California sued the company in on July 30. Harris called Internet sweepstakes gambling a $10 billion illegal industry, much of it run through “sweepstakes cafés.” She sued the company for selling its software in California.
“Sweepstakes cafes operate using sweepstakes gambling systems that mimic casino-style games,” Harris said in her request for an injunction in Superior Court. “Their operation constitutes unlawful gambling. Sweepstakes gambling systems are the primary vehicle by which sweepstakes cafes purvey illegal gambling to the public.
“Sweepstakes cafes have persisted in conducting illegal gambling in the face of considerable local, state, and federal law enforcement efforts. Sweepstakes cafes use Sweepstakes Gambling Systems from one of a limited number of sweepstakes café software providers, including defendant.”
Harris announced the state’s settlement on July 31. In addition to the $700,000 it bars Capital Sweepstakes from conducting any kind of sweepstakes operations in California for 10 years.
A federal sentencing hearing for Freels and Capital Sweepstakes Systems is set for Nov. 5. Freels could be sentenced to up to 5 years in prison.
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