Gaming Trade Group Encourages Regulators to Crack Down on Internet Sweepstakes
- 22 Aug 2024
- Gambling News
Online sweepstakes should be subject to tighter regulatory scrutiny, according to the American Gaming Association (AGA), the country's leading trade association that advocates for the commercial and tribal gaming businesses in Congress and throughout the nation.
Traditional slot machines and table games are available through online websites and applications at so-called "sweepstakes casinos." The platforms use a dual-currency approach to get around state and federal gambling rules.
To play the casino games, new players are given a complimentary allocation of virtual currency. To continue playing once the free play period expires, gamers can buy additional virtual cash.
Usually, only one of the currencies can be exchanged for cash or prizes at online sweepstakes casinos. Because there is no upfront cost for players to participate, these operators assert that they are not engaging in gambling facilitation.
Since state authorities in Michigan, Georgia, and Delaware recently sent cease-and-desist letters to a number of operators, online sweepstakes casinos have come under regulatory scrutiny.
AGA Emphasizes Regulatory Watchfulness
The AGA said online sweepstakes casinos harm customers and violate gaming laws in a warning about sweepstakes released last month. The gaming lobby is calling on state authorities to issue warnings to sweeps operators, warning them that failure to promptly stop their US-focused operations may result in legal action.
“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 apps and online sweepstakes casinos are different in that the latter do not give users the chance to win real money.
“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 Wins Big in the Sweepstakes
Two major operators of sweepstakes casinos, Virtual Gaming Worlds (VGW), based in San Francisco and operating Luckyland Casino, Chumba Casino, and Global Poker, and Stake.us, based in Cyprus, received cease-and-desist orders from the Michigan Gaming Control Board before the end of 2023.
The companies were instructed by the authority to immediately remove their games from Michigan. According to the board, the sweepstakes casinos broke the Michigan Gaming Control and Revenue Act, the Lawful Internet Gaming Act, and the Lawful Sports Betting Act. Additionally, the sweeps operators were informed that they could be prosecuted under the Michigan Penal Code.
The communications caused Stake and VGW to discontinue their product offerings in Michigan. VGW is being sued in Georgia for operating unlawfully, and Delaware has taken similar action against the corporation, according to a report this week.
