New Jersey Lawmaker Proposes Bill to Regulate Sweepstakes Casinos

^{New Jersey lawmaker proposes regulating sweepstakes casinos. (Image: Associated Press)}

For the past couple of years, sweepstakes casinos have lived on the fringes of the gambling world, with some regulators and lawmakers believing they constitute illegal online gambling. But at least one lawmaker in New Jersey is looking to bring these websites into the regulated gaming marketplace.

New Jersey Assemblyman Clinton Calabrese (D-Bergen County) proposed his bill, known as Bill A5196, which would make the state the first in the country to regulate and legalize sweepstakes casinos.

Free Coins, Prizes Raise Legal Questions

While sweepstakes casinos resemble traditional online casinos in many ways, they operate in a fashion that operators say makes them legal in at least some US states. Players can only purchase “play money” tokens on the sites, which can only be used for fun and can never be exchanged for prizes.

However, players can earn free “sweeps coins” that can also be wagered in the same games. Players may also receive some sweep coins—which go by different names on different sites—as a bonus when they purchase play money tokens. Players who accumulate enough sweeps coins can then exchange them for gift cards or other rewards.

Because these sites—whether or not they should be considered legal—operate outside the mainstream of the gaming industry, they aren’t subjected to the regulations that online casinos and sportsbooks comply with. Calabrese’s legislation seeks to change that.

The Social and Promotional Games Association (SPGA)—a group formed in September by a group of 11 sweepstakes and social gaming sites—has come out in support of the bill.

“The SPGA welcomes Assemblyman Calabrese’s bill,” the SPGA said in a statement. 

“The SPGA and its members are advocates for clear regulations that enable transparent, innovative, and responsible social and promotional gaming experiences.”

Would Gaming Industry Support Regulated Sweepstakes Model?

Calabrese’s legislation would classify sweepstakes casinos as internet gaming operators and would allow the New Jersey Division of Gaming Enforcement to regulate their operations. All sites would require licenses and would have to comply with state laws to operate legally within New Jersey.

In addition, any sweepstakes casinos that want a New Jersey license would need to partner with a land-based casino in Atlantic City. This is the same relationship that the state’s current online gaming operators work under.

Whether the bill will find much support in New Jersey’s powerful gaming industry is an open question. While legalized gaming operators are certainly critical of sweepstakes sites—the American Gaming Association has blasted the spread of the unregulated sites—and are unlikely to welcome the legitimization of new competition, it would force the sweepstakes sites to partner with existing casinos and likely drive some unregulated operators out of the market.

The proposal comes on the heels of a lawsuit filed against multiple sweepstakes casinos in December.

New Jersey resident Julian Bargo said that he lost more than $1,000 on sweepstakes casinos such as Wow Vegas, McLuck, High 5, and CrownCoins, all of whom are accused of running illegal gaming platforms in the lawsuit. 

Bargo also named Google, Apple, and their respective app stores in the lawsuit, saying that they facilitate the existence of the allegedly illegal gambling sites.