Regulatory Review: Sweepstakes in the U.S.

The rise of sweepstakes casinos across the United States is due to a combination of consumer demand, legal ambiguity and offerings under the guise of traditional sweepstakes. The lack of regulatory clarity makes it difficult for operators looking to enter the sweepstakes market to understand what is legal. In this blog, we give you a glimpse of the status of sweepstakes in the United States.

What’s the state of sweepstakes in the U.S?

In the early 2000s, internet sweepstakes cafés emerged as an alternative to traditional sweepstakes. Internet sweepstakes cafés offer the chance to win a prize with the purchase of a product or service, typically internet access or a telephone card.

The purchase-for-entry model, which deviates from the traditional sweepstakes model, and the resemblance of slot-machine gameplay, together brought into question whether these businesses violate state anti-gambling laws.

Following the expansion of internet sweepstakes cafés, several states have enacted laws to prohibit sweepstakes games being offered via terminals in public places, including California, Connecticut, Massachusetts, New York, Pennsylvania and others.

These prohibitions have not yet extended to the burgeoning sweepstakes casinos vertical, however, which has come into sharp view amid the expansion of online gaming generally and slow adoption of iGaming across U.S. states.

Sweepstakes platforms offer casino-style games online and are similar to traditional sweepstakes in that they allow players to participate for free through the use of credits or, alternatively through credits which may be purchased to fund gameplay. 

The absence of consideration helps operators to, in theory, fit into federal and state laws that permit sweepstakes operations rather than laws that govern a gambling operation. Despite this legal difference, the games resemble those offered by an online casino operator, drawing closer scrutiny to sweepstakes casino games among industry groups and policymakers.

In September 2023, the Michigan Gaming Control Board was the first regulator to strike against the sweepstakes vertical, issuing cease-and-desist letters to three prominent sweepstakes operators for offering illegal online gambling. 

This is just a glimpse from our recent regulatory review, available to Vixio customers, where our experts examine the legality of traditional sweepstakes, online gambling, and online sweepstakes by state, answering the key questions, including:

• Are sweepstakes legal/regulated?
• Is online gambling legal?
• Is online sweepstakes legal/regulated/prohibited?

Not yet a Vixio customer?

Get in touch to find out more about how Vixio GamblingCompliance can help your business stay abreast of topics like this one, and more.