Inside the Regulatory Fight Over U.S. Sweepstakes Casinos

09:50 Feb 27th, 2025

In recent years, we’ve seen an exponential increase in the popularity of sweepstakes casinos in the U.S. These gaming sites advertise a “free-to-play” model for the players, where no purchases are necessary, allowing them to experience casino-style games like slots, blackjack, and roulette, with seemingly no purchase needed, but there is certainly more than meets the eyes. 

Various regulators, associations, and industry groups in the U.S. are concerned with the operations of these gaming sites, as they operate in a legal grey area that raises several issues regarding consumer protection, taxation, and responsible gambling, as players can still choose to spend money and potentially win cash rewards and prizes when playing. Let’s discuss some of the most influential news regarding the regulatory fight over U.S. sweepstakes casinos.

American Gaming Association Unveils A Policy Opposing Sweepstakes Casinos

In August 2024, the American Gaming Association introduced a policy that strongly opposed sweepstakes casino and their operators. The organization claims that the gaming sites operate through legal loopholes that allow players to wager real money and redeem cash prizes through the dual currency systems without any regulatory restrictions.

AGA’s policy has put intense pressure on US industry regulators and lawmakers to delve deeper into the operations of sweepstakes casinos and close any loopholes that can be exploited. The organization claims that most of the operators are putting players in a compromised situation due to the lack of responsible gambling protocols, but also damaging the economic integrity of the regulated gambling market.

Recently, we've seen states like Delaware and Michigan taking steps in this direction by issuing cease and desist letters to some of the biggest sweepstakes operators for violating numerous gaming laws.

NCLGS Introduces a Draft Proposing Sweepstakes Bans

In November 2024, The National Council of Legislators from Gaming States issued a draft that could potentially assist online gambling regulators with thorough blueprints, allowing them to construct regulatory frameworks that could adapt based on the infrastructure of every state.

In addition to focusing on taxation, player protection, and responsible gambling, NCLGS’s legislation draft [pdf] also considered sweepstakes casinos, proposing that they be banned entirely due to the legal ambiguities and loopholes most operators tend to exploit. Operators could pay fines of $100,000 in case of regulatory violation if the legislation is passed but also get their existing licenses revoked.

The NCLGS Modern Internet Gaming Act draft was introduced to the public, with the Council requesting feedback from the industry stakeholders, regulators, and people before it could be adopted.

AGA and IGA Collaborate to Address Legal Challenges of Sweepstakes Gaming

During the discussion between the American Gaming Association and the Indian Gaming Association, AGA Senior Vice President Chris Cylke indicated the rising concern about sweepstakes casinos and their overall status in the ambiguous legal area where they usually operate.

Even though most sweepstake brands use the excuse of being similar to promotions such as McDonlad's Monopoly Game or Publisher's Clearing House, Cylke believes that when these systems are applied to online casino games, they become a lot more serious and potentially dangerous. The AGA urges regulators and lawmakers to inspect these operators and their compliance with the law.

Furthermore, IGA’s Victor Rocha and Executive Director Jason Giles claim that the collaboration between IGA and AGA and their educational series influences the Californian tribes and other stakeholders on the subject of unregulated sweepstakes casinos and their negative impact on the industry’s economy and gaming laws.

SGPA’s Report on the Growth of Social Casino and Sweepstakes Elements

At the end of October 2024, the Social and Promotional Games Association released a report detailing the exponential rise of social casinos with sweepstakes elements and how they managed to attain a massive audience by providing them with casino-style games like online slots, blackjack, roulette, and baccarat.

In the report, SGPA outlines how most sweepstakes casinos function, explaining the Alternative Means of Entry (AMOE) system that effectively allows players to gather virtual currencies and enjoy the content without making any purchases. In their findings, SGPA reports that two-thirds of the players play exclusively for free without spending any real money.

Still, in the last decade, the sweepstakes industry has generated over 40 billion dollars from player spending, leading SGPA to highlight the importance of a transparent framework allowing for apparent legal compliance, safer environments for players, and responsible gambling practices.

One Country Receives Cease And Desist from the MGCB

In August of 2024, an Arkansas-based operator, OC Media Holdings LLC, better known as One Country, received a cease and desist letter from the Michigan Gaming Control Board due to the company facilitating illegal online sweepstakes promotions for Michigan residents.

The MGBC’c cease and desist letter outlines that the operator breached the Lawful Internet Gaming Act, Michigan Gaming Control and Revenue Act, and the Michigan Penal Cod by allowing users to receive sweepstakes entries through monthly payments, with differing entry levels based on the monthly payment amount.

One Country was given 14 days to comply by restricting access to Michigan residents to its sweepstakes promotions. Otherwise, the MGCB will take further legal action with the assistance of the Michigan Attorney General’s Office.

California Tribes against Sweepstakes Casinos and DFS

In California, tribal leaders represented by the California Nations Indian Gaming Association are against unregulated Sweepstakes Casinos and Daily Fantasy Sports sites, as they claim that the operators are compromising their exclusive rights for operating gambling environments.

CNIGA’s chairman, James Siva, noted that sweepstakes casinos and DFS websites are monumentally deterring from the Tribal’s sovereignty in the gambling industry and its financial capabilities. He, alongside other leaders, discussed how the websites advertise a “free to play” model while allowing players to purchase virtual currency and claim rewards, making the system similar to traditional gambling.

Even with delays from regulatory bodies addressing this subject, Californian tribes continue fighting, as they believe that all new gambling landscapes should pass through them primarily.

California Files Lawsuit Against Pulsz.com Sweepstakes

Pulsz.com, an online sweepstakes casino operated by Yellow Social Interactive Ltd., was the main target of California's first lawsuit against sweepstakes casinos. Dennis Boyle, the plaintiff, filed the lawsuit against the industry giant by arguing that the website operates as an online casino while exploiting the legal loopholes to avoid any gambling regulations in the state. 

He claims that Pulsz.com, like many other social sweepstakes casinos, uses its dual currency system to advertise the free-to-play model while essentially allowing for real-money gambling by implementing purchasable currency bundles and prize redemptions on the website.

Boyle’s case against Pulsz.com could potentially be a pivot for stricter regulations and other lawsuits against sweepstakes casinos in California. The lawsuit could also inspire other states to go in the same direction, similar to how Kentucky and Washington have started imposing strict regulations and bans.

Google and Apple Sued Over Sweepstakes Apps

Another lawsuit that shook the world of online gambling was targeted at none other than the tech industry giants everyone knows, Google and Apple. The two companies were sued under the Racketeer Influenced and Corrupt Organizations (RICO) Act for facilitating sweepstakes gambling by allowing apps from brands like High 5 Casino, Wow Vegas, and McLuck.com to be downloaded on their app stores.

Julian Bargo, the lead plaintiff in Google and Apple, lost $1000 while playing on these apps and argues that the operators use arbitration agreements to protect themselves from liability. The lawsuit also accuses Google and Apple of allowing illegal payments on the apps, allowing the two companies to generate additional income.

This lawsuit amplifies the ongoing movements and actions against unregulated sweepstakes casinos, and critics foresee that these kinds of acts will continue to arise in the industry until lawmakers start constructing new regulations.

Mississippi Senator Proposes Sweepstakes Casino Ban

On January 27th, 2025, Mississippi Senator Joey Fillingale introduced Senate Bill 2510, a bill that would effectively ban online sweepstakes casinos across Mississippi if passed. The legislation aims to enforce strict violation penalties that would implement fines of upwards of $100,000 or 10 years in prison. 

The new Mississippi legislation would also allow the authorities to confiscate and destroy devices used for online sweepstakes games. Critics are worried about the bill's lack of specifications for sweepstakes promotions and games, as not defining all elements of these activities can lead to troubling rule enforcement.

Others, on the other hand, claim that the passing of Bill 2510 can significantly affect land-based gambling establishments in Mississippi, as the prohibition of online sweepstakes casinos should remove a hefty part of the market competition.

New Jersey Bill Seeks to Regulate Sweepstakes Casinos

While Mississippi could potentially ban online sweepstakes operating, New Jersey’s new proposed bill aims to regulate them fully. Assembly, Tourism Gaming, and the Arts Committee were introduced to a bill by Assemblyman Clinton Calabrese to define sweepstakes casinos as platforms allowing players to play casino-style games with free currency.

The legislation also states that players will be able to redeem cash prizes and other rewards by exchanging currencies and that the operators can offer players the ability to purchase the currencies from them. Additionally, the bill defines requirements for licensing, third-party audits, and biannual reports. Still, it doesn’t define tax rates, leading to the belief that they might be identical to regular online casinos.

Considering everything, the Social and Promotional Games Association expressed support. It fully supported the bill, claiming sweepstakes casinos should have clear regulations and laws in New Jersey.