New Jersey Could Become Latest State to Crack Down on Chumba Casino, Other Sweepstakes Casinos

New Jersey may soon require the likes of Chumba Casino and a host of other sweepstakes gaming sites to pay the piper or get the hell out of dodge.

Sweepstakes casinos - also known as social casinos - are believed to have taken in some $40 billion in over the past decade.  The irony here is that these are supposedly "free-to-play".

They're not.

Customers purchase virtual coins on these websites.  That's the loophole that gets around that pesky real money online casino obstacle to operate freely in states like New Jersey while promoting their brand all over the airwaves.

They also don't pay a licensing fee and presumably not the same operating tax percentage as regulated i-Gaming sites in the Garden State.

At least one lawmaker wants to change that.

Assemblyman Clinton Calabrese (D) has proposed legislation this week to reel in sweepstakes casino operators.

Bill A5196 would classify the sites more as traditional online gaming in the Garden State. Indeed, New Jersey is one of only seven U.S. states that regulate i-Gaming.  Sweepstakes casinos have swept (pun intended) the U.S. and truly advertise just as much as insurance companies and pharmaceuticals.  Real money online casinos are accessible from most states, minus the advertisements.  Most of these casinos are actually licensed in worldwide gaming jurisdictions like Malta, Curacao and even Canada (the Kahnawake Reservation, just outside of Montreal).

When Calabrese says he wants to "classify" these sweepstakes sites as traditional online gambling, he means tax them.

“Sweepstakes casinos have operated in a regulatory gray area, which has led to significant challenges, including consumer protection concerns, underage gambling, and economic losses for the state,” he told Gaming Today. “Recognizing these issues, I have introduced this legislation to address the lack of oversight for these platforms.

“This bill aims to establish clear regulatory requirements and create a level playing field for all operators, ensuring that sweepstakes casinos meet the same standards as other forms of internet gaming in New Jersey.”

As with other online gaming sites in the state, sweepstakes sites would also have to partner with one of the state’s casinos based on Calabrese' measure as currently written.

One easy solution for the sweepstakes casino....

Leave New Jersey.

That's easier said than done.

This past week, Gambling911.com was among the first to report on Maryland sending out cease and desist letters to a handful of social casinos, including Stake.US and McLuck.

Maryland regulators also threatened to issue letters to payment processors.

Stake.US and McLuck rely on these same payment processors in other states.  That presents a bit of a quagmire.

Of course, exiting Maryland might help seal that damn for the moment.

But make no mistake about it.  We're talking about a damn about to break if other state regulators get the same idea.

Remarkably, there is a Social and Promotional Gaming Association (SPGA) that does exist on behalf of sweepstakes casinos.  Who knew?

That association announced a new code of conduct for operators back in December, perhaps definitely seeing the writing on the wall.

Their focus: age verification to limit purchases to users 18 and older; proper identity verification; location verification of customers’ and anti-money laundering policies to ensure proper transaction monitoring.

Nowhere in those pillars does it mention paying any set operating tax or licensing fees to any state.  We'll assume, for the sake of argument, these companies pay some taxes in states where they operate if they're based in the U.S.

“The pillars of the SPGA Code of Conduct highlight the technology and processes already in place at most social sweeps operators to ensure that the millions of adults who enjoy these games do so in a safe and reliable environment,” SPGA spokesperson Camilla Wright said. “The standards of the code of conduct go above and beyond the accepted best practices for traditional social casinos.”

Prominent sweepstakes critic and attorney Daniel Wallach expressed doubt the bill could pass given the political interests in the Garden State.

“A sweepstakes casino legalisation bill stands almost no chance of passing in New Jersey, where regulated casinos represent the most powerful lobbying force in the state,” he told Next.io.

“There’s virtually no likelihood that such a bill would bypass the objections of the regulated casino industry. Additionally, constitutional restrictions may make the legalisation of sweepstakes casinos a tough sell legally.”

No word yet on when Bill A5196 is set to move forward.