As the popularity of sweepstakes-based wagering models continues to surge, the American Gaming Association (AGA) has sounded the alarm on the potential risks these platforms pose to consumers and the legal gaming industry. In a recently released policy statement, the AGA emphasized the need for increased regulatory oversight to prevent sweepstakes casinos from circumventing state gambling laws and exploiting legal ambiguities to operate unchecked.
Sweepstakes Casinos: A Growing Threat
The rise of so-called “sweepstakes casinos” has introduced a new and unregulated form of online gambling that mimics traditional casino games such as slots, roulette, blackjack, and poker. These platforms allow players to engage in gameplay either for free or by purchasing virtual currency, commonly known as Gold Coins. Alongside Gold Coins, players may also receive Sweep Coins, a secondary form of virtual currency that can be exchanged for cash or prizes, making these games increasingly indistinguishable from conventional online casinos.
However, the dual-currency model used by these operators—where Sweep Coins are presented as “free” but often require real money or significant time investment to redeem—has raised concerns among regulators and industry stakeholders. The AGA’s policy statement highlights the dangers posed by the lack of regulatory oversight, which “presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions.” The organization notes that many sweepstakes operators implement weak, if any, responsible gaming protocols and offer minimal self-exclusion processes, leaving players vulnerable to exploitation.
Michigan Takes Action Against Sweepstakes Operators
In response to the growing presence of sweepstakes casinos, some states have begun taking legal action to curb their operations. Michigan, in particular, has emerged as a battleground in the fight against unregulated sweepstakes gambling. In November and December of 2023, the Michigan Gaming Control Board (GCB) issued cease-and-desist orders to Cyprus-based Sweepstakes Limited (Stake.us) and San Francisco-based VGW Luckyland, both of which offer sweepstakes-based gaming services. These companies were found to be in violation of Michigan’s gaming laws, including the Lawful Internet Gaming Act, which mandates that internet gaming can only be offered by licensed operators.
The GCB’s crackdown on VGW Luckyland also cited violations of the Michigan Gaming Control and Revenue Act and the Michigan Penal Code. The GCB determined that VGW’s activities constituted illegal gambling, as they involved “conducting illegal gambling by offering an internet game in which a player wagers something of monetary value for the opportunity to win something of monetary value.” As a result of these violations, VGW and other sweepstakes operators have been forced to cease operations in Michigan.
A Call for Broader Regulatory Scrutiny
The AGA has called for more comprehensive regulatory scrutiny of sweepstakes casinos and sportsbooks operating under similar models across the United States. The trade group argues that these platforms exploit legal loopholes and often operate in a legal gray area, undermining the integrity of the regulated gaming industry and depriving states of crucial tax revenue. The AGA’s policy statement urges regulators and state attorneys general to investigate these companies thoroughly to ensure compliance with state laws and regulations.
In addition to enforcement actions, the AGA recommends that legislatures consider enacting new laws to close existing loopholes that allow unlicensed operators to offer online real-money gambling under the guise of sweepstakes. “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 AGA stated in its policy.
The Need for Immediate Action
Industry experts warn that the rapid growth of sweepstakes casinos presents an urgent threat to consumers and the legal gaming industry. According to a recent report by Eilers & Krejcik, the market for sweepstakes gaming is expected to reach approximately $8.5 billion in 2024, with projections suggesting it could explode to over $11 billion by 2025. This growth has been fueled, in part, by a surge of private equity investment, with investors betting that states will be too slow to crack down on these operators.
As highlighted in a recent LinkedIn post, the opaque nature of sweepstakes operations “presents a prime opportunity for illegal activity and enriching bad actors.” The post further warns that sweepstakes casinos are “flooding into states in which online gaming is otherwise illegal, and it’s hitting unsuspecting consumers like a tidal wave.”
Given the potential for harm, the AGA and other industry stakeholders are urging regulators to take swift action to protect consumers and preserve the integrity of the legal gaming market. The sooner regulatory bodies and state attorneys general address these concerns, the better it will be for consumers, the industry, and the prevention of illegal activities such as money laundering.
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