The American Gaming Association (AGA), the nation’s preeminent trade group representing the interests of the commercial and tribal gaming industries in Congress and across the country, says online sweepstakes deserve more regulatory scrutiny.
So-called “sweepstakes casinos” offer traditional slot machines and table games via online websites and apps. The platforms circumvent state and federal gaming laws by utilizing a dual-currency system.
New players are afforded a free allotment of virtual coins that can be used to play the casino games. Once the free play runs out, players can purchase a separate virtual currency to further their gameplay.
Typically, online sweepstakes casinos only allow one of the currencies to be redeemed for prizes or cash. Such operators claim they aren’t facilitating gambling because players don’t need to buy anything up-front to participate.
Online sweepstakes casinos have come under regulatory examination, with state officials in Michigan, Georgia, and Delaware recently sending cease-and-desist letters to several operators.
In a memo regarding sweepstakes issued this month, the AGA said online sweepstakes casinos undermine gaming regulations and threaten consumers. The gaming lobby is urging state regulators to send warning notices to sweeps operators informing them they’ll face legal action if they don’t immediately terminate their US-focused operations.
“There are an increasing number of entities that have intentionally designed business models to circumvent or exploit ambiguity in state gambling laws and the regulatory frameworks within which the legal gaming industry operates,” the AGA memo read.
“Gaming regulators and state attorneys general should investigate companies or platforms that offer casino games or a form of sports betting under the ‘sweepstakes’ model to determine whether or not these operators are in compliance with their respective laws and regulations and take appropriate action if not. Where state laws and regulations are not clear, legislatures should consider enacting legislation to prevent unlicensed operators from exploiting loopholes in sweepstakes regulations to offer online real money gambling,” the memo continued.
The AGA says online sweepstakes casinos differ from social gaming apps in that the latter doesn’t provide an opportunity for players to win cash.
“Unlike sweepstakes casinos, which utilize a dual currency system to offer players the chance to exchange the in-game currency for real money and prizes, social casino games are more casual games that resemble gambling style games but have a closed loop economy where rewards cannot be redeemed for real-world currency, used to win prizes, or traded to other players,” the AGA said.
Toward the end of 2023, the Michigan Gaming Control Board sent cease-and-desist letters to two leading sweepstakes casino operators, Cyprus-based Stake.us and San Francisco-based Virtual Gaming Worlds (VGW), which runs Luckyland Casino, Chumba Casino, and Global Poker.
The regulator told the businesses to immediately withdraw their games from Michigan. The board said the sweepstakes casinos violated the state’s Lawful Internet Gaming Act, Lawful Sports Betting Act, and Michigan Gaming Control and Revenue Act. The sweeps operators were also told they faced legal action under the Michigan Penal Code.
As a result of the communications, both Stake and VGW stopped offering their products in Michigan. It was reported this week that Delaware has taken similar action against VGW and the company is being sued in Georgia for operating illegally.
