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As sweepstakes gaming draws more interest from U.S. lawmakers and regulators, industry leaders predict several paths it could take in the coming months.
During various sessions at the NEXT Summit New York on Wednesday (March 12), industry executives and gaming experts made their predictions.
Bill Gantz, a partner at Duane Morris law firm, said that the next six months will be key to determining what the future of the sweepstakes sector looks like.
Gantz noted that although legislation has been filed in several states to ban aspects of the sweepstakes model, including the dual-currency format utilized by many of the industry’s top players, that legislation has yet to pass in any jurisdiction.
Even if such legislation is approved, meanwhile, other aspects of the so-called freemium model will still be viable.
“I think a doom-and-gloom, or all-or-nothing, or on-or-off outlook for this category is not accurate, because all of these operators are actually freemium operators first, and that is an essential piece of the model,” Gantz said.
“There's a lot of fluidity, and I think the war in terms of where the specific dual-currency product may be offered, it will be won or lost in the next six months based on how involved [gaming industry] stakeholders become in our legislative efforts.”
Bills to prohibit sweepstakes platforms offering casino games have been introduced so far this year in Connecticut, Florida, Maryland, Mississippi, New Jersey and New York.
A bill to prohibit sweepstakes casino games was passed unanimously on Wednesday by Maryland's Senate. However, that bill must still pass the House, just like the bill that was also approved last month by the Mississippi Senate. Bills in other states have yet to move out of committee.
Chris Grove, co-founder of venture capital firm Acies Investments, which holds a number of gaming sweepstakes brands in its portfolio, said he believes that establishing regulations for sweepstakes casino platforms could help the regulated gaming industry bridge the gap to passing more online casino legislation.
“Consumers like this product because it does not force them to make the same hard decision to self-identify as a gambler by putting down a credit card in order to play games with a chance to win a prize,” he said. “That softer ramp into a real money experience is something that makes consumers a lot more comfortable with these products, and I think it could also make politicians a lot more comfortable with these products.”
Speakers were also split on how sweepstakes operators and licensed gaming suppliers could interact going forward.
Benjie Cherniak, principal at Avenue H Capital, projected that the lines between the regulated and unregulated gaming spaces will continue to blur.
“It’s within the realm of reason, I think, that an operator in the U.S. that's playing in the legislative white space will make the move, via an acquisition of some sort, into the quote-unquote, somewhat gray space in some capacity, in order to get a leg up in upcoming states, in order to bring on board a userbase, in order to create another revenue stream.”
However, Rickard Vikström, founder and CEO of online gaming hosting provider Internet Vikings, feels the opposite, arguing that in the next few months, those lines between regulated and unregulated products will harden.
“I see a lot of suppliers that try to be on both sides,” Vikström said. “You can't play on both sides, it will never work. You need to pick one side and do that, and that's what I think will happen.”
“Some of these larger companies will not be able to work with the sweepstakes,” he predicted. “They will either pull out from the sweepstakes, or they make so much money from it, they will pull out from the [regulated] space.”
Vikström said that his company, which boasts licensed operations in 25 U.S. states, decided three years ago to not supply sweepstakes operators.
“We just totally skipped that, because we know that, okay, there's always innovation in this industry … but then you have always had the regulators and legislators that are trying to battle that,” he added. “There's so much money behind the real money gaming industry that was trying to battle this, and we took that stand, and I'm happy to do it.
“We need to make those kind of lines because, I have done fingerprints, I've done all my tax returns, I’ve done that, and why shouldn’t everyone need to do that?”
Gantz argued that although any company is within their rights to make a business decision not to serve sweepstakes platforms, it is unfair to assume that the sweepstakes category is unlawful.
“There are legal opinions, there are no clear rules, there are no prosecutions, there's no authority to just say we're going to get in trouble if we offer this,” he said.
“It's a risk-management decision, and you're certainly not the only company that has done that,” Gantz told Vikström. “But I think trying to penalize it by statute is wrong.”
