Golden Hearts Games Believes It Operated Lawfully Before Leaving Michigan

Written By Drew Ellis on December 1, 2023
Golden Hearts to MGCB There has been a misunderstanding

In recent months, Michigan regulators have made a concentrated effort to target what they deem illegal online gambling.

Included in that is an increased focus on “sweepstakes” casinos. However, some of those accused of being unlawful online casinos view themselves as legal promotional games.

That is the case with Golden Hearts Games, Inc. who discussed the issue in a statement to PlayMichigan.

The Michigan Attorney General and Michigan Gaming Control Board feel “sweepstakes” casinos operate too similarly to a Michigan online casino while not facing the same rules and regulations.

Golden Hearts Games is a Massachusetts-based startup venture that voluntarily withdrew from Michigan over the issue. Golden Hearts Games admitted no wrongdoing and maintains it was operating lawful promotional games.

However, Golden Hearts Games says it does not have the resources to fight the court battle to prove that against the Michigan regulators, which it was threatened with if it did not cease operations.

Timeline of Michigan’s efforts to remove Golden Hearts Games

In September, Attorney General Dana Nessel announced that her office’s Alcohol and Gambling Enforcement Division stopped Golden Hearts Games from offering its platform to Michigan residents.

“Unlicensed gaming robs our schools and our government of essential funding and leaves consumers unprotected,” Nessel said in a press release at the time. “When companies like Golden Hearts attempt to circumvent Michigan’s gaming laws, they create the false impression that their games are legal and safe for consumers. My office is committed to ensuring that our gaming laws are strictly enforced and those who violate those laws are held accountable.”

Initial cease-and-desist request

The efforts to get Golden Hearts Games out of Michigan started back in August of 2021 when state regulators began investigating.

In March of 2022, the MGCB issued a cease-and-desist letter to Golden Hearts Games, alleging that the company’s activity constituted illegal internet gaming as it did not hold a license to offer it in the state of Michigan, as required under the Michigan Lawful Internet Gaming Act.

According to Golden Hearts Games, it had not previously been contacted by the MGCB or any Michigan officials and was not aware of any investigation. The company and its Michigan-based gaming counsel quickly responded to the MGCB, explaining that it believed it did not require a license because it was offering promotional games, which are lawful in Michigan, and not covered by the Michigan Lawful Internet Gaming Act.

Golden Hearts also says it supplied legal opinions from several outside counsel gaming and promotional gaming attorneys, further illustrating the company’s position. Because the company did not believe it was in violation of any laws or regulations, Golden Hearts Games did not stop operating in Michigan, pending final resolution of the dispute.

Golden Hearts attempts at communication

According to Golden Hearts, neither the MGCB nor the Michigan Attorney General (MAG) offered any opinion or commentary on Golden Hearts Games’ response or position. Golden Hearts says for eight months it made repeated requests for a meeting with regulators to discuss the situation, to no success.

In January of 2023, the MGCB and MAG agreed to a Zoom meeting with Golden Hearts Games. During that meeting, Golden Hearts Games executives and the company’s Michigan gaming counsel demonstrated its platform and explained why it believed its platform offered promotional games, thus not requiring a license.

Following that meeting, Golden Hearts Games says it received no further communications from the MGCB or Attorney General for seven months.

Second cease-and-desist request

Then, in August of this year, the company received a new cease-and-desist letter, this time from the Attorney General, making a new allegation that Golden Hearts Games was in violation of the Michigan Consumer Protection Act.

It also stated that if the company did not withdraw from Michigan in 10 days, the MAG would file a civil action in state court, also under the Michigan Consumer Protection Act.

Golden Hearts Games says it responded immediately and the MAG agreed to meet to discuss the new cease-and-desist letter. In that meeting, Golden Hearts Games again explained its position regarding promotional games, but was told by the MAG the only options available to the company were either to withdraw from Michigan or make its case in court.

Golden Hearts Games take on the matter

As a young startup venture with limited resources, Golden Hearts Games decided it should voluntarily halt operations in Michigan and agreed to sign an Assurance of Discontinuance. In the document, Golden Hearts Games admitted no wrongdoing by the company, and the threat of litigation by Michigan regulators was removed.

“We respect the Michigan regulators and officials who always acted in good faith and have essential, important missions, but we want to make clear that Golden Hearts Games has never admitted to any wrongdoing or legal or regulatory violations of any kind, in Michigan or anywhere,” Steve Kane, CEO & Co-Founder of Golden Hearts Games told PlayMichigan in a statement.

“The company and its counsel believe it has never violated any Michigan (or other) laws or regulations. But the Michigan A.G. stated its intent to file a civil action (under the MI Consumer Protection Act) and Golden Hearts Games is a young, small company with sparse resources. So, to avoid potentially prolonged, expensive litigation, we voluntarily withdrew from Michigan.”

The Assurance of Discontinuance was filed on Sept. 1 of this year in Ingham County Court.

Sweepstakes gaming vs. promotional gaming

The “sweepstakes” label is somewhat of a hot topic in Michigan.

What this means is that instead of monetary units, sites utilize play chips, often known as “Gold Coins,” while allowing users to also secure different play chips, often known as Sweeps Coins, as promotional bonuses. Sweeps Coins can then be played in other games in order to try to win prizes.

The key to these casinos is what is often called “promotional gaming.” In order to be considered promotional gaming, a person can participate for free, and never pay anything despite other players paying.

Alternative Method of Entry

This free entry is offered to everyone via what is usually called an “Alternative Method of Entry” (AMOE).

Along with that, people playing free must be offered what is typically called “equal opportunity.” That means people playing for free must be allowed to play the same games, with the same odds or rules, and chances to win the same prizes as is provided to people who have chosen to pay to play.

So, if a company holds a raffle and gives away promotional tickets, those promotional tickets hold the same odds value to win as someone who takes part in buying additional tickets. The winner can’t be influenced by someone choosing to spend money into the company. Each ticket, regardless of how it came to be accessed, has the same value.

McDonalds Monopoly — a promotional example

Another example of promotional gaming is the McDonald’s Monopoly promotion that was popular over the years. Customers could play random chance games to try to win cash and other prizes by acquiring game pieces through buying certain McDonald’s products.

However, for that contest to operate as a promotional game (not a gambling game), McDonald’s had to also have a free, Alternative Method of Entry option. That means without ever buying McDonald’s products, people can request and receive free game pieces by mail, which give them entry to the same games played by paying McDonald’s customers. They also have equal chances to win the same prizes.

McDonald’s Monopoly is a lawful game that McDonald’s uses to promote the sale of its products – which is why such games are called “promotional games.”

How Golden Hearts Games works

In the case of companies like Golden Hearts Games, they offer online casino-style games which are just for fun and do not offer cash prizes or other payouts of any value.

To play these games, people are encouraged to buy packages of “Gold Coins,” the virtual currency used to play the games. As a promotional incentive to get people to buy Gold Coins packages, paying customers may also receive bonuses of another virtual currency, called Sweeps Coins. Sweeps Coins allows players to enter other games which do offer cash payouts or other valuable prizes.

The Sweeps Coins games are promotional games, incentivizing people to buy into the Gold Coins games. But there is a free Alternative Method of Entry where people can get access to the platform without paying. The companies provide them with free Gold Coins and Sweeps Coins to make that happen.

So, while Michigan regulators have alleged that Golden Hearts Games are “illegal gambling,” Golden Hearts Games feels they are living up to the legal requirements and best, safe practices of lawful “promotional games,” which are not prohibited under Michigan law.

Other states not joining in Michigan’s actions

Since September, we have seen a similar situation occur with Virtual Gaming Worlds where they elected to leave operations in Michigan.

VGW owns and operates the promotional games platforms Chumba Casino, Luckyland Slots and Global Poker. They stated in October that use of their products would cease on Dec. 1 in Michigan. VGW expressed “regulatory concerns” as their reason for stepping out of Michigan.

Like Golden Hearts Games, which operates in every state but Michigan, VGW still operates in 47 states. Those include other states with legalized online casinos.

Golden Hearts Games says it has not seen any kind of domino effect started by Michigan, as no other states today are making a push to challenge the company. And, according to Golden Hearts Games, in October 2022, the company and its platform were reviewed by Indiana regulators, and found to be lawful promotional games in Indiana.

As legalized online casinos expand into other states, it’s hard to say if that will change.

Photo by PlayMichigan
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Drew Ellis

Drew Ellis is the Lead Writer of PlayMichigan, the No. 1 source for online gambling news in Michigan. A lifelong resident of the state, Ellis has been working in various forms of media since 1998, including more than a decade in the sports betting industry prior to transitioning into US casino markets in 2020.

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