AGA warns regulators to watch for “unlicensed” sweepstakes operators “exploiting loopholes”
Trade body argues sweepstake casinos present “a prime opportunity for illegal activity” by getting around traditional casino regulations
The American Gaming Association (AGA) has called for regulators across the country to be vigilant when it comes to sweepstake casinos.
The trade body classes sweepstake casinos as places which offer traditional casino games such as slots, roulette, and card games, allowing players to play “ostensibly for free, receive free credits, or buy virtual currency to further their gameplay.”
Sweepstake sportsbooks also operate on a free-to-play model, using a free tokens system and allowing players to bet on each other’s wagers or make bets directly with one another, according to AGA.
AGA added that sweepstake casinos then “misleadingly” claim they don’t offer gambling under the letter of the law, as real money isn’t required to play their games.
This allows sweepstake casinos to circumvent regulations associated with traditional casinos, which the AGA suggests puts players at significant risk.
An AGA statement said: “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 sweepstake-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.”
The trade body cited an incident from 2023, where the Michigan Gaming Control Board (GCB) sent cease-and-desist letters to sweepstake casino operators Sweepstakes Limited (owned by Stake.us) and San Francisco-based VGW Luckyland (subsidiary of VGW Holdings).
Both companies have since stopped offering sweepstake products in Michigan.
Due to the companies’ “unregulated and unlicensed online gaming offerings”, the pair were found to be in violation of the state’s Lawful Internet Gaming Act, the Michigan Gaming Control and Revenue Act, and the Michigan Penal Code.
AGA added that state regulators should investigate companies operating sweepstake models to make sure they adhere to the legislation in place.
The statement continued: “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.”
Earlier this month, Catena Media CEO Manuel Stan claimed that sweepstake casinos were the company’s fastest growing vertical, accounting for more than a third ($11m) of the firm’s revenue generated from online casino affiliation.
Meanwhile, Flutter CEO Peter Jackson spoke of his concerns that sliding tax scales in Illinois could lead to a rise in unregulated sweepstake casinos.