In a memo published via Vixio Regulatory Intelligence, the AGA stated:
AGA Takes Aim at Sweepstakes Casinos - Calls for State RegulationSweepstakes casinos claim that because they don’t require real money for their gameplay, they are not offering gambling under the letter of the law. However, functionally, sweepstakes casinos look and play like an online casino while using a dual-currency system to avoid licensing and regulation.
Sweepstakes Sportsbooks offer “free-to-play sportsbooks” where people can bet on each other’s wagers, or stake bets directly with each other. Many operate with two different types of free “tokens” that can be used to wager, and users can exchange them for real money when won through gameplay.
The AGA identified sweepstake casinos, also referred to as social casinos, as a potential threat to consumers as they fall outside the regulation of many state gambling commissions.
The lack of regulatory oversight presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions. These sweepstakes-based operators have weak (if any) responsible gaming protocols and few, if any, self-exclusion processes. There is no independent product testing to ensure basic fairness to players, and although many claim players must be 18+, age verification procedures, if they exist, are often questionable.
The opaque nature of these operations also presents a prime opportunity for illegal activity and enriching bad actors.
Sweepstakes Casinos’ Legal Standing and Popularity
AGA Takes Aim at Sweepstakes Casinos - Calls for State Regulation- Washington Gambling Commission Sweepstakes FAQs
- Idaho State Legislation Banning All Forms of Gambling
Michigan has taken action to address the operation of sweepstakes casinos in the state. The Michigan Gaming Control Board sent cease and desist letters to three sweeps operators – PredictionStrike Inc., in Bay Shore, New York; Sweepstakes Limited (Stake.us), in Limassol, Cyprus; and VGW LuckyLand, Inc. (VGW) in San Francisco, California.
The MGCC stated that all three were offering online gaming in Michigan without licenses to do so legally. This was regardless of the fact that the state’s gambling code does not prohibit the operation of sweeps casinos.
In every other state, however, they fall into a grey area where they are considered legal as they do not allow customers to play games with real money. This ease of access has led to a boom in the industry as states take their time over the introduction of regulated US online casinos following the success of legal sports betting in the US.
Industry Growth
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AGA Takes Aim at Sweepstakes Casinos - Calls for State Regulation
- 61% growth in 2023 alone
- $5.6 billion in player purchases in 2023 AGA Takes Aim at Sweepstakes Casinos - Calls for State Regulation
- Projected CAGR of 44% for 2024 + 2025
- Projects player purchases of $11.4 billion in 2025
Potential for Tax Gains
AGA Takes Aim at Sweepstakes Casinos - Calls for State RegulationFor example, the state of New Jersey has a 15% tax rate on online gaming revenues. If sweepstakes casinos were regulated across the US with a similar tax rate in force, states would have collected $300 million in 2023 alone.
Sweepstakes Casinos Under Pressure
The AGA’s recent calls for scrutiny and Michigan’s cease and desist letters are not the first time that sweepstakes casinos face pressure – most of which is from former customers.
In June of 2024, a class action lawsuit was filed against online social casino and poker game developer VGW in the state of Georgia. The action alleged that VGW’s sites were in breach of local gambling laws.
The Plaintiff in the suit alleges that she lost around $1,150 when playing games of chance on VGW’s websites that are legally available in the state. The suits claims that presenting the games as games of chance where no money is won or lost is a misrepresentation.
In Washington on June 1, 2023, the U.S. District Court for the Western District of Washington approved a $415 million settlement against DoubleDown Interactive LLC and International Game Technology PLC. The court ruled that both sweeps operators were providing illegal gambling games online.
AGA Takes Aim at Sweepstakes Casinos - Calls for State Regulation AGA Takes Aim at Sweepstakes Casinos - Calls for State Regulation2022 saw another class-action lawsuit against VGW LuckyLand in Kentucky. This was settled for over $11 million after it was alleged that sweepstakes activities violated local gambling laws.
Olivia has worked as an editor and writer for major brands across multiple niches. She now focuses on the iGaming and sports betting industries.