Michigan Cracks Down On Sweepstakes Casinos

January 22, 2024
Three sweepstakes-based casino and sports-betting operators have been forced to exit the Michigan market after receiving cease-and-desist letters from state gaming regulators accusing them of offering illegal online gambling.

Three sweepstakes-based casino and sports-betting operators have been forced to exit the Michigan market after receiving cease-and-desist letters from state gaming regulators accusing them of offering illegal online gambling.

The Michigan Gaming Control Board (MGCB) announced that it had sent cease-and-desist letters to PredictionStrike, Stake.us and VGW LuckyLand Inc., whose parent company is VGW Holdings Ltd., a leading social gaming company based in Australia.

The notices were sent on October 19, November 2, and December 5, 2023, respectively, and the MGCB said late Thursday (January 18) that all three companies have since taken steps to prevent Michigan residents from using their websites.

The MGCB's announcement provides extra context to the previously reported withdrawal of VGW’s prominent Chumba Casino, Luckyland Slots and Global Poker from one of the three main markets for real-money online casino gaming in the United States.

The state’s crackdown on sweepstakes companies began on September 1, when Michigan attorney general Dana Nessel secured an assurance of discontinuance to shut down the Michigan operations of Massachusetts-based Golden Hearts Games.

Sweepstakes-based games differ from real-money online casino games by allowing players to either play for free or purchase credits to fund their game play and then receive additional free credits. Only the free credits awarded to players are redeemable for cash or other prizes.

By structuring the games this way, VGW and other sweepstakes operators have typically been able to operate in all U.S. states except for Washington and Idaho, because the purchases can be considered as entries rather than wagers. 

Still, industry commentators have recently questioned whether sweepstakes-based casino games could start to come under greater enforcement scrutiny, given their increasing prominence and potential resemblance to real-money online casinos that generate meaningful tax revenues for those states, including Michigan, where they are legal.

“These companies have been operating for years and years in the U.S.,” said Jeff Ifrah, founder of Ifrah Law in Washington, D.C. “Regulators are aware of them and until now have been silent.”

“One new wrinkle, because of regulated iGaming, some platforms supporting sweeps are also licensed by iGaming regulators and that provides a hook for regulators to ask questions,” Ifrah told Vixio GamblingCompliance.

“Those types of conversations and outcomes do not always reflect an honest legal analysis of the product being offered,” he added.

In its statement, the MGCB accused PredictionStrike of operating unlicensed internet gaming and sports betting, while Stake.us was alleged to be promoting an unlicensed online lottery and raffle for customers that buy its products through its website.

Under the terms and conditions on its website, Michigan is one of seven listed states listed where residents are now excluded from playing the games offered on the Stake.us platform. 

VGW was accused of conducting illegal gambling by offering an internet game in which a player wagers something of monetary value for the opportunity to win something of monetary value.

“Gambling regulations are in place for a reason, and illegal gambling operations are not welcome in Michigan,” MGCB executive director Henry Williams said in a statement.

“We do not want businesses who skirt the law having access to Michigan citizens and leaving them vulnerable because they are playing on unregulated sites that leave them with no recourse, and that siphon funds away from communities because they are not paying taxes like a regulated, legal gambling establishment would.”

The MGCB said PredictionStrike, Stake.us, and VGW had all violated the Lawful Internet Gaming Act and Lawful Sports Betting Act, two laws from 2019 that regulate online casino games and mobile sports betting in the state.

The companies also violated the Michigan Gaming Control and Revenue Act, which prohibits a party from conducting a gambling operation without a license issued by the MGCB, and the Michigan Penal Code, which broadly prohibits any form of unauthorized gambling involving consideration, prize and chance. 

Bill Miller, president and CEO of the American Gaming Association (AGA), supported the MGCB’s crackdown, writing in a post Friday on X, formerly Twitter, that “more states must follow their lead if we want to protect consumers across the country.”

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