AGA Looks To Curtail Growth of US Sweepstakes Casinos

Article by : Erik Gibbs Aug 22, 2024

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The American Gaming Association (AGA) has recently expressed growing concerns over the rise of sweepstakes casinos, which it views as a potential threat to consumer protection and the integrity of the legal gaming industry. The AGA argues that these platforms have seen significant growth in recent years and are taking advantage of loopholes in state gambling laws to operate in a gray area, potentially bypassing the stringent regulations that govern traditional gaming operators.

Sweepstakes casinos operate using a dual-currency system that allows players to engage in popular casino games like slots, poker, and roulette. Players purchase virtual currency, often called Gold Coins, to play these games.

As a bonus, they receive “Sweep Coins,” which can be used to win real money or prizes. This system, according to the AGA, blurs the line between free-to-play games and real-money gambling, effectively allowing these platforms to function like online casinos without being subject to the same regulatory scrutiny.

The legal gaming industry in the US is heavily regulated, with strict requirements designed to protect consumers, ensure fair play, and contribute to state revenues through taxes and fees. Regulated gaming companies invest significantly in compliance, responsible gaming measures, and rigorous product testing, all under the watchful eye of gaming regulators. In contrast, sweepstakes casinos, by operating outside these established legal frameworks, not only pose risks to consumers but also deny states substantial tax revenue.

The rapid growth of the sweepstakes casino market is evident. Data from Eilers & Krejcik Gaming shows that this market expanded at a compound annual growth rate (CAGR) of 85% between 2019 and 2023. Last year alone, player purchases in this market grew by 61%, reaching $5.6 billion and generating $2 billion in net revenue.

This growth has been driven by the expansion of existing operators, the introduction of new products, and the strong performance of leading companies like Virtual Gaming Worlds (VGW), which operates platforms such as Chumba Casino and Global Poker.

Despite the AGA’s concerns, the sweepstakes casino market shows no signs of slowing down. Projections suggest that the market could grow at a CAGR of 44% over the next two years, potentially reaching $11.4 billion in player purchases and $4 billion in net revenue by 2025. This continued expansion highlights the significant challenge regulators face in reining in these platforms.

In response to the growing concerns, some states have begun taking action against specific operators. VGW, for example, has been forced to cease operations in several states, including Idaho, Washington, Michigan, and Delaware. State and federal courts are also starting to weigh in on the legality of these platforms, indicating that more widespread regulatory action could be on the horizon.

The AGA has called on gaming regulators and state attorneys general to investigate companies offering casino games or sports betting under the sweepstakes model. The organization urges these authorities to assess whether these operators are complying with state laws and regulations and to take appropriate action against those found to be in violation.

The sweepstakes casino market continues to grow, and the call for increased regulatory scrutiny is likely to intensify, shaping the future of this rapidly evolving segment of the gaming industry.