The American Gaming Association (AGA) recently acknowledged that it only became aware of the threat posed by sweepstakes in late 2023, when Michigan took action against two offshore iGaming firms. This revelation came during a webinar attended by AGA’s Senior Vice President of Government Relations, Chris Cylke, along with executives from the Indian Gaming Association (IGA) who shared concerns about the increasing prevalence of sweepstakes gaming in California.
Cylke admitted that sweepstakes had not been on AGA’s radar until Michigan issued cease-and-desist orders to the two offshore firms. After conducting investigations and receiving reports from state regulators, AGA discovered that sweepstakes were generating significant profits. However, the legality of the social gaming vertical remains shaky, with Cylke stating that AGA members were hesitant to offer sweepstakes due to the risks involved.
The AGA has been advocating for state regulators to investigate operators offering iGaming under the sweepstakes model, which allows users to play for free or make cryptocurrency purchases to bypass regulatory requirements. This practice poses a threat to the highly competitive and regulated US iGaming market, as offshore operators are willing to take risks to operate outside of the regulatory framework.
In response to AGA’s call for action, some states have taken steps to address firms using sweepstakes models to potentially circumvent regulations and laws. For example, Tennessee regulators fined Curacao-based iGaming giant Bovada $50,000 and forced the company to exit 13 US markets. However, the Social and Promotional Games Association (SPGA) defended the legality of social casinos with sweepstakes prizing in most states.
Overall, the AGA’s recent focus on the sweepstakes market highlights the challenges and risks associated with operating outside of the regulated iGaming industry. As state regulators continue to investigate and take action against firms using questionable practices, the landscape of the US gambling market may undergo significant changes to ensure consumer protection and compliance with regulatory standards.