Multiple States Ramp Up Efforts to Crack Down on Unregulated Sweepstakes Casinos

^{Stake is a sweepstakes casino brand that has been trying to cement its legitimacy by partnering with UFC, Alfa Romeo F1 Racing and Everton in the EPL. (Image: Stake)}

A growing number of states are taking aim at the increasingly popular sweepstakes casino model, raising questions about the future of the online gambling sites.

Sweepstakes operators have been under fire in many states, with various officials either aiming at eliminating the sites completely or bringing them under the same regulatory framework as traditional online gambling.

Dual Currency System No Different Than Gambling, Critics Say

Sweepstakes casinos and sweepstakes casino apps attempt to operate outside of those regulations by instead conforming to sweepstakes laws. This is achieved by using virtual currencies – colloquially known as Gold Coins and Sweeps Coins, though names vary by site – rather than allowing for direct real money gambling. 

Gold Coins can be purchased and used for “fun” play. Sweeps Coins, on the other hand, can be obtained for free in several ways, and can be redeemed for real money or gift card prizes. While you can’t directly purchase Sweeps Coins, they are offered as a “bonus” for Gold Coin purchases – arguably making them what players are really paying for.

Whether or not sweepstakes casinos technically get around gambling laws, many lawmakers and gaming industry officials see them as functionally identical to other online casinos.

“Sweepstakes operators…deploy legal acrobatics to avoid calling themselves betting or gambling, only then to offer products that most universally would agree are gambling yet without the safeguards and regulatory constraints,” the American Gaming Association said in its State of the Industry report on Feb. 19. 

That feeling is shared by regulators in many states as well. While it’s impossible to know what legislators or attorneys general are considering in every state, the following are just a few of the measures that have been taken across the country:

• In New Jersey, Assemblyman Clinton Calabrese (D-Bergen County) introduced a bill that would regulate and legalize sweepstakes casinos.
• New York State Sen. Joseph Addabbo (D-Queens) has argued in his role as chair of the Senate Racing, Gaming, and Wagering Committee that sweepstakes casinos should be banned or incorporated into a broader iGaming bill.
• Earlier this month, the Mississippi Senate became the first legislative body in the United States to pass a ban on sweepstakes casinos.
• In late January, West Virginia attorney general JB McCuskey served subpoenas to sweepstakes gaming operators, with McCuskey saying that “we have serious concerns about West Virginia consumers, specifically our children, being targeted by illegal gambling operations.”
• A Maryland bill that would ban sweepstakes casinos in the state is scheduled for its first committee hearing on March 5. 
• A Connecticut bill to block sweepstakes casinos from operating in the state, which was supported by the state’s Department of Consumer Protection, received its first hearing on Feb. 14.
• Florida Rep. Webster Barnaby (R-DeLand) and Sen. Corey Simon (R-3^rd District) have introduced bills into the state legislature that would effectively ban sweepstakes casinos in the Sunshine State.

Casinos Leaving States that Question Sweepstakes Model

The combined effort of various state officials has led some sweepstakes operators to retreat from some of these jurisdictions. 

On Feb. 18, operator High 5 Games stopped taking players in Connecticut, Delaware, New Jersey, Pennsylvania, Rhode Island, and West Virginia, adding to a list that already included Washington, Nevada, Michigan, Idaho, and more states. Several other operators have exited Maryland and West Virginia in recent weeks.

If previous attempts to use the sweepstakes model to get around gambling laws are any indication, the sweepstakes casino industry faces an uphill battle. As gaming attorney Daniel Wallach wrote for Forbes.com on Feb. 24, many states, including California and Pennsylvania, have successfully argued in the past that “sweepstakes cafes” were illegal gambling even if players had ways to obtain “entries” for free. 

Still, sweepstakes casinos and their operators have maintained their legality. The Social and Promotional Gaming Association (SPGA), an industry group for sweepstakes casinos, has blasted moves to crack down on the sector, saying that opponents fundamentally misstate what their operators have to offer.

“Properly operated sweepstakes are legal in almost all states,” the SPGA said in a response to the AGA State of the Industry presentation. “SPGA members operate within well-established legal frameworks that contrast starkly with black-market offshore sportsbooks and casinos.”