Image by Fathromi Ramdlon from Pixabay
Sweepstakes casinos are immensely popular across the USA (and further afield), particularly in states where online real-money casino gambling is not legal. Currently, that is the vast majority, with only a handful permitting and regulating online casinos. However, the US has seen a dramatic shift in its attitudes towards gambling, and now, gambling in some form or another is permitted in around half of the country. Before the invention of sweepstakes casinos, we had more classic sweepstakes competitions in the USA. While they’re still popular, online sweepstakes casinos have recently taken the crown.
The striking down of the PASPA ban as unconstitutional in 2018 opened the starting gates for the approval of sports betting across the country. At the time of the decision, only Nevada offered legal, regulated sports wagering, while the number is now closer to forty, and the business is booming. However, for whatever reason, state lawmakers have been less enthusiastic about legalizing online casino gambling.
Is it all just protectionism
One argument advanced for the lack of progress is a moral one (after all, anything fun is a great target for prohibition), but that does not account for why sports betting has been enthusiastically adopted. It is thought that a strong driving influence around online casino regulation (or lack of it) is about protectionism, particularly of bricks and mortar casinos. Policy makers have yet to be convinced that opening online operations would not divert attention away from economically significant state-based physical casinos. Even though a state like New Jersey can confidently prove that the two worlds can exist side by side, they have to admit that online casinos are more popular in terms of money staked.
A loophole or a genuine opportunity?
However, regardless of what the regulators and lawmakers decree, a huge number of Americans love to play online casino games. In the past, they flocked to offshore sites if they were not in a legalized state like New Jersey, West Virginia, Michigan, Pennsylvania, Delaware, Connecticut, or, most recently, Rhode Island. To cater to people's desire to play online casino games safely and legally, online platforms have created social and sweepstakes casinos, which have all the advantages but are not subject to the same regulations.
While punters have flocked to sites to play for fun and, with sweepstakes sites, the possibility of cashing in virtual prize money for physical prizes by restaking the ‘gold coins' on new games, some state legislators have taken a dim view and are looking to outlaw them, claiming that they do not comply with sweepstakes legislation. However, there is a lot at stake here for the operators who have gone out of their way to create a safe and legal alternative.
Different laws
Sweepstakes casinos, unlike traditional real money casinos, come under sweepstakes laws rather than gambling ones, meaning they can operate in states where online gambling for real money is restricted. This is because sweepstakes casinos typically do not meet all three criteria that define something as gambling in the United States. Those criteria are Prize, Chance, and Consideration.
- Prize: A player is rewarded with an award of monetary value
- Chance: Winners are determined by luck rather than skill
- Consideration: Players have to pay to enter
Sweepstakes casinos have been set up so that they do not meet the ‘consideration' element, as there are free entry routes, which means that they are classified as legal promotions. These are most commonly in the form of daily login bonuses, where players are awarded bonuses in the form of virtual currency, which they can use to play on all the casino games. Social casinos reward players with virtual prizes, such as a place on the leader board or more gold coins. Sweepstakes casinos run on a dual currency system with Gold Coins and Sweeps Coins – it is the Sweeps Coins that can be ‘cashed out'. Online review sites like Casino.org find daily bonuses and recommend the best operators, so that players can be aware of any pitfalls within the market.
Who are they protecting – consumers or industry?
However, some legislators are not happy and think that the online sites are exploiting a loophole rather than offering a legitimate and safe alternative. At least that is what they are saying publicly. Interestingly, some of the states that are pushing back are the ones that have the most to lose from people playing for free and fun, rather than betting at real money casinos. For example, New Jersey legislators have passed Bill 5447, which bans sweepstakes casinos and establishes new penalties for those found ‘gambling illegally. It would ban platforms in the Garden State from offering virtual currency for cash prizes and impose penalties on what it deems to be “unlawful gambling activities.” It is now awaiting the Governor's approval.
The cynic might suggest that this has nothing to do with consumer protection and everything to do with safeguarding state revenues earned from the lucrative online casino gambling industry. After all, if people are wagering with virtual coins and free currency, they are not spending money at the real-money ones, where the state takes a percentage of the cut. There is a genuine concern that casino lobbyists, who want to remove legal competition, are behind the bill. The Social and Promotional Games Association urged the Governor to say no, claiming it was a ‘blow to digital freedom' that only protects big casinos.
New regulations
It should be noted that there is a growing movement against Sweepstakes Casinos. Interestingly, most of the states considering or that have already fired warning shots are the very states where real money gambling is an essential part of their economy. For example, Nevada and Louisiana's legislators have the sweepstakes casinos in the firing line. In Louisiana, the state's gaming board has issued cease-and-desist orders despite the Governor vetoing recent legislation.
Meanwhile, in New York, a state that has profited enormously from the introduction of online sports betting and where legislation is being prepared for the possible legalization of real-money online casino gambling, a bill has recently been passed banning online sweepstakes casinos (pending sign-off by the Governor), and the Attorney General has also taken action.
The debate around the legality of sweepstakes continues. The balance will probably be swayed by which lobby group has the deepest pockets and can persuade the legislators to listen to their argument. Connecticut, a state where real-money online gambling could be threatened by the sweepstakes variety, has passed a bill classifying sweepstakes casino operations as a Class D felony.
Business as usual
The irony is that while social, sweeps, and real money casinos almost certainly have some crossover in audience, they cater to different markets and demographics. Meanwhile, unregulated and shady real money operators continue to ply their trade from offshore locations.
