Federal judge denies online casino’s arbitration bid

In Brief

• A federal judge denied a motion by Stake.us to compel arbitration in a proposed Minnesota class action.
• Plaintiff Chris Wolters alleges Stake.us operates an illegal online gambling platform and seeks recovery of more than $80,000 in alleged losses.
• The court found Stake failed to establish a valid arbitration agreement or prove Wolters agreed to the platform’s terms.
• Judge John Tunheim ruled that if the underlying contract violates Minnesota gambling laws, it may be void and unenforceable.

A federal judge in Minnesota has denied online casino operator Stake’s motion to compel arbitration in a proposed class action alleging the online sweepstakes casino operates an illegal gambling platform in violation of Minnesota law. The court concluded that Stake failed to demonstrate the existence of a valid arbitration agreement.

Plaintiff Chris Wolters filed the proposed class action in August 2025, alleging that Stake.us operates a real-money internet casino that allows users to purchase virtual currency, wager it on casino-style games, and redeem winnings for cryptocurrency that can ultimately be converted into U.S. dollars. According to the complaint, the platform functions as an unlawful online gambling operation while representing that its services are legal for Minnesota residents. Wolters alleges he used the platform between April 2023 and February 2025. Ultimately, he lost more than $80,000 before entering recovery for gambling addiction.

The underlying complaint asserts five causes of action on behalf of Wolters and a proposed class of similarly situated Minnesota users. He seeks recovery of gambling losses under Minnesota Statutes Section 541.20; alleges violations of the Minnesota Consumer Fraud Act, the Minnesota Deceptive Trade Practices Act, and the Minnesota False Statement in Advertising Law; and asserts a claim for unjust enrichment. Wolters contends that Stake.us unlawfully operated an online gambling platform in Minnesota, misrepresented the legality of its services, and retained money allegedly lost by consumers through illegal gambling activity.

Stake.us responded to the suit by moving to compel arbitration, arguing that Wolters agreed to the company’s online terms and conditions when creating his account. Those terms contain a broad arbitration provision requiring disputes — including questions concerning the existence, validity, enforceability, or termination of the agreement — to be resolved through arbitration. Stake.us relied primarily on a declaration from its founder stating that users were required to accept the terms and conditions before creating an account, together with an internal screenshot that the company asserted was associated with Wolters’s account.

However, the court denied the motion to compel arbitration. It determined that Stake.us had not established the existence of a valid contract because Minnesota law generally treats contracts entered into in violation of statutes prohibiting regulated conduct as void. The complaint alleges that Stake’s platform constitutes illegal gambling under Minnesota law, and the court noted that Stake did not meaningfully address the substance of those allegations in its briefing. Instead, the company argued that the legality of its business should be resolved later in the litigation.

The court concluded that, at this preliminary stage, Stake failed to carry its burden of proving the validity of the underlying contract. It emphasized that Stake’s arbitration clause expressly depends upon the parties’ agreement to the broader terms and conditions. Because the arbitration provision is expressly tied to the validity of the underlying agreement, the court found it could not be severed and enforced independently if the contract itself is void under Minnesota law.

In reaching that conclusion, the court relied on Minnesota precedent holding that contracts entered into in violation of statutes enacted to protect the public are void rather than merely unenforceable.

“[I]f Stake’s Terms and Conditions are a contract entered into in violation of Minnesota’s gambling statutes, the Court must treat that contract as invalid and nonexistent,” wrote U.S. District Judge John Tunheim. “Wolters has alleged facts demonstrating that Stake’s Terms and Conditions are an illegal gambling operation, and Stake has not yet presented any evidence to the contrary.”

Additionally, the court held that Stake independently failed to prove that Wolters ever agreed to the arbitration provision. Stake relied on an affidavit from its founder stating that acceptance of the terms and conditions was mandatory during the relevant period. However, the accompanying screenshot did not identify Wolters by name or otherwise demonstrate that he personally assented to the agreement. The court found that this was insufficient to establish contract formation by a preponderance of the evidence. It stated that even if it had rejected Wolters’s illegality arguments, the evidentiary record would still require a limited trial on whether any agreement between the parties was ever formed before arbitration could be compelled.

In an email to Minnesota Lawyer, plaintiff’s attorney Vildan A. Teske said, “We are pleased with the Court’s decision and look forward to litigating this case on behalf of our client and all of the other Minnesotans who have been impacted by Stake.us’ illegal gambling website.”

Minnesota Lawyer also reached out to Stake.us.

This is not the first lawsuit filed against Stake.us. Additional actions have been filed against the company across the country.