Sweepstakes Betting: The Latest Gambling Craze is Dangerous
Author:
Zach Lutz
Published:
Jul 23, 2024
,
03:56 p.m.
ET
The Supreme Court's May 2018 decision granting states the authority to regulate sports betting has led to a flourishing market with 38 states now offering some form of legalized sports wagering. However, it’s also had a downstream effect of creating legal gray-area opportunities for betting-adjacent products.
The next big wave appears to be “sweepstakes” betting. These products are currently open to millions more Americans, including vulnerable young people aged 18 to 20 and those in states where traditional sports gambling remains prohibited. Given that opportunity, there are more companies rushing in to join the race to take advantage of the legal loophole. Let’s dive into the concept of sweepstakes betting, including how it’s legal and the risks to be aware of with it.
What is Sweepstakes Betting?
Sweepstakes betting offers a unique twist on traditional sports betting by operating under the legal framework of sweepstakes laws. In this model, the platform generally offers two types of virtual currency: virtual coins and virtual cash. Both currencies can be used to place bets, but they serve different purposes and hold different intrinsic values.
The virtual coins are strictly for entertainment value and carry no real-world monetary value but can be used and accumulated to place bets for fun. This model resembles a social game, where the thrill of betting is present, but there are no real monetary stakes.
In contrast, the virtual cash side of the platform allows bettors to convert virtual currency into real money. When you wager with virtual cash, your winnings can be withdrawn as actual dollars into an account or digital payment platform.
A critical piece to the process is that when you purchase virtual coins, you often receive virtual cash as a bonus, bridging the gap between play money and real stakes. For example, spending $100 might buy you 1,000,000 virtual coins and a bonus of 100 in virtual cash. While the coins remain part of a virtual game, the cash can become tangible rewards through correct predictions, like in sports betting.
Another key component of sweepstakes products is that there is “No Purchase Required,” meaning you can play for free (using the virtual coins) without buying anything. This is a key differentiator from sports betting products, where deposits are required to place bets.
How does it differ from traditional sports betting?
Sweepstakes betting sets itself apart from traditional sports betting through its adherence to sweepstakes laws, notably the Alternative Method of Entry (AMOE). This legal requirement ensures participants can enter the betting game with a no-purchase-necessary option (no real-money deposit), keeping sweepstakes betting distinct from typical gambling.
With most sweepstakes betting sites, users can mail in their username and receive free virtual coins (and oftentimes virtual cash as well), which can be used for making predictions using the product. Once you meet the wagering requirements (which vary), any virtual cash winnings can be converted into real money. This free-entry model not only attracts new users but also aligns with state laws that permit sweepstakes under specific guidelines.
Are Sweepstakes betting sites legal?
This is a complicated topic, but in general the answer appears to be yes right now. Unlike traditional sports betting, which requires stringent regulation and approval from state gaming commissions, sweepstakes fall under a different set of laws. As of now, sweepstakes betting products are not regulated by any state gaming commission or authority. The inclusion of an AMOE makes it legally permissible, even in states where traditional betting is prohibited.
Currently, sweepstakes betting is live in approximately 40 states, including massive markets like California and Texas where traditional sports betting is not yet available. It’s worth noting that some states have stricter rules around and definitions of sweepstakes, so big sweepstakes-based betting companies like Fliff choose not to operate in places like Hawaii, Idaho, Nevada, Tennessee, and Washington. They also have different rules regarding real-money purchases in a handful of other states like Alabama, Colorado, Georgia, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Montana and Ohio.
Age restrictions for Sweepstakes
Sweepstakes betting, while offering a legal loophole for broader access, still maintains age restrictions. However, whereas legal sports betting requires users to be 21+ in most states, sweepstakes only require participants to be 18+ years old.
Because sweepstakes betting operators claim to not be real-money sportsbooks, they permit younger users than traditional sports betting operators can. The 18- to 20-year-old segment is incredibly attractive to all gambling operators, as many can convert into long-term customers by ingraining betting behaviors at a young age. There’s also then a trickle-down effect to kids even younger than age 18, who even in high school find creative ways to bet.
Who are the biggest Sweepstakes gambling companies?
Fliff
The sweepstakes betting industry is still in its infancy, but certain companies have already made a noteworthy splash. One of the most prominent players is Fliff, which entered the market a few years ago and quickly established itself as a leader.
ProphetX
In addition, other operators are pivoting towards this model, recognizing its potential to reach a wider audience. One such company is Prophet, previously known for its sports betting exchange offering in New Jersey. Prophet has transitioned to the sweepstakes model, rebranding as ProphetX. This shift should allow them to skirt the limitations of market access deals and state-specific regulations.
Novig
Another operator called Novig recently exited Colorado as a regulated sportsbook operator and is transitioning into sweepstakes betting, underscoring the potential for this model to disrupt the traditional sports betting landscape. A key question, though, is how long will this last? When will state regulators try to crack down on sweepstakes-based gambling products, like they did with DFS 2.0 in the past year? The answer is probably that it will happen at some point in the years ahead, but there may be bigger fish to fry first.
Stake
One of those bigger fish that may be in the crosshairs of regulators is Stake, a sweepstakes-based casino and sportsbook that operates globally, including in the U.S. with some products. Stake has grown massively in recent years, bringing Drake on board as a brand ambassador and now sponsoring the jersey of English Premier League soccer club Everton. Like others, they try to play it safe by avoiding certain gaming products in certain states, and they don’t offer sports betting at all in America. However, their unregulated casino games are arguably even more dangerous and are available in the majority of states.
Dangers and risks of Sweepstakes betting
Blurred line between virtual and real money
While sweepstakes betting opens up new engagement avenues for sports enthusiasts, it also comes with its own set of risks and concerns. One of the primary dangers is the perception that betting with virtual currency doesn't involve real money. This can lead to individuals, particularly younger participants, underestimating the financial implications of their actions and developing unhealthy betting habits.
Lack of consumer protections
Moreover, the lack of regulation in the sweepstakes betting space means that consumers have limited recourse in case of disputes or issues with operators. The absence of oversight can attract unscrupulous operators who may exploit the legal loophole to engage in fraudulent activities. Participants must exercise caution and thoroughly research the legitimacy and reputation of the platforms they choose to engage with.
Teenagers gambling
Teens are especially vulnerable to developing gambling problems for multiple reasons, mainly the immaturity of their brains. The brains of teenagers are still developing, especially in the areas responsible for impulse control and decision-making, which are of course critical with gaming and gambling products. The prefrontal cortex, which helps regulate behavior and assess risks, generally does not fully develop until approximately age 25. Therefore, teens can be more susceptible to impulsive behaviors and risk-taking, including gambling.
Young people also often lack many of the life experiences and cognitive maturity to fully comprehend the consequences of gambling. This can result in an increased likelihood of developing problematic gambling behaviors early on in life. Exposure to gambling at a young age can set the stage for long-term addiction problems, so the increased accessibility of gambling-related products to those 18-20 years old is incredibly dangerous. Sadly, we may not see the full impact until years from now, when it’s likely too late for many of them.
Sweepstakes Betting: Addiction Treatment and Resources
For those who find themselves struggling with the addictive nature of sweepstakes betting, specialized resources and support options are available. Treatment providers such as Birches Health offer programs to help individuals regain control. And the best part is that care sessions are all from the comfort of home, often with $0 out-of-pocket costs.
If you or someone you know is experiencing difficulties with sweepstakes betting, consider reaching out to Birches Health for assistance.
Alternatively, you can simply call 833-483-3838 or email hello@bircheshealth.com to get in touch directly with the Birches team!
