What Exactly is the Loophole That Makes Sweepstakes Casinos Legal?

Free-to-play? Not exactly.

Sweepstakes casinos would not be making the big bucks if that were truly the case.

Unlike their real money casino counterparts, the sweepstakes model employs virtual coins.

Proprietary sweepstakes casino software has helped propel brands to overtake big pharma on some US television networks in terms of ad spends, resmarkably. Even Flo, the Geiko Gecko and Limu Emu, representing the auto insurance sector, are no match for these sweepstakes casinos. They employ some of the biggest celebrities in the biz. We're talking Ryan Seacrest, John Stamos and Paris Hilton, to name a few.

What Are Sweepstakes Casinos?

These sweepstakes casinos automatically have a presence in the U.S. market via direct advertising on television and other media outlets, including social media where these brands are especially prevalent. The real money online casinos typically hold an international gaming license from jurisdictions such as Curacao and Malta (the big worldwide iGaming licensing hubs). The United Kingdom's Isle of Man is another gaming licensing hub that tends not to allow sites that target the U.S. market.

Anjouan is fast becoming one of the leading real money online casino hubs.

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."

"It was good at first but now it sucks it won't let me log in and I have tried everything and I spent a lot of money on the game now I don't have any way of getting back."

You see where we are going here. The "free' component only lasts for a bit before real money action begins to kick in.

Payment processing is indeed an integral part of any sweepstakes casino platform. Leading software providers like CogniPlay partner with industry leading payment processors that ensure a high transaction success rate.

So What's the Loophole?

Because these sites do not require real money deposits, sweepstakes operators insists the sites are fully legal.

All sweepstakes casinos use some form of virtual currency for their players to enjoy social casino games, without needing to make a purchase.

But as noted above, this doesn't last long. Real money is soon being pumped into these games.

Some state regulators are looking to put an end to the sweepstakes casino presence. And, indeed, some of have successful (i.e. New Jersey and New York). 

Most have either tried and failed to push through legislation or simply do not care. 

In fact, the landscape is becoming even more murky with the likes of online prediction markets now offering sports betting contracts. These ventures have served as a pleasant distraction away from sweepstakes casinos as state regulators see more of a threat to their precious sports gambling taxes. 

In the meantime, sweepstaks software providers continue to ensure their platforms conform to criteria state regulators demand from their real money counterparts.

CogniPlay ensures that its Know Your Customer, ID verification and fraud prevention systems are extremely robust.

Upon its launch last year, CogniPlay CEO Allan Turner emphasized the importance of setting the industry standard:

“We are very proud to take the CogniPlay product to market... We want to provide the most flexible platform in the space, to enable our clients to create the product they want to have, not for us to dictate the product to them.”