The American Gaming Association (AGA), the leading trade group representing commercial and tribal gaming interests in Congress and throughout the United States, has called for more regulatory scrutiny of online sweepstakes casinos. These platforms, which allow players to win real money, have recently come under fire from several states.
Online sweepstakes casinos offer traditional slot machines and table games via websites and apps, circumventing state and federal gaming laws by using a dual-currency system. New players receive a free allotment of virtual coins to play the games. Once these coins are exhausted, players can purchase additional virtual currency to continue playing. Typically, only one type of currency can be redeemed for prizes or cash, allowing operators to argue that they aren’t facilitating gambling, as no up-front purchase is required to participate.
State officials in Michigan, Georgia, and Delaware have recently started cracking down on these unregulated gaming platforms, sending cease-and-desist letters to several operators. The AGA has issued a memo stating that online sweepstakes casinos undermine gaming regulations and pose a threat to consumers. The association is urging state regulators to warn these operators that they will face legal action if they do not immediately cease their US-focused operations.
The memo emphasizes the need for gaming regulators and state attorneys general to investigate companies offering casino games or sports betting under the “sweepstakes” model to ensure compliance with state laws and regulations. If these laws and regulations are unclear, the memo suggests that legislatures should enact legislation to prevent unlicensed operators from exploiting loopholes in sweepstakes regulations.
According to the AGA, online sweepstakes casinos differ from social gaming apps in that the latter do not provide opportunities for players to win cash. Social casino games resemble gambling-style games but operate within a closed-loop economy where rewards cannot be redeemed for real-world currency, prizes, or traded to other players.
In late 2023, the Michigan Gaming Control Board sent cease-and-desist letters to two prominent sweepstakes casino operators, Cyprus-based Stake.us and San Francisco-based Virtual Gaming Worlds (VGW), which runs Luckyland Casino, Chumba Casino, and Global Poker. The regulator demanded the immediate withdrawal of their games from Michigan, citing violations of the state’s Lawful Internet Gaming Act, Lawful Sports Betting Act, and Michigan Gaming Control and Revenue Act. The operators were also warned that they faced legal action under the Michigan Penal Code. Following these communications, both Stake and VGW ceased offering their products in Michigan. This week, it was reported that Delaware took similar action against VGW, while the company is facing a lawsuit in Georgia for operating illegally.
