Sweepstakes casinos are the latest trend taking over the US and global online gaming market, despite their patchy regulation.
In short, sweepstakes operate much like typical online casinos. However, they skirt the line of typical gambling definition by not having players traditionally ‘pay’ to enter. This may include the use of in-house currencies that can be used to play, or free entries as rewards for player loyalty. As Catena Media CEO Manuel Stan explained in the October issue of Trafficology: “Sweepstakes is an old concept where players did not have to pay to enter and any purchases made after the entry did not increase the chance of winning.”
Among both operators and affiliates, sweepstakes provide an opportunity to re-engage players and bring on new players who may be averse to typical gambling. Furthermore, due to not technically being gambling by its legal definition, sweepstakes gaming has become especially popular in areas where iGaming is not accessible or regulated. This is why, while there has been some interest in Europe, it is the US where sweepstakes have really made a mark.
As of writing, only seven US states offer legalised iGaming: New Jersey, West Virginia, Pennsylvania, Rhode Island, Delaware, Connecticut and Michigan. While this does not mean sweepstakes gaming does not or has not operated in these states in the past – Stan noted that sweepstakes casinos have been banned in Michigan, for example – for the most part, the popularity lies in non-regulated states.
Sweepstakes have come to fill a gap in the market, providing a thus-far not illegal alternative to iGaming. However, legal does not mean regulated, which has made the vertical something of a target for regulators. The American Gaming Association (AGA), for example, said: “There are an increasing number of entities that have intentionally designed business models to circumvent or exploit ambiguity in state gambling laws and the regulatory frameworks,” calling for regulators to investigate and take action against non-compliant sweepstakes operators and “where state laws and regulations are not clear, legislatures should consider enacting legislation to prevent unlicensed operators from exploiting loopholes in sweepstakes regulations to offer online real money gambling.”
On the topic, CogniPlay Co-Founder and CEO Allan Turner made an interesting point during our interview for the October issue of Trafficology. He said: “I think the sweeps vertical will continue to come under pressure from the AGA and other parties with vested interests in seeing sweeps struggle. I think it’s exceptionally important for sweeps brands to behave as though they are regulated in terms of making sure they... look after customers in an honourable manner.”
Sweepstakes: A catalyst for US iGaming growth?
The popularity of sweeps in the US is a proof-of-concept for iGaming in the US. People want it and have found a way to get it. As Stan explained: “The growth of the social sweepstakes casinos sector and the attention it attracts will have a positive impact on state legislators to consider the future online casino regulation.”
SCCG Management Founder and CEO Stephen Crystal voiced a similar opinion in his piece ‘Comprehensive Analysis of Sweepstakes Casinos: Growth, Innovation, and Legal Insights.’ He wrote: ‘Sweepstakes casinos have had a profound impact on the iGaming industry, primarily by expanding the audience for online gaming,’ noting how the ‘no-risk, free-to-play model’ has attracted new players with its accessibility. He also noted how sweepstakes innovation has lit something of a fire under iGaming operators to improve their offerings if they want to compete with a free alternative, writing: ‘This constant drive for innovation has raised the bar across the iGaming sector, encouraging traditional casinos to adopt new technologies and marketing strategies to keep up with the evolving landscape.’
Are sweepstakes here to stay?
When we asked IGA Group Director Mario Fiorini for his insights on sweepstakes, its regulation and impact on iGaming, he told Gambling Insider: “How long will it last? I say eventually it will get regulated as anything else. I believe within the coming years it will gain some form of regulation, because it always starts the same. They let it have a lot of leeway but, eventually, they will start regulating it.”
Sweepstakes have shown value as a vehicle for gaining new customers, both for accessibility and geographical reasons. Many sweepstakes have also taken to self-governance, to protect customers and the reputation of the sector. Is regulation on the horizon? This will likely come on a state-by-state basis. As a vertical, Itsik Akiva previously told us it already generates billions of dollars. So it is certainly one to watch.
