The American Gaming Association (AGA) is raising concerns about the growing use of sweepstakes-based wagering models, which are gaining popularity in the gambling industry.
In a recent policy statement, the AGA addressed the rise of sweepstakes casinos and sportsbooks, suggesting these platforms may bypass state gambling laws and regulatory frameworks, potentially reducing tax revenue.
According to the AGA, sweepstakes models also pose risks to consumer safety and fairness.
“The absence of regulatory oversight introduces risks for consumers and undermines the integrity and economic contributions of the legal gaming market through investment and tax revenues,” the AGA said. The group also noted that many sweepstakes operators lack responsible gaming measures and self-exclusion options.
The organization criticizes the sweepstakes model, where players can participate “for free” or purchase virtual currency to enhance their experience and win cash prizes. Operators in this space argue that the dual-currency setup complies with existing sweepstakes laws.
In addition to highlighting these concerns, the AGA is urging regulators to take action. They want government agencies to investigate sweepstakes operators and determine if they comply with state laws. The AGA calls for clear legislation to prevent unregulated operators from exploiting loopholes in sweepstakes laws to offer online gambling.
Challenges for Sweepstakes Operators
Some states have already attempted to curb the activities of companies like Virtual Game Works (VGW), a prominent player in the sweepstakes space with leading brands like Chumba Casino and Luckyland Slots. Reports indicate that Delaware’s Division of Gaming Enforcement issued a cease-and-desist order to VGW in February 2023, though the company has yet to comply.
VGW has also faced scrutiny in Michigan, where the state’s Gaming Control Board (GCB) ordered the company to stop offering its sweepstakes services. The AGA’s policy statement references VGW’s exit from the Michigan market after being accused of running illegal gambling operations. The GCB concluded that VGW violated several state laws, including the Michigan Penal Code and the Lawful Internet Gaming Act.
Despite these setbacks, sweepstakes operators like VGW are expected to pursue expansion in other markets, with research from Eilers & Krejcik projecting player purchases in this sector to reach around $8.5 billion in 2024.
