Sweepstakes Casinos: The Battle Ensues

Given that only seven U.S. states have legalized online casino gambling, it's easy to understand why licensed operators are protective of the access they can provide. In those seven states (Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia), the operators are none too thrilled about the availability of offshore online casino sites from other parts of the world. Now, there is another present danger to the nation's top online casino operators.

Sweepstakes Casinos Arrive on the Scene

In a world where online casino gambling has become a legitimate and acceptable form of online adult entertainment, there is a new online casino phenomenon sweeping through the country. "Sweepstakes casinos" are the "now" online casino option for casino gambling enthusiasts who are looking to play online casino games of chance in a social media environment.

What is most notable about sweepstakes casinos is that they allow players to play games of chance for free. That's correct. Sweepstakes casinos are offering players free chips that they can use to play video slots, table games, and more. In most cases, these free chips are referred to as "gold coins" that are seemingly available and replenishable at the drop of a hat. Of course, there is a caveat. Gold coin winnings come in the form of more gold coins that can only be used to play more online casino games. They are not redeemable for anything of real value.

Naturally, someone might wonder, "What is the point of playing online casino games if there is not a pot of gold at the end of the rainbow? Here are five reasons why players might enjoy playing online casino games for free:

• Learn how to play casino games without financial risk


• Experiment with betting strategies without risk


• Fun way to pass the time


• Enjoy socializing with other players while in action


• Explore chances to become a real money casino gambler
  

The Real Cash Side of Sweepstakes Casinos

At this point, it's necessary to point out that many of today's most prominent sweepstakes casino operators also offer real cash gaming options for players who are willing to take the financial risk. Since it's a gray area from a legal standpoint (more on that below), astute online gamblers might be wondering how that works. It typically works as follows.

When a new customer registers with a sweepstakes casino, they are given a "welcome bonus" in the form of gold coins to get rolling. If the sweepstakes casino also offers access to a real-cash casino, new customers are also allotted a few special coins, often referred to as "sweeps coins." Sweeps coins can also be purchased by customers at a stated price.

Said coins can be used exclusively to play real-cash casino games. That will usually include video slots and table games from one or more of the top iGaming software developers in the world. Note: these are the same games that can be found in online casinos throughout the online casino universe.

What makes these special coins unique is that they can be redeemed for something of value. To be clear, it's not really a direct redemption value process. Instead, sweeps coins are often used to earn entry into sweepstakes drawings or contests for prizes, hence the term sweepstakes casino. Note: Contests might require that players earn a certain number of points to get access to certain prizes along a stated spectrum of available options.

Here is a list of redemption options that are quite common within the sweepstakes casino community:

• Gift cards to popular stores and restaurants


• Memorabilia or other valuable assets


• Travel and vacation trips


• Additional gold or sweep[s coins


• Real cash
  

How coins are to be redeemed is always subject to the terms and conditions put forth by the sweepstakes casino. Yes, they can certainly vary from one casino to another, and from one state to another. It's incumbent on each customer to always read all terms and conditions to avoid confusion and misunderstandings. Such terms and conditions might include playthrough requirements, winnings limitations, and withdrawal limits.

Are Sweepstakes Casinos Legal?

At this point, an astute and experienced online gambler might be questioning the legality of sweepstakes casinos, and rightfully so. Above, mention was made of a gray area. Indeed, sweepstakes casinos are usually operating right on the borderline of state and federal laws.

It's worth mentioning that only a dozen or so states have outlawed sweepstakes casinos if said casinos offer access to anything beyond free play. It's also noteworthy that other states are currently looking at the possibility of outlawing these casinos.

There are several issues front and center. First, 43 states don't allow online casino gambling for real cash, period! Second, some states are okay with the sweepstakes casino concept only if operators are able to secure the appropriate licensing. Many operators try hard to bypass the licensing requirement simply because they know they won't pass muster. Finally, there is a lot of pushback against sweepstakes casino operators being able to operate in states where operators in control of other forms of legal gambling might be harmed. That might include race tracks, lotteries, bingo providers, and licensed casinos in the aforementioned seven states. The battle has ensued.

No one is fooled by the promise of prizes instead of CASH for coins. It's still real-money gambling if a player wagers purchased sweeps coins with the expectation of getting an asset in return. It makes no difference if the asset is real cash, a gift card, or a vacation trip to Las Vegas. This is often the first thing state regulators have to consider before allowing their residents to use sweepstakes in their purest form.

This legality issue is a big deal. Why? Dozens of states have made attempts to legalize online casino gambling. Dozens of states have failed to do so for a variety of reasons. It doesn't seem just that a sweepstakes casino operator should be able to circumvent laws while other legitimate online casino operators have been denied the same access. A lot of states are banning sweepstakes casinos for this very reason.

Of equal importance is the licensing and regulation of sweepstakes casinos. State legislators have an obligation to protect their residents from rogue parties that might do the residents harm. It's difficult to control rogue parties if ownership is hidden and operations are allowed to continue without oversight. Nevada seems to fully support sweepstakes casinos, but only if the appropriate license has been issued and reporting provisions have been put in place.

That leaves the competition problem. One of the key reasons that states have trouble passing iGaming legislation is that Indian Tribes often hold the exclusive rights to offer any form of casino gambling within their respective states. That right was established by the Indian Fair Gaming Act of 1988. Since Tribal communities usually depend heavily on casino revenue, they don't like having to share. In the seven states that have legalized iGaming activities, this very same issue was resolved by making sure local Tribes will get a piece of the online gambling revenue pie.

The competition issue goes deeper. Lotteries don't like watching revenue drop because players have other gaming options, especially online gaming options. Race tracks are constantly battling to hold onto gambling market share, and they also don't like competition unless they are compensated for a yes vote. That's not to forget mentioning that licensed iGaming operators certainly don't appreciate competition from unlicensed and unregulated competitors.

How Should This Issue Be Resolved?

Among several schools of thought comes what seems to be the only fair and viable solution to this issue. It would seem prudent for states to ban sweepstakes casinos if they offer the prize redemption option. In states where iGaming is legal, they should be forced to acquire the proper licensing if access to such a license exists.

In conclusion, this is a hot topic throughout the U.S. gambling industry. Unless sweepstakes casino operators can offer up a viable compromise by stare, it looks as though the life expectancy of the sweepstakes casino might be limited unless they are willing to settle on being free-to-play casinos, deriving their income from advertisers.