Cannibalization is the term industry insiders use to describe the idea that sweepstakes casinos might pull players from real money gambling sites.
Lately, there’s been quite a bit of noise about how sweepstakes casinos could be a serious threat to the online gambling industry, with some even suggesting they cannibalize traditional real money casinos’ revenue. These claims have only gained momentum thanks to the rapid growth of sweepstakes sites since 2020.
Are the Claims True?
Short answer: No. And there’s data to back that up.
Macquarie Equity Research recently stated that they found “little evidence” supporting the idea that sweepstakes operators are diminishing iGaming revenue. In their opinion, iGaming content continues to provide a superior gaming experience, and the growth rates of online casinos in the US remain strong.
Here’s the thing: if sweepstakes casinos are truly stealing players, you’d expect real money casino revenues in a state to increase when sweepstakes sites are banned there, right? Well, that’s not what the numbers show.
Take Michigan, for example. After the state issued cease-and-desist letters to several sweepstakes casinos in late 2023, forcing pretty much all brands to leave, you would think MI online casino revenues would’ve spiked. However, according to a study by Eilers & Krejcik Gaming (EKG), Michigan’s online casino growth from January to August 2024 was the second worst among regulated states, at just 24.8%.
For comparison, West Virginia—where sweepstakes casinos are still going strong—recorded a growth of 54.5% in the same period. In other words, the idea that sweepstakes casinos are siphoning off players just doesn’t hold up.
What Does This Mean for Sweepstakes Casinos?
Untrue as they may be, these cannibalization claims may have a real impact on sweepstakes casinos. The American Gaming Association (AGA) has been pushing for tougher regulations, arguing that sweepstakes casinos operate in a gray area with little oversight. This has led to increased scrutiny, and some states have even forced sites to shut down.
It’s not all doom and gloom, though. Matt Kaufman from Eilers & Krejcik predicts that while a few states might crack down on sweepstakes casinos—especially those with strong online gambling laws—most will continue to allow them. After all, they’re legal and compliant in many states.
History Repeating Itself
This debate has been ongoing for years regarding online casinos and their land-based counterparts. When online casinos first emerged, people worried they’d destroy land-based casinos. However, over time, it became clear that online and retail casinos serve different audiences and purposes. Instead of cannibalizing the market, online casinos have brought more people into the fold. As DraftKings CEO Jason Robins put it: “[Online casinos] bring more people into the market – that lifts everything.”
The Bottom Line
Sweepstakes casinos aren’t a threat to real money gambling sites. They fill their own unique niche and appeal to a different audience.
Much like the old debate between online and land-based casinos, the idea of cannibalization doesn’t hold water. Both types of platforms can coexist and thrive, each adding to the diversity of the online gaming industry. On this same note, NJ is looking to regulate online sweepstakes casinos similarly to real money gambling sites.
Author: Alex Windsor
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