The American Gaming Association last week published a memo asking gaming regulators to take a closer look at sweepstakes operators.
Last week, the casino trade group began circulating a memo titled, “Regulatory Vigilance Critical to Ensure ‘Sweepstakes’ Don’t Threaten Consumers and Undermine Gaming Regulation.”
“As a result, consumers are being deprived of protections and states are forgoing significant tax and revenue opportunities as this gambling replaces that conducted through regulated channels,” the AGA memo reads.
Sweepstakes rise in sports betting
The conclusion of the AGA memo suggests state gambling regulators and attorneys general “should investigate companies or platforms that offer casino games or a form of sports betting under the ‘sweepstakes’ model.” That model allows users to play for free or with purchased virtual currency through regulatory loopholes, according to the AGA.
Users can exchange the virtual currencies to real money. The dual-currency system allows the operators to avoid licensing and regulation, according to the memo.
In late 2023, the Michigan Gambling Control Board ordered three sweepstakes companies to cease operations in the state. The companies (PredictionStrike, Stake.us and VGW) have stopped offering their products in Michigan.
AGA sees regulatory gaps
The AGA said the sweepstakes operators are not under the same regulatory scrutiny as legal US sportsbooks and online casinos. The memo notes companies are using “sweepstakes-based” models to “potentially skirt gaming laws and regulations” that US sports betting and online casino operators must follow.
“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,” the memo reads. “These sweepstakes-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 AGA also outlined its view of the difference between sweeps and social casinos. While sweepstakes offers the dual-currency model to allow for cashouts, social casinos are a “closed loop economy.” The AGA said users cannot redeem social casino rewards for real world value.
