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While fierce debate continues over the legality and long-term viability of sweepstakes casino gaming, some companies are caught in the middle between both sides.
Sweepstakes gambling continued to be a popular topic during the SBC Summit Americas event in Fort Lauderdale this week, with operators arguing that sweepstakes players are different from online casino customers, drawn by the social aspects of the game rather than the potential prize at the end.
“These are not people who would play on a black market site or who know what a black market site is; these are people who play Candy Crush,” argued Jamison Selby, CEO of Rubystone, which operates and supplies technology for sweepstakes platforms.
Selby said his company’s data shows at least two-thirds of their players strictly play for free without ever depositing funds, and argued that regulatory actions in Michigan leading to the exit of several major sweeps platforms from the state demonstrate the different types of player.
“If you look at what happened in Michigan after they kicked the sweepstakes operators out, if they were the same players, well, you should have seen a rush back to the traditional incumbents, and you did not, it's not what happened,” Selby said. “As far as we can tell from the evidence, it's a pretty shockingly distinct group of players."
“With the black market site, I have to go and I'm going to have to make a deposit,” agreed Jason Rosenberg, CEO of consulting firm American iGaming Solutions. “And sweepstakes, the gross gaming revenue is so grossly artificially inflated because the sheer volume of free coins, free entries that you're giving, and that's what appeals to a lot of players as well.”
Shawn Fluharty, who serves as head of government affairs for games provider Play'n Go as well as a West Virginia legislator and president of the National Council of Legislators from Gaming States (NCLGS), disagreed with the premise and cautioned companies against getting into the space.
“Do you think the average consumer knows the damn difference between sweeps and a regulated iGaming platform?” he asked. “I think if you're [a company] making that decision, you should tread carefully.
“If you're already in the sweeps space and you want to [enter] a licensed, regulated space, good luck. Regulators have a long memory, and they're going to remember that…and I think that puts you in a precarious position.”
Selby countered by arguing that similar challenges were made over a decade ago over daily fantasy sports, only for DraftKings and FanDuel to not only survive them, but go on to dominate the U.S. sports-betting market as licensed operators.
“If you look at the largest operators in online iGaming today, go back 20 years, they were on the other side of the table,” Selby argued. “The exact same states were having the exact same arguments, the attorney general was publishing the exact same letters, arguing DFS was the worst thing ever.
“And now, oddly enough, most of those major DFS companies are now the regulated incumbents. So the long game seemed to play out quite well.”
Fluharty added that, unlike in prediction markets, where companies like Kalshi have immediately challenged cease-and-desist letters with lawsuits asserting their right to operate, sweepstakes operators have been more reluctant to mount a similar legal challenge when regulators demand they leave the state.
“They're answering with their feet and they're getting the hell out of town,” he said. “Many of these companies are making the executive decision to get out because they want to play the long game and realize their license may be at risk if they decide to go in the regulated space.”
Some operators, however, may be publicly advocating one side while privately looking for a way in on the other.
Rosenberg said that he had been consulted by several Indian gaming tribes asking how to “covertly invest without anybody knowing” in sweepstakes operations.
He also cited an unnamed tribe currently that runs a dual currency sweepstakes platform where the equivalent of what operators refer to as “sweepstakes cash” can be exchanged for physical goods on-site instead of cash like in many sweepstakes models.
That comes as many national organizations, including the American Gaming Association and Indian Gaming Association, speak out against sweepstakes operations.
"The know-your-customer modules, geolocation, content, the attorneys, processing, banking, it's all the same suppliers, and they're all members of these organizations,” he said. “You have the political lobbying side saying one thing, and their members are doing something completely different and I think that's where there's some real confusion on the industry side.
“Right now, there's just seems to be hypocrisy between what one hand is saying and what the other hand is doing,” Rosenberg added.
