The legality or otherwise of sweepstakes casino operations has been in the spotlight for quite some time now. Surprisingly, talks on the subject intensified at the just concluded 2024 Winter Meeting of the National Council of Legislators from Gaming States (NCLGS). The meeting convened stakeholders and regulators from across the nation to discuss the nature of sweepstakes and potential implications for traditional casino gaming.
Kicking off the event and general discussions was a panel session titled, ‘This Ain’t Your Granddad’s Sweepstakes,’ where legislators debated on the regulation, licensing, and taxation of the industry. The panel had Rep. Chris Kannady, an Oklahoma lawmaker moderate the session before a packed ballroom in Harrah’s Hotel at Caesars New Orleans.
Among the issues considered in the hour-long panel session was a definition of gambling and whether such accommodated sweepstakes casinos. Panel members also argued perhaps the most burning question, viz whether states could regulate or statutorily determine how sweepstakes platforms run their operations.
General counsel at Ohio Casino Control Commission, Andromeda Morrison put forward a positive argument, pushing for state-based regulation of sweepstakes.
“For the regulators in the room, this is a very challenging topic,” Morrison said. “For the legislators in the room, use your regulators as resources. … We want to make sure everyone who is in Ohio is doing so legally and in a corporate, responsible way.”
Sweepstakes gaming is available in 48 states in the country, except Washington DC, and Michigan. Most social casino sites offer free-to-play games but also include a model that permits purchasing virtual coins to play games and stand a chance to win real prizes.
The sweepstakes operating model is built on a dual-currency system which distinguishes “gold coin” from “sweep coins.” While the former is available for free and only contributes to fun gaming, the latter has monetary value and is redeemable as real prizes, possibly even cash. Many operators have experimented with this structure with much success.
Virtual Gaming World (VGW) is one of the top gaming companies that adopt this procedure in accepted states. Other notable brands including Fliff and Kickr Games are even now incorporating the mechanism into traditional online gaming tournaments. Together, all of these named companies form a part of the Social and Promotional Gaming Association (SPGA) established to counter dissidents to the sweepstakes model.
Expectedly, this currency mechanism has attracted more industry enemies than VGW and its sister companies must have imagined. At the meeting, Howard Glaser, head of government affairs at Light & Wonder subtly made his position known when he used a slide from Fliff during his remarks.
The slide explored how to purchase special cash and utilize it to win real money. Below the slide read, “To Regulators: Not Gambling; To Players: How to Win Real Money,” suggesting that Glaser considered the dual currency model as an encroachment into traditional gambling systems that also needed regulation.
In an interview with reporters afterward, Glaser revealed that his company is keeping an eye on the sweepstakes industry “because the regulated gaming industry is going to be concerned anytime that unregulated entities offering similar products without taxation, without customer protections, without licensing, without AML requirements, without regulatory.”
“The regulated gaming industry invests heavily in all of these areas, and pursuing growth in gaming is very important, but doing it responsibly has to come along with that,” Glaser said.
Furthermore, according to Chad Beynon, a Macquarie analyst, real money sweepstakes casinos will generate nothing less than $2.1 billion in 2025. If such financial performance is left unregulated and untaxed, the financial performance of traditional casinos will be affected. This was the opinion of Steve Croxton, MD at Rice, Voelker LLC.
This meeting couldn’t have come at a more opportune time than some days to the Senate Judiciary Committee hearing on sports betting. While there are no guarantees that sweepstakes would form a part of the legislative discussion, there’s no doubt that ripples from the NCLGS meeting could trigger a consideration of the existing legal framework.
Nonetheless, there were some stakeholders who held some positive view of sweepstakes at the panel sessions. Tres York, Senior Director, Government Relations at the American Gaming Association believed online sweepstakes were similar to McDonald’s promotions.
Similarly, Bill Gantz, a lawyer representing a number of sweepstakes clients, believes the states already have what it takes to address unregulated gaming. In his opinion, the states can change the law or existing regulations if they deem it necessary.
Both sides, however, did agree on the need to combat problem gambling as sweepstakes could be a source of potential issues. Many regulators also called for operators to limit access to underaged customers, a phenomenon Morrison believed would be better managed on regulated platforms.