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Gaming Trade Group Encourages Regulators to Crack Down on Internet Sweepstakes

Online sweepstakes should be subject to tighter regulatory scrutiny, according to the American Gaming Association (AGA), the leading trade association in the country that represents the interests of the commercial and tribal gaming businesses in Congress and throughout the nation.

Traditional slot machines and table games are available on so-called "sweepstakes casinos"' websites and applications. The platforms use a dual-currency method to get around both state and federal gambling rules.

A complimentary allocation of virtual coins is provided to new players so they can enjoy the casino games. To further their gaming once the free play period expires, gamers can buy additional virtual currency.

Generally, only one of the currencies can be redeemed for prizes or cash at online sweepstakes casinos. Since players don't have to pay anything up advance to play, these operators argue they aren't encouraging gambling.

A number of operators of online sweepstakes casinos have lately received cease-and-desist letters from state regulators in Georgia, Michigan, and Delaware, putting them under regulatory scrutiny.

AGA Insists on Regulatory Watchfulness 

The AGA said that online sweepstakes casinos violate gaming laws and endanger players in a memo concerning sweepstakes that was released last month. State regulators are being urged by the gaming lobby to issue warning notifications to sweeps operators, threatening legal action if the operators don't immediately stop 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.

According to the AGA, social gaming applications don't give users the chance to win real money, whereas online sweepstakes casinos do.

“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.

Michigan Sweeps Into the Contest

The Michigan Gaming Control Board issued cease-and-desist letters around the end of 2023 to two of the biggest operators of sweepstakes casinos: Virtual Gaming Worlds (VGW), based in San Francisco and operating Luckyland Casino, Chumba Casino, and Global Poker; Stake.us is based in Cyprus.

The regulator ordered the companies to take their games out of Michigan right away. The Michigan Gaming Control and Revenue Act, the Lawful Internet Gaming Act, and the Lawful Sports Betting Act were all broken, according to the board, by the sweepstakes casinos. It was also informed to the sweeps operators that they may be sued under the Michigan Penal Code.

Following the conversations, Stake and VGW ceased selling their goods in Michigan. This week, it was announced that Delaware had taken similar legal action against VGW, and the business is facing a Georgian lawsuit alleging illegal operations.