AGA Highlights Legal Uncertainty in Sweepstakes Gaming

The American Gaming Association (AGA) and Indian Gaming Association (IGA) are addressing the complex legal terrain of sweepstakes gaming, with AGA Senior Vice President Chris Cylke calling attention to the unclear regulatory framework. In an ongoing educational series led by IGA’s Victor Rocha and Jason Giles, industry leaders are examining how sweepstakes differ from regulated gambling and what these distinctions might mean for the growing sports betting industry in the United States.

Cylke emphasized the challenges presented by sweepstakes’ ambiguous legal status, noting that many forms of sweepstakes gaming operate with less oversight than traditional casino games. He explained that AGA members are cautious about engaging in sweepstakes due to potential risks to their licenses. “If sweepstakes gaming were as clear cut as those involved with it are saying, we probably would be doing it,” Cylke remarked, highlighting concerns about potential legal ramifications.

Sweepstakes in the Context of Lightly Regulated Games

Jason Giles, IGA’s executive director, also commented on the broader category of games like sweepstakes and fantasy sports, which often exist in a regulatory grey area. He pointed out that such games may not receive thorough legislative attention because lawmakers tend to focus on politically charged topics. “Part of the problem is that (attorneys general) are usually looking for higher office, so it is not a priority,” Giles noted, adding that people playing free games at home may seem low-priority to policymakers. He cited Virginia as an example, where illegal gambling machines persist while officials prioritize other matters like marijuana legalization.

Drawing parallels between sweepstakes and the initial rise of daily fantasy sports (DFS) platforms like DraftKings and FanDuel, Giles described how these platforms expanded in a similar unregulated space. According to him, operators often aim for a broad user base before states impose regulations, a strategy he referred to as “saturation.” This tactic can make it challenging for regulators to catch up once such games become widely established.

While traditional sweepstakes, such as McDonald's Monopoly game, are widely accepted, their application within online casinos raises distinct concerns. Cylke highlighted that when sweepstakes mechanics are repurposed for online gaming, the legal clarity becomes “murky,” challenging the perception that they are merely promotional tools.

Industry Push for Regulatory Oversight and Education

The AGA’s involvement reflects a broader industry worry over the rapid growth of minimally regulated sweepstakes platforms. In a recent example from late 2023, Michigan’s Gaming Control Board issued cease-and-desist orders to several unauthorized sweepstakes operators, including Stake.us and VGW Luckyland. These companies subsequently withdrew from Michigan, underscoring the complexities of enforcing regulations on sweepstakes gaming. Following this action, the AGA issued guidance encouraging other state regulators to assess sweepstakes games’ compliance with local laws. Cylke pointed out, “We’ve seen that with Bovada, we’ve seen that with certain elements of the DFS 2.0 space, and we’ll see something similar with sweepstakes casinos as well.”

The AGA and IGA’s educational series, led by Rocha, aims to guide California tribes and other stakeholders in evaluating the potential effects of legalizing sports betting in California. Rocha’s goal is to promote an understanding of how unregulated gaming alternatives might impact the tribes’ exclusive rights to casino gambling within the state. With California tribes considering a potential sports betting initiative, decisions on fantasy sports and similar activities could influence regulatory policies more broadly.

Looking ahead, Rocha compared the push for regulatory acceptance of sweepstakes and similar games to a form of “manifest destiny,” suggesting that legal actions against unlicensed operators like Bovada represent a shift toward limiting unregulated gaming options. The IGA’s educational sessions have become a central forum for industry leaders to consider cooperative efforts that address the risks posed by unregulated games like sweepstakes. While no specific strategies were finalized, Cylke and Rocha agreed that further collaboration is essential, with Cylke concluding, “We educate … and we make a commitment to work together.”

Source: AGAs Cylke Labels Sweepstakes Legal Status as "Murky" Amid Industry Debate, realmoneyaction.com, November 1, 2024.