Crackdown on Sweepstakes Betting & Online Casino Begins

The long-overdue crackdown on sweepstakes-based sports betting and online casino products has begun. Even though they are popular with many bettors (especially those in states where sports betting is not yet legal), they have come under scrutiny for their deceptive practices and gray-area (at best) offerings. Sweepstakes casinos are not regulated, and therefore some states are coming down on the industry in attempts to shutter their operations. 

What are “sweepstakes” betting and casino products? 

Sweepstakes betting and online casinos have become the latest crazes in online gaming. These companies and products operate under the legal framework of sweepstakes laws. No purchase is required, which means you can technically play for free, although they often make the free option difficult with steps like physical mail-in requests, naturally pushing most users to the paid versions for participation.

Once you receive or purchase virtual coins, you can use those to gamble, either in sportsbook-like products or casino games. And once you meet the wagering requirements (ex: betting using the virtual coins once or twice), you can convert the virtual coins into cash. These companies argue that this model is in line with state sweepstakes laws that allow them under certain guidelines. 

Are sweepstakes betting products legal or not?

Sweepstakes casinos have been around for a while. They increased notably  in popularity over the past few years, especially during the COVID-19 lockdown period. Despite their popularity, many aim to remain in the shadows, outside of the attention of federal and state regulators. Still, sweepstakes casinos have recently found themselves in the spotlight, with some states even sending cease-and-desist letters. 

In which states are sweepstakes betting operational?

Each state has its own rules and regulations regarding sweepstakes and contests. For example, Florida, New York, and Rhode Island require promotions to be bonded and registered. One popular platform operates in all states except Washington, but participants in Hawaii, Idaho, Nevada, and Tennessee are restricted from participating in our sweepstakes promotions. 

Which states have cracked down on sweepstakes betting?

The national American Gaming Association (AGA) has pushed for a crackdown on sweepstakes gaming. The group called on U.S. states to crack down on unlicensed sweepstakes and gaming operations. Sweepstakes aren't regulated like the sports betting and gambling industries, which means in part that states don’t see tax revenue from them like they do with traditional sportsbooks. 

The AGA argued that sweepstakes operate without independent testing, self-exclusion processes or age protocols. The U.S. trade group demands legislatures from states with regulatory gray areas to enact laws that prevent these gaming operators from taking advantage of sweepstakes loopholes. 

In the meantime, the Delaware Division of Gaming Enforcement told SBC Americas that it has ordered Virtual Gaming Worlds (VGW) to shut down its operations in the state and halt online sweepstakes casinos. VGW has received similar notices in Georgia, Idaho and Washington. 

Michigan is one of the seven states that offer online casino gambling and mobile sports betting, but state regulators have issued cease-and-desist letters to VGW, PredictionStrike, and Stake.us for operating illegally in their state. Additionally, a class action lawsuit was filed in the Florida Middle District Court. 

UPDATE (9/30/24): Connecticut has also cracked down on "sweeps casinos," saying that it is illegal gambling under state law and operators can be subject to civil and criminal penalties. In an order to one of the major sweepstakes casinos, the Connecticut Department of Consumer Protection wrote that the company "does not possess an online gaming operator’s license...or any other relevant qualification...to provide online gaming to Connecticut residents."

The department also found that the company's "promotion of unlicensed and illegal gambling services is also an unfair trade practice" under the state Unfair Trade Practices Act. The order was made earlier this year but is now public.

What’s next? Is this the end of sweepstakes-style gambling? 

The AGA certainly hopes that more states will follow suit and try to shut down these sweepstakes-based gambling companies. However, at the same time, some companies are jumping at the chance to offer these products in states where sports betting and casino games are not yet legal, tapping into audiences that market leaders FanDuel, DraftKings, BetMGM cannot touch. 

The legal considerations are complex, as sweepstakes regulations vary by state, but some industry experts maintain that these companies are abiding by the current laws around them. Therefore, there is likely more of a need to tighten regulations to eliminate this loophole, or pass new legislation to do so. And as you can expect, this could be a lengthy process in many states, meaning these companies will likely continue to operate in the meantime. 

Sources:

Are Sweepstakes Casinos the New DFS 2.0? - by Steve Ruddock

Perth Billionaire Laurence Escalante to fight back as his casino empire Virtual Gaming Worlds loses dominance in the US

AGA Calls for Crack Down on Sweepstakes Gaming

Report: Delaware Lottery Wants Virtual Gaming Worlds to Exit