The sweepstakes casino sector in the United States is now facing enhanced legal scrutiny with big news from both Florida and New York. Sweepstakes casinos are basically online gaming apps that allow users to play casino-style games with virtual currency value in exchange for real prizes. Sweepstakes casinos have operated in a loosely defined legal space. But recent lawsuits and state-level legislation involve some legal challenges which could further shape the argument that sweepstakes casinos are illegal and will be subject to further regulatory restrictions.
Florida’s Legal Challenge: Knapp v. VGW HoldingsTo begin with in Florida Knapp v. VGW
Holdings remains an important legal case and even provides some interesting reading for those interested in the Sweepstakes24.com casino industry. VGW Holdings operates a number of sweepstakes casinos including the well-known Chumba Casino and LuckyLand Slots and are facing allegations of several violations of Florida gaming and gambling laws. Specifically, VGW takes “virtual currency” (Sweeps Coins) players are able to use their virtual currency in VGW’s sweepstakes casinos and players can buy virtual currency and redeem for cash prizes value. The plaintiffs in this case propose that VGW’s business model constitutes illegal gambling which under Florida’s statutes constitutes illegal gambling in the state, especially based on Section 849.14 and Section 849.08 of Florida Statutes, both of which provide definitions of gambling.
Legal professionals say that if the court rules against VGW Holdings, the case itself could set the stage for how sweepstakes casinos will be treated nationally. The outcome could influence how other states will deal with similar platforms. If the court does rule that VGW is in violation, that would fuel some momentum toward a defeat in a long legal process if this case ever gets to trial. That WorldPay, a third-party payment processor, is also named as a defendant is evidence of the reality facing financial institutions where there is now the possibility of liability for even facilitating sweepstakes gambling activities.
New York’s Legislators are Getting Ahead
of the GameNot to be outdone by the proceedings in Michigan,
New York legislators are doing their best to get ahead of the game and prevent any enactment of the prohibition on
sweepstakes casinos in their state. On April 12, 2022, New York State Senator Joseph Addabbo Jr., Chair of the Senate Racing, Gaming and Wagering Committee, introduced Senate Bill 5935, and was doing his part to ban the operation, assisting or even the advertisement of online unregulated sweepstakes casinos within New York State. The Bill proposed Penal Law and directed fines of not less than $10,000 and not more than $100,000 for violations, and gave police and other law enforcement the powers to impose fines as well as deny or suspend any participant’s gaming license. Senator Addabbo testified with a great deal of concern, indicating that anyone involved in the world of gaming should get uneasy about online gambling.
sweepstakes casinos’ accessibility to minors, and the potential for gambling addiction or gambling-related problems. Senator Addabbo testified further, “there’s no difference between illegal gaming at your local strip mall and legal gaming with regulated iGaming options; there are real choices for the responsible players.” The Senate Racing, Gaming and Wagering Committee bill is now pending
consideration in the New York Senate. If the law passes, New York will not only be looking to regulate or eliminate illegal online gambling, but seeking to join states such as Michigan, Idaho or Washington in regulating or eliminating sweepstakes casinos from operation.
Broader Impacts and Reactions from Industry Stakeholders
The legal action in Florida and the recent legislative action in New York is part of a wider trend in the United States to regulate and potentially prohibit sweepstakes casinos. Our developments help to contextualize and understand what the future may look like for internet platforms based on the idea of a sweepstakes-style gaming, like Sweepstakes24.com.
As states clarify their stance on platforms operating in this space, operators will require a new business plan in order to legally operate in their state. The ultimate resolution of these legal and legislative developments could affect how sweepstakes casinos are permitted, regulated and operate in the future but others will be watching such as operators, payment processors and technology companies involved too.
