The American Gaming Association is calling for U.S. state regulators to crack down on potentially unlawful sweepstakes gaming in their jurisdictions.
The U.S. trade group for the gambling industry claims that this form of gaming businesses, many offshore, are skirting state regulations and laws.
“Gaming regulators and state attorneys general should investigate companies or platforms that offer casino games or a form of sports betting under the ‘sweepstakes’ model to determine whether or not these operators are in compliance with their respective laws and regulations and take appropriate action if not,” the AGA wrote in a memo sent to regulators and obtained by Vixio.
The U.S. trade group for the gambling industry added that legislatures in states with gray areas should enact laws to prevent unlicensed gaming operators from exploiting sweepstake loopholes.
No regulation
Sweepstakes gaming typically allows players to receive free credits, usually coins or tokens, to place sports bets or play in online casinos, which offer slots and table games. Customers can then purchase more credits and receive additional free credits that can be redeemed for cash and prizes.
The AGA argues that these sweepstakes games operate without regulatory oversight, have no self-exclusion processes, and no independent testing to make sure sites are meeting age protocols.
“The opaque nature of these operations also presents a prime opportunity for illegal activity and enriching bad actors,” the AGA wrote.
Follow the money
What’s also drawn the ire of the AGA is the tax money.
In the 38 legal sports betting jurisdictions and seven iGaming states, operators pay a percentage of their revenue, based on varying tax structures, to the state. However, since sweepstakes games operate on a different business model than traditional online casinos, they're not subject to the same tax regulations.
One of the arguments pro-sports betting legislators have used since PASPA was overturned in 2018 is that regulating sportsbooks and online casinos helps curb offshore, unregulated gaming sites.
“The lack of regulatory oversight presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions,” the AGA said.
Not in Michigan
The Wolverine State began cracking down on sweepstakes gaming late last year.
Michigan regulators sent a cease-and-desist letter to brands Stake.us and PredictionStrike operating under the Australian-based company Virtual Gaming Worlds.
Regulators told VGW that it was violating the Michigan Gaming Control and Revenue Act. The gaming company complied and blocked Michigan residents' access.
“Gambling regulations are in place for a reason, and illegal gambling operations are not welcome in Michigan,” MGCB executive director Henry Williams said in January. “We do not want businesses who skirt the law having access to Michigan citizens and leaving them vulnerable because they are playing on unregulated sites that leave them with no recourse, and that siphon funds away from communities because they are not paying taxes like a regulated, legal gambling establishment would.”
