It seemed like one moment, sweepstakes casinos were the latest trend 'sweeping' the nation, and the next, legislators in certain states decided to clamp down on them. While social and sweepstakes casinos have proved very popular with players, some states have taken a dim view of their ability to circumvent existing gambling legislation and aggressive marketing, and the winds of change are blowing in.


Sweepstakes casinos are regulated by sweepstakes laws rather than gambling laws, allowing them to operate in states where online gambling is restricted. This is because sweepstakes casinos do not meet all three criteria that define gambling. Those are prize, chance, and consideration. However, not everyone agrees, and there is a tussle going on in several states. We sat down with Alexander Korsager from Casino.org to get his view on what is happening and how the industry is changing.


We started by asking,


"What is the current situation of sweepstakes casinos in the US?"


Alexander Korsager told us,


"We are finding sweepstakes casinos are as popular as ever, and people relish the chance to play online casino games. Currently, online sweepstakes casinos are available to play in all US states, excluding Washington, Michigan, Idaho, and Nevada. However, restrictions are pending in others, including Montana, Connecticut, Louisiana, New Jersey, and New York. California has also drawn a line in the sand and will outlaw them very shortly. However, for the majority of Americans, sweepstakes casinos are available as long as they adhere to the following rules.


All prizes are identifiable before entry

Competitions have a precise end date

Purchases do not enhance your chances of winning."


Next, we asked,


"So how do sweepstakes casinos not meet the US definition of gambling?"


Korsager replied,


"Sweepstakes casinos offer players a free participation method, meaning that the 'consideration' criterion is not met. This is usually in the form of daily login bonuses that let players claim virtual currency that they play with. This allows them to be classified as legal promotions. The dual-currency system in the form of Gold Coins and Sweeps Coins adds another layer of compliance and distinguishes them from traditional real money casinos."


"However, the industry is coming under increasing pressure from legislators who are looking to close down what they see as a loophole. Several states, including New York, New Jersey, and Florida, are applying regulatory pressure to impose restrictions or outright bans on online sweepstakes casinos. Many proposed bills highlight the use of "virtual" or "dual-currency systems" to bypass existing gambling legislation. While there are still many hurdles to jump, there is no doubt that some lawmakers have sweepstakes casinos in their sights."


"What specifically is happening on the ground?"


"Things have really been changing since August, when the American Gaming Association published a report showing that most consumers regard them as gambling. With around 90% of players regarding them as gambling, it is unsurprising that many people feel that there needs to be some safeguards put in place. As they are not classified as gambling, it has been felt that there is a need to increase protections for sweepstakes players. At Casino.org, we are meticulous about only recommending bona fide sites that look after their players' welfare, but unfortunately, there is some incredibly aggressive and inappropriate advertising out there".


"New Jersey’s AB 5447 went into effect on August 14th, which banned sweepstakes casinos in the state. The bill was automatically enshrined in law with or without the signature of Governor Phil Murphy."


"So, is it just states where real-money gambling is allowed that are cracking down?"


"No, that is the odd thing. You might assume that only those who feel their commercial markets are under threat would ban sweepstakes casinos, but that is not always the case. California is a case in point. The citizens rejected a move to allow online gambling in the state in a referendum in 2024, and in October, Governor Gavin Newsom signed a prohibition on sweepstakes casinos, too. It is estimated that the California ban will wipe out around 20% of the sector's market share, thereby seriously affecting the viability and competitiveness of sweepstakes casinos. Operators need economies of scale to thrive, and this is quite a body blow."


"Are you suggesting that a California ban could change the industry?"


"Well, hopefully not, because so many people enjoy playing at sweepstakes casinos, but it might make the operators more mindful of looking after player welfare. We need responsible gaming, whether people are playing sweeps, social, or real-money casinos. There should be responsible gambling tools in place just as there are on real-money sites. After all, time is precious, and if people are spending too long on sites, it is not healthy."


"Disciplined, well-organized players could take advantage of the daily bonuses offered by sweepstakes casinos and turn them into real money in their pockets. A fair number of sweepstakes casinos offer a small bonus just for logging in to the app or site, and it is possible to convert Sweeps Coins into real cash and prizes by doing nothing more than logging in every day. However, it is very easy to get sidetracked, and this seems to be what is concerning the legislators."


"Have there been any further bans?"


"Yes, unfortunately for the industry Minnesota's Attorney general recently announced a crackdown on 14 sweepstakes casinos claiming they were running "illegal gambling websites". This follows the Minnesota Alcohol and Gambling Enforcement agency notifying sweepstakes operators five months prior that the "sweepstakes-based model of gambling is illegal" in the state. While a ban in Minnesota will not have the knock-on effect of the one in California, they are all body blows to the sector".


"Do you think sweepstakes casinos will survive?"


"Despite law changes, sweepstakes casinos are still incredibly popular. People want to play casino games; the question is how that can be done without upsetting the lawmakers. As we know, the US has some of the toughest and some of the most relaxed gambling rules, so it is probably just a case of finding a balance."


"The model is not going to vanish overnight, and it is estimated that sweepstakes platforms could drive $10.6 billion in gross revenue this year. However, the market is becoming saturated, and we have seen operators withdraw from the market. Long-term sustainability is going to depend on the sites being adaptable. Operators cannot just rely on the dual-currency mechanic. In order to remain relevant, they need to create integrated ecosystems that deliver compliance and entertainment."