A magic portal or legal loophole?
Sweepstakes and social casinos seemed to be a magic portal that allowed people who loved casino games the chance to play online without breaking any laws. Sweepstakes casinos offer all the fun and thrills of their real-money counterparts but are not covered by the same legislation. This is because the player is not betting with real money on the direct outcome of an event (or spin of the reels).
Gambling has always been very strictly controlled in the US, and some state legislators have taken a dim view of online casino operators finding a clever way to circumvent their bans and prohibitions. Â Currently, only seven US states allow real-money online casino gaming, and sweepstakes and social casinos were welcomed with open arms by iGamers nationwide.
Exploding business
The platforms allow players to gamble with virtual gold coins. If players win more virtual currency, the winnings can be exchanged for physical prizes, including real money options. The operators offer casino-style games, including slots, blackjack, roulette, and poker, under the guise of a perpetually running sweepstakes. It has proved to be incredibly popular, and Forbes estimates that net revenue will be around $4 billion this year.
Talk of banning sweepstakes casinos without follow-up legislative action is unlikely to impact this growing industry. In fact, it could actually drive up usage if people fear that something they have come to enjoy is in danger of being snatched away. While authorities may purport to want to protect citizens from gambling harm, prohibition often has the absolute opposite effect.
What is driving legislation?
Many people suspect that the driving force behind potential bans is the gambling industry itself, concerned about land-based operators losing out to the ever-growing stream of offshore and US-domiciled sweeps casinos coming online. For example, the Florida legislature has proposed a series of updates to Florida’s gambling laws that would ban sweepstakes casinos and other online platforms that offer casino-style gaming while allowing the same activities when conducted at a tribal gaming establishment. People have interpreted this as an early sign that online casino gambling is set to be legalized in the state under the exclusive control of the Seminole Tribe.
However, for now, sweepstakes casinos are legal and popular in Florida and most other states (except for Washington, Michigan, Nevada, and Idaho). Companies throughout the country are working hard to attract players to their sites and, as with other industry sectors, use promotion and marketing techniques to attract users to their online casinos instead of a competitor. There is a bit of a gold rush underway as operators aim to cash in on the sector’s popularity before regulators find a way to meddle, and players sweep up enticing promotion offers and free play opportunities.
Advertising and marketing are growing industries
The advertising industry as a whole might be experiencing pain from the latest round of tariffs, but industries using advertising and simple promotion techniques are reaping the rewards. Nowhere is this more apparent than in the online gambling industry and online sweepstakes in particular.
They employ all kinds of promotional mechanics; there are daily bonuses, weekly giveaways, and links from social media sites. Players are rewarded for logging in regularly, and some sweepstakes and social casinos offer one hundred coins a day to returning players. This is very different from real-money casino promotions, where the biggest incentives tend to be around signing up for the first time.
If storm clouds are gathering on the horizon with threats of tighter legislation, for now, everyone seems to be making the most of the golden hour (or free golden coins at least). Daily bonuses are the major differentiator in promotional activity between social and sweepstake casinos and the real money versions. In addition to gold and sweeps coins, many offer loyalty rewards and other perks for a daily login.
Sweepstakes and social casinos are embedded in and spawned from social media platforms. Therefore, it is hardly surprising that regular ‘attendance’ is rewarded, as the behavior is similar to users maintaining their streak on an online game like Wordle or a learning platform like Duolingo. Fans of these sites say they are just harmless distractions, and players can access them without making any financial deposits. There are also rewards for completing daily challenges and social media giveaways.
Cracking down – but will it work?
The objection from those against the platforms is that they are exploiting legal loopholes by running ‘perpetual sweepstakes’ and could encourage people to develop harmful gambling habits. Bonuses offer players the chance to accumulate significant hordes of sweep coins, which can be exchanged for real money prizes. Policing loopholes in gambling law can be challenging, and states now seem to want to ‘lock the stable door after the horse has bolted’. The problem will be with rounding up the horses!
Revenues at sweepstakes casinos have grown tenfold over the last five years. They are no longer small fry; however, they pay no gambling taxes as the loophole the platforms use to operate means that they are not classified as gambling sites. In states that do not collect gambling revenues, this is not a huge problem, but it is for those who earn revenue through levies on online operators.
The states that are cracking down the hardest are those that allow online casino gambling. New Jersey, Maryland, and Connecticut’s state lawmakers have all introduced legislation to ban sweepstakes casinos. Michigan is using existing laws that do not allow unlicensed operators to offer services in the state. However, it is an ongoing tussle.
In New York, a law was introduced to ban sweepstakes casinos, but State Senator Joseph Addabbo Jr., who introduced the bill, said it would be more efficient if the state gaming commission or attorney general stepped in. The problem is that regulators do not have effective enforcement options, as sweepstake casinos have no license to revoke!
Other states have gone for a different approach and have decided to try to legalize and regulate online gambling rather than try to eliminate it. Lawmakers in Arkansas have introduced legislation to legalize online casino games and ban sweepstake casinos.
The sweepstakes casinos will just have to wait it out and hope more states do not follow in the footsteps of those trying to legislate them out of business. As with the crypto companies, the businesses that thrive in the long run will be those that ride out the storm.
