The American Gaming Association (AGA) has urged US gaming regulators and attorney generals to revisit the legal gray area sweepstakes casinos operate in. AGA is calling for new laws to protect the players and the legal gambling industry.
The Association has issued a memo titled “Regulatory Vigilance Critical to Ensure ‘Sweepstakes’ Don’t Threaten Consumers and Undermine Gaming Regulation.”
The motivation behind this move likely stems from the influx of numerous new sweepstakes casino platforms.
Many inexperienced operators have yet to implement responsible gaming features (most notably self-exclusion) on their platforms. According to AGA’s memo, insufficient regulatory oversight in the sweepstakes casino industry threatens the economic interests of the legal gambling space.
The Argument Against Sweepstakes Gaming
The American Gaming Association has voiced its concerns about the unregulated “gray area,” which allows sweepstakes casinos to operate even without a license from relevant iGaming authorities.
The association underscored that this “presents a prime opportunity for illegal activity and enriching bad actors.”
Different Legal Frameworks & Cash Prizes
The AGA noted that sweepstakes casinos follow legal frameworks that differ from those of real money and social casinos. Sweepstakes Coins currency, effectively treated as bonus funds, allows players to redeem cash prizes, while Gold Coins currency enables free play.
This system is different from social casinos that use solely Gold Coins, which cannot be redeemed for cash prizes, as players might feel compelled to pay real cash for Gold Coin bundles to boost their balance.
However, legitimate sweepstakes casinos ensure their players never have to pay to play by giving newcomers free currency via welcome bonuses while regular bonuses further reinforce compliance with “no purchase necessary” laws.
Unlicensed Casino Operations
One of the strongest arguments against sweepstakes gaming in AGA’s memo refers to the casinos operating without a license. Sweepstakes casinos are currently allowed to work without one as long as they abide by all sweepstakes laws.
Sweepstakes legislation varies from state to state, but sweepstakes casinos are universally required never to “sell things of value” and ensure only eligible players can participate in sweepstakes prizes.
Player Safety at Risk
The AGA argues consumers do not enjoy satisfactory protection at sweepstakes casinos. Namely, licensing bodies typically handle complaints, investigate relevant casinos, demand casinos remedy the situation, and ultimately revoke their license if they do not cooperate.
The Association points out that players are left to fend for themselves – they can’t file complaints to iGaming regulators since sweepstakes casinos aren’t licensed to begin with.
However, many iGaming experts committed to seeing the legitimate sweepstakes casino industry flourish are backing the player in similar ways a regulator would by providing direct assistance and supplemental aid in the form of guides, reviews, forums, and other educational content.
Lower Taxes & Less Income for the Legal Gambling Industry
The final major point in the AGA’s memo highlights that sweepstakes casinos are undermining the economic interests of the states they operate in, as well as the legal US gambling industry as a whole.
The Association’s advocates point out that “states are forgoing significant tax and revenue opportunities” since sweepstakes casinos do not have the same tax obligations as their “legal” counterparts.
Furthermore, sweepstakes casinos are taking players (and their deposits) away from real-money casinos, lowering the total tax contributions from online and land-based casinos.
We have to remember that sweepstakes casinos are not primarily designed as online gambling venues where millions of dollars flow daily.
With a requirement that all purchases must be de facto optional – made possible with ample rewards and free bonuses – describing the amount of money players spend at sweepstakes casinos as “negligible” would be an understatement.
Likely Outcome of AGA’s Appeal
The American Gaming Association is a powerful lobbying force with a track record spanning over thirty years and a formidable presence in virtually all 50 states.
Some of its biggest members are owners of large casino chains, so if they decide to launch an all-out war on sweepstakes gaming, they’ll likely win.
New regulations might take months to properly craft, while concrete laws might require even more time.
Regardless of how seriously state attorney generals and gaming regulators take the AGA’s memo, this move will undoubtedly lead to many sweepstakes casinos moving out of certain states where they are likely to be scrutinized—such was the case in Michigan with Stake.us, and other social casinos, not too long ago.
Current Sweepstakes Gaming Restrictions
The legal gray area in the sweepstakes gaming industry is somewhat caused by the regulators themselves, as most of them never defined the term “sweepstakes casino.”
Common definitions of “sweepstakes” related to raffles, drawings, and lotteries do not apply to casino gaming operating under similar concepts.
However, several states have clear-cut restrictions, such as the Michigan Gaming Control Board’s take on Internet Sweepstakes Cafes, which almost completely criminalizes sweepstakes gaming.
Washington State Gambling Commission listed extensive restrictions to “promotional contests of chance” that apply to sweepstakes casinos, featuring severe weekly and annual redemption limits ($100 per week, $5,000 per year).
Although the Delaware Division of Gaming Enforcement never passed any restrictions that expressly target sweepstakes casinos, they cracked down on Virtual Gaming Worlds in 2023, just like the MGCB.
Since gambling in Idaho is primarily regulated by its Tribal Gaming Commission (fully vested in seeing tribal casinos flourish), it’s safe to assume they’ll be among the first to board AGA’s bandwagon and either severely limit or completely push sweepstakes gaming out of the state. Sweeps Coins are already illegal in the state.
Other states frequently restricted at sweepstakes casinos (except for DE, ID, MI, and WA) include the rest legal online casino states (NJ, PA), and Alabama, Georgia, Louisiana, Nevada, and Montana. New York and Florida also have prize redemption rules in place, limiting sweeps casino wins at $5,000 per round/day.
Whether the rest 40 states will set measures in place, as a result of AGA’s appeal, remains to be seen.
Author: Bogdan Lunkan
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