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The rise of online sweepstakes casinos in the U.S. has become a serious issue for state gaming regulators, as they believe the offshore, unregulated websites are illegal gambling operations.
But the sweepstakes phenomenon is not entirely new.
In the mid-2000s, a new type of business moved into strip malls, first in the southern U.S. but later across the country, known as internet sweepstakes cafes.
The businesses offered internet access for a fee. Alongside internet time, customers would receive entries into a prize draw. In practice, that draw, presented on a screen made to resemble a slot machine, was the main appeal for most customers.
Like the online sweepstakes casinos, internet cafes used sweepstakes laws, the same ones that allow McDonalds to hold its Monopoly promotion, or Publishers Clearing House to hand out supersized checks, to offer a game that resembled unlicensed real-money gambling.
And like the current wave of sweepstakes sites, a number of critics, including most of the regulated gaming industry, saw the contests as a clear circumvention of existing gambling laws and a way to offer unlicensed, unregulated gambling.
Now, efforts have ramped up whether via regulators, attorneys general or legislation to ban online sweepstakes casinos and block operators from the market. Is the online vertical following the same pattern as its retail predecessor?
To the American Gaming Association (AGA), the two business models are effectively the same.
The comparison to the sweepstakes cafes is a pretty apt comparison, Tres York, vice president of state government relations at the AGA, told 蹤獲鱉鱉 GamblingCompliance. In many ways this is no different. One was happening in a storefront, and one was on the internet. But the business model is the same.
If they are the same, that could have major legal consequences.
Some of the largest markets for online sweepstakes, such as Florida and California, issued statutes against sweepstakes cafes. If those rules are deemed to apply to the online games, that could have major consequences for the burgeoning sector.
With the cafes, once awareness was raised, you saw a wave of states that passed legislation to ban them, York said. And there were numerous legal cases that were resolved with judges ruling against the business model, and I think those apply as well to the online space.
But the push to ban sweepstakes cafes in certain states also appeared to hit businesses that did not look much at all like unlicensed casinos. In Ohio in 2013, the state legislature passed a bill to ban all internet cafes, whether they offered sweepstakes competitions or not.
At the time, state Republican Senator Bill Seitz described the bills approach as, shoot 'em all and let God sort it out.
Other states to enact prohibitions on internet sweepstakes cafes include California, Connecticut, Massachusetts, New York and Pennsylvania, However, many of those same states have been unable to ban or restrict online sweepstakes casinos that have found a niche among the slow adoption of iGaming across the U.S.
Currently, the sweepstakes industry says bills attempting to outlaw their business model will end up hitting a range of uncontroversial promotions. Addressing bills that collapsed in Arkansas and Maryland, a spokesperson for the Social and Promotional Games Association (SPGA) said the legislation threatened to hit a number of sectors of the economy.
When legislation threatens everyday perks from airlines, hotels, and your local coffee shop, its clear the bills arent just misguided, theyre dangerously out of touch, the spokesperson said.
In New York, a bill introduced by Senator Joseph Addabbo Jr., a Democrat, appears to have better chances of success. Addabbo says the bill is targeted squarely at online sweepstakes casino sites.
We are very clear about what were talking about, Addabbo said. Those trying to interpret this bill beyond its terms are wrong.
Were very clear that this bill concerns online gaming and gambling. Its not going to apply to a company doing a genuine promotional sweepstakes contest.
York sees certain differences between a legitimate sweepstakes contest and a gambling product that attempts to use sweepstakes laws as a defense.
One thing that you can point to is that in traditional, legitimate sweepstakes, theyre for a limited period of time, but in this case, these sweepstakes games are running 24 hours a day, seven days a week, 365 days of the year, York said.
The other thing, and this isnt necessarily my argument, this is what the regulators have said, is that the way this is designed is the proponents say the gold coins are free, but not a single regulator who has looked at this has bought that argument.
The regulators have said that the sweeps coins that you can win real money on, you essentially get them from any purchase of gold coins. And then what do you think people are doing? Theyre going to play with the sweeps coins. And then if youre lucky enough to win, you can then re-bet them, which is just another component of gambling.
Regulators see this as a perhaps too clever by half attempt to offer gambling, York added.
Whatever the answer to the legal questions, there are other similarities between the rise of and subsequent crackdowns against sweepstakes cafes and websites.
One is that, outside their player base and the gaming industry, most people do not know much about them. That is an issue Addabbo has encountered as he tries to convince his colleagues in the state legislature to vote for his bill to ban the vertical.
They dont understand it and they dont realize its a problem, Addabbo said. I have educated my colleagues in the [state] Senate; Ive shown them these very colorful games that are accessible to a minor. It is a growing business and its growing in terms of awareness.
For sweepstakes cafes, that growth continued for around a decade before a wave of legislation and regulatory action led to businesses disappearing from strip malls. Will online sweepstakes last that long, or could their legal status be clarified a lot sooner?
I think it could be sooner, York said. Theres been a lot of actions from regulators, and state attorneys general from our perspective since we really started focusing on it, within not even 12 months. But when the end resolution on this is really anybodys guess.
