The smiling faces of Paris Hilton and Ryan Seacrest made surprise looks before the Louisiana Senate for Friday's hearing on prohibited gambling.

No, they weren't personally in attendance, however the world-famous celebrities were conspicuously included in a slide presentation on social and sweepstakes casinos - the questionable websites using both totally free casino-style video games and financially rewarding prizes, such as money, gift cards or cryptocurrency. In one ad, the fist-pumping Seacrest is seen plugging Chumba Casino, where anybody can 'play for totally free,' while a crop-topped Hilton holds a chip for sweepstakes operator, Wow Vegas, in the other.

The websites are simply two cogs in the multibillion-dollar industry that now finds itself besieged by claims. In the eyes of lots of video gaming corporations, not to discuss suit complainants and state regulators, sweepstakes gambling establishments function as conventional gambling establishments, just without the oversight, consumer defenses and tax laws. So not only can they avoid the high 24-percent federal gaming levy, but sweepstakes operators aren't based on regulatory obstacles like anti-money laundering and responsible-gaming securities.

One operator, Australia-based Virtual Gaming Worlds (VGW), reported $4 billion in earnings in 2015 alone. Now the company deals with accusations of illegal gambling in a New york city lawsuit that declares VGW uses celebrity endorsers to 'create a veneer of legitimacy' around its item. (See VGW's statement below)

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

Sweepstakes endorsers include a variety of stars from gambling enthusiasts Drake and DJ Khaled to swimmer Michael Phelps, along with NBA stars Karl-Anthony Towns and Paul George - none of whom offer any distinctions between conventional gambling and sweepstakes play.

Paris Hilton is seen plugging Wow Vegas, among numerous sweepstakes casinos discovered online

Ryan Seacrest urges fans to dip into Chumba Casino, where many - however not all - video games are totally free

Drake has a handle social sweeps casino, Stake, that he regularly touts on social media

Read More

Donald Trump 'set to name NBA group owner as US ambassador to Italy'

Instead, advertisements usually center around the social aspect of the casinos, while leaving out the capacity for real sports betting losses.

Others tempt clients with pledges of rewards. One such operator, Stake, ran a social networks ad flaunting Drake's cars and trucks, planes and estates before rotating to video of the rapper playing online casino-style games.

'Daddy, why do we have so much cash?' read the very first caption on the screen.

Another caption discussed: 'Because I never ever offered up.'

The discrepancy in between gambling websites and social or sweepstakes casinos is a bit complicated, however operators of the latter insist they're not involved with the former.

A spokesperson for an industry trade group, the Social and Promotional Gaming Association (SPGA), described its members are not in direct competition with online casinos and sportsbooks. Furthermore, according to SPGA data, the majority of the players on social-sweepstakes casinos are sports betting free.

'Most social sweeps clients never make a purchase,' the SPGA representative informed DailyMail.com. 'The minority of clients who make purchases do so in quantities far smaller sized than the typical deposit or bet size at real-money online gaming websites.'

Social gambling establishments use consumers a possibility to play casino-style games with friends. Players have the alternative to buy worthless currency often referred to as 'gold coins,' which can not be exchanged genuine money, however can be utilized to open various features within the games.

But within the world of social gambling establishments exists sweepstakes video gaming, enabling customers to acquire other currency understood as 'sweeps coins' that can be exchanged for cash or other rewards.

And therein lies the potential for financial losses, like the ones declared by complainants in Florida, Georgia, New Jersey and New York. One gamer told the Washington Post he lost more than $100,000 on sweepstakes gambling establishments in the previous year after continuing to buy more coins in pursuit of money and other things of worth.

The Philadelphia 76ers' Paul George is seen promoting a Worldwide Poker occasion

Social sweeps casino Stake ran an advertisement displaying Drake's vehicles, aircrafts and estates

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

Traditional online gambling establishments are banned in all but seven states, which has helped to sustain the popularity of sweepstakes gambling establishments.

Anyone over the age of 18 can access the sweepstakes sites, which do not need typically require recognition. However, websites like Chumba will request for IDs from gamers attempting to withdraw any funds.

Many sites, like the crypto-compatible Stake, allow customers to send mail-in ask for free sweeps coins, offered the players follow painfully specific instructions. What's more, players are often rewarded with sweeps coins merely for signing up, thus giving them a reason to try their hands at any variety of gambling establishment video games for a chance to win - or lose - real cash.

So why are sweepstakes sites enabled to operate in 48 states, while online gambling establishments are prohibited in all however 7?

According to the stakeholders, their product is the complimentary casino-style video gaming, and the real-stakes competition is simply a way of promoting their bread and butter.

'Social sweepstakes games are merely a form of online home entertainment,' an SPGA representative informed DailyMail.com by email. 'No purchase is required to dip into social casinos with sweepstakes prizes. Consumers never ever need to pay for an opportunity to win rewards. That absence of a purchase requirement - or" consideration" - is a crucial difference between social sweeps and traditional online gambling sites like gambling establishments.'

Think of the way that McDonald's uses its annual Monopoly game to promote its food: Customers aren't paying to gamble, but rather they're buying hamburgers and french fries that use them the possibility to win lucrative prizes, such as a $1 million prize.

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

'Sweepstakes are an enduring method for promoting all sort of everyday services in the United States, everything from hamburgers to publication subscriptions to coffee and home improvement shops,' the SPGA spokesperson informed DailyMail.com. 'Sweepstakes promos are frequently 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 does not cut it.

For beginners, gaming lawyer Daniel Wallach mentions, McDonald's Monopoly game does not run forever. Rather, it has a well-defined start and end, thus suggesting the sweepstakes is not the fast-food giant's primary product. Instead, the sweepstakes is being utilized to promote genuine items like french fries, shakes, and the Filet-O-Fish.

'They do not last permanently and they're generally not connected to casino-style games of chance,' Wallach informed DailyMail.com. 'They're just cash giveaways.

'The sweepstakes [casinos] possess none of the attributes commonly connected with McDonald's-design sweepstakes promos,' Wallach continued. 'Besides running in perpetuity, the sweepstakes gambling establishments provide" casino-like" payouts, typically 80 percent or more of incomes, whereas the common payout percentage for a short-term marketing sweepstakes is an unimportant share of the revenue earned by the business [generally less than one percent]'

Wallach is fast to liken the online social sweeps gambling establishments to the web cafes that emerged in Florida, using customers the chance to play casino-style games for real rewards. Much of those brick-and-mortar establishments have because been shuttered over allegations of illegal sports betting.

DJ Khaled is amongst a number of celebrity spokespeople for VGW's Global Poker brand

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

'These differences are not arbitrary,' Wallach stated of social sweeps casinos. 'They have actually repeatedly been pointed out by courts and state attorney generals as crucial consider figuring out that a sweepstakes promo was in truth a guise for prohibited gaming.'

One of the gambling establishment market's leading trade companies, the American Gaming Association, is now pushing legislators to investigate sweepstakes operators and, sometimes, enact new legislation on the concern.

'Consumers are being deprived of protections and states are giving up considerable tax and revenue opportunities as this gaming replaces that carried out through controlled channels,' checked out a well-circulated AGA memo.

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

Sweepstakes gambling establishment operators paid a combined $14.2 million in four different cases in Kentucky without admitting any misbehavior, according to the Washington Post. Meanwhile VGW consented to pay $11.75 million in one class-action claim, stating the settlement was made to avoid legal costs and continued litigation.

Michael Phelps has signed an offer with the VGW Group, which owns Global Poker

In the most recent claim, which is mainly similar to its predecessors, New York state residents Lamar Prater and Rebecca Pratt both claim to have lost well over $1,000 to VGW, which is explained in the filing as an 'illegal gambling business. '

Apple and Google have also been named as accuseds in suits for hosting the sweepstakes websites. But unlike VGW, neither tech business reacted to DailyMail.com's demand for remark.

'We normally don't talk about matters before the courts,' a VGW representative told DailyMail.com through e-mail. 'However, we note that this claim has actually only just been submitted with the court and VGW has actually not been formally served.

'We have full self-confidence in our compliance with all laws and regulations where we run, and stay confident about the future,' the representative continued. 'We continue to provide our free-to-play games throughout the majority of The United States and Canada, as we have for more than a decade, producing not just excellent video games, user experiences and home entertainment, however also guaranteeing this is done securely, responsibly and at the highest level of standards.

'More broadly, we 'd reiterate that class actions and other litigations and arbitrations are fairly common across the online social video games industry (and the US more broadly), and our standard practice is that we mean to vigorously defend any claim which may be brought against us.'

The concerns between traditional online gaming and sweepstakes casinos might show problematic for some celeb endorsers.

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

'It's paradoxical that professional athletes are hawking prohibited sports betting 'sweeps' websites while at the same time the leagues wish to predict a strong stance against illegal sports betting - especially when trying to tamp down the periodic gambling scandal,' Glaser informed DailyMail.com.

It was just 8 months ago that Toronto Raptors forward Jontay Porter received a life time restriction from the NBA over claims he conspired with bettors. However, to be clear, Porter's scandal is unrelated to anything including social or sweepstakes gambling establishments.

Together with VGW, Apple and Google are being demanded hosting supposedly unlawful sports betting websites

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

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

Neither an NBA spokesperson nor the gamers' representatives responded to DailyMail.com's requests for comment. For that matter, spokespeople for Drake, DJ Khaled, Hilton, Seacrest and Phelps likewise ignored to react to DailyMail.com e-mails.

Asked if their celebrity endorsers have an obligation to explain to clients the differences and similarities between iGaming and sweepstakes gambling establishments, VGW insisted there is absolutely nothing more that requires to be done.

'We have full confidence in our influencer and ambassadorial collaborations, and our service practices more broadly,' the representative said. 'A few of our values are" our gamers come first" and" we do what's right", and we put our values at the core of whatever we do.'

Glaser, an outspoken challenger of sweepstakes sites, sees things in a different way.

'Celebrities who provide their names to dubious illegal gambling websites are, at a minimum, putting their track records at risk as well as courting civil and class actions by consumers who declare harm,' Glaser said. 'There is likewise some risk that state regulators and state lawyers basic rope star endorsers into enforcement efforts for helping with prohibited gambling.'

New YorkNBADrakeParis Hilton