If you've been following Gambling911.com in recent months we don't have to tell you there's no shortage of stories involving sweepstakes casinos and various state crackdowns.  Unlike the real money online casinos, some of which have operated with impunity for the better part of three decades now, a good number of these sweepstakes casinos do have an operating presence in the US whereas the real money internet casinos are mostly all based out of, and licensed in, foreign gambling hubs like Curacao and Malta. 

States Must Create Laws to Prohibit Sweepstakes Casinos

When a state regulator sends a cease and desist letter to an offshore casino, the perception at least is that these operators are mostly out or reach.  That's not the case with the sweepstakes casinos.   Publishers Clearing House just got into the sweepstakes casino game and are quite obviously based in the U.S.

Even sites like Pulsz, owned and operated by Yellow Social Interactive Limited, are based out of Gibraltar, a gaming hub that tends to require its operators to follow US laws as they applied to restricting access.  

So far, the app providers like Google Play and the Apple Store continue to take a hands off approach. 

Sweepstakes casinos have found a unique loophole in US law that individual states are now realizing they must seal in order to make the activity a violation of law.  Most states are likely to remain with the status quo.  In other words, sweepstakes casinos are not deemed as illegal, per se. 

When individuals play Sweepstakes Coins games, they can win more, and when they accumulate a required minimum amount of Sweepstakes Coins, they can be redeemed for cash prizes. The process of turning your winnings into prizes like gift cards or even cash prizes can differ from site to site but often involves a similar path. Ultimately, individuals are spending money to purchase coins in exchange for a prize.

To get a feel for how the sweepstakes online casino model work, one can simply check out reviews online from actual customers explaining the process.

There is that "free" component that quickly turns into pumping actual money into the casino (via virtual coins).

We won't name the sweepstakes casino here but these are just some sample reviews that mention the "free" to "purchase" evolution:

"The games are extremely fun and exciting and I enjoy playing them but since ....by advertisers as a casino that requires no purchase necessary, you almost have to purchase something on the app in order to have an experience that last longer than an ice cream headache! They don't reward enough free play."

"The very fun app! And has a lot of fun games and it has a lot of new games constantly coming in. You actually can win real money and although I've never won anything over $1,200 at one time I find that it's a lot of give-and-take some days you win, some days you don't! They do give me a lot of money comp at least once a week I get at least 25 to $30."

"Have a great time playing the games, but the sweepstakes coins are hard to come by, sometimes."

Washington State

Many of these companies interpreted some state laws early on as strictly forbidding the sweepstakes model. 

One such state, Washington, tends to be named among the "restricted" states.

Sweepstakes must not require participants to make a purchase or provide any form of consideration to enter. There must always be a free method of entry available to all participants.  The state law is such that companies must avoid requiring participants to make a purchase to enter, which tends to go against the ethos of these casino sites.

But more importantly perhaps, Washington remains the only state that makes actual gambling online a Class C felony.  This means that the customer, at least in theory, could wind up in handcuffs.

Washington makes it so that playing games of chance for ANY prize, even if no real money is required to play, is considered a violation of state law.

Unlike offshore gambling sites, many of which have long blocked Washington residents, the sweepstakes casinos do report winnings to the IRS.  Therefore, the whole anonymity factor does not apply.  It's like shoplifting where you're being caught on the surveillance cameras.

Delaware

Delaware is not playing games when it comes to online sweepstakes casinos.

So far, they've only gone after the parent company of the wildly popular Chumba Casino.

The Division of Gaming Enforcement released the following statement in early April:

"An investigation by the Delaware Division of Gaming Enforcement (DGE) into VGW Luckyland, Inc. – a subsidiary of the Australian-based VGW Holdings Ltd. – revealed that VGW Luckyland, Inc. was operating illegal online gaming".

VGW Luckyland, Inc. operates some of the largest sweepstakes casinos including Chumba Casino, Global Poker and Luckyland Slots.  Chumba Casino is known for its commercials featuring Hollywood celebrity and Wheel of Fortune host Ryan Seacrest.

"Delaware officials concluded the VGW misrepresented its services as promotional sweepstakes while enabling individuals to purchase coins for casino-style games, leading to potential cash winnings."

Michigan and New Jersey

In recent years, Michigan and New Jersey made it abundantly clear they will do whatever it takes to protect their casino industry.  

New Jersey has tried to prevent prediction market Kalshi from accepting customers within its borders and Kalshi, in turn, sued the Garden State.

Detroit casinos reported $98.8M in revenue in February.  So it is understandable why regulators here are doing everything humanly possible to rid the state of sweepstakes casinos.  They've been mostly successful up to this point.

Florida

Florida's attack on the sweepstakes casino sector may be viewed more as grandstanding in that regulators here are required to protect the Seminole tribe as part of their compact agreement.

Companies like Stake.US still allow those in Florida to play.

Florida has one other quirk in its law.  Registration and bonding is required if the total prize value exceeds $5,000.

New York

New York State requires the same registration and bonding process but lawmakers also grasp the concept that they must pass new laws.

Senator Joseph Addabbo, the Chair of the New York State Senate Racing, made it abundantly clear heading into the new legislative session, he was making it his mission to eradicate sweepstakes casinos in The Empire State.

“One of my primary objectives as Gaming chair is ensuring New Yorkers are protected from gambling operations that have the potential of becoming more problematic without proper legislative action, such as unregulated sweepstakes casino operators,” stated Addabbo.

“Many sweepstakes' operators are located offshore making enforcement limited or impossible, and our most vulnerable populations, youth and elderly, are most often targeted, which is why I want to act to address this existing loophole,” Addabbo added. The Senator expressed that the sweepstakes operators are allowing individuals to pay for virtual coins and win more coins that can be redeemed for cash prizes. “The use of money to play a game and win more money is simple gambling and should be safely regulated.

"When individuals play Sweepstakes Coins games, they can win more, and when they accumulate a required minimum amount of Sweepstakes Coins, they can be redeemed for cash prizes. The process of turning your winnings into prizes like gift cards or even cash prizes can differ from site to site but often involves a similar path. Ultimately, individuals are spending money to purchase coins in exchange for a prize.

“To close this loophole, I will work to ban or incorporate Sweepstakes Casinos in the state, akin to current laws in Michigan, Idaho, and Washington, and I will push for iGaming as a safe, effective alternative for online casino enthusiasts,” Addabbo explained. “By addressing the Sweepstakes Casinos issue and allowing a regulated iGaming casino option, we are demonstrating our commitment to protecting New Yorkers, dealing with gaming addiction, while adding tax revenue beneficial to all state residents,” Addabbo explained. “Without an option for safe, regulated online gaming, many individuals will fall victim to sweepstakes casinos that entice customers through free play advertising with the potential for prizes through the purchase of gold coins,” added Addabbo. “I encourage my colleagues and the Governor to take action against unregulated sweepstakes casinos, while reconsidering the benefits of allowing legal iGaming operators to provide sanctioned services in a popular and ever-growing industry,” concluded Addabbo.

His efforts are starting to result in a mass exodus of sweepstakes casinos.

Rhode Island

Rhode Island requires registration for sweepstakes offered in retail establishments with prizes over $500 and a filing with the Secretary of State.

California

California prohibits certain misleading advertising tactics as well as requiring transparency about odds and “no purchase necessary” rules.