AGAs Cylke Labels Sweepstakes Legal Status as "Murky" Amid Industry Debate

the controversial nature of sweepstakes gaming, AGA Senior Vice President Chris Cylke emphasized the uncertain legal landscape surrounding these games. The ongoing educational series, led by IGA conference chair Victor Rocha and executive director Jason Giles, seeks to clarify the distinctions between sweepstakes and regulated gaming, as well as the potential impacts on the legal sports betting market in the United States.

Navigating the Unclear Legal Boundaries of Sweepstakes

Cylke acknowledged the challenging legal status of sweepstakes, a form of gaming that often operates without the stringent regulatory oversight of conventional casino games. The AGA, he explained, remains cautious due to the legal ambiguities, with concerned that engaging in sweepstakes gaming could jeopardize their gaming licenses. “If sweepstakes gaming were as clear cut as those involved with it are saying, we probably would be doing it,” Cylke noted, citing AGA ’ apprehensions about the potential risks.

Jason Giles pointed to the difficulties of addressing sweepstakes and similar activities, which he suggested fall into a broader category of loosely regulated games that also includes fantasy sports. According to Giles, such activities often avoid regulatory scrutiny because they do not capture the attention of lawmakers, many of whom prioritize issues deemed more politically significant. “Part of the problem is that (attorneys general) are usually looking for higher office, so it is not a priority,” he said, adding that the idea of people playing free games at home may seem inconsequential to policymakers. He drew a comparison to Virginia, where, despite the ongoing presence of illegal machines, state officials are focused on other priorities like the legalization of marijuana.

Industry Comparisons and Calls for Regulatory Action

During the discussion, Giles compared the emergence of sweepstakes to the initial rise of daily fantasy sports platforms, such as DraftKings and FanDuel. Like sweepstakes, these platforms operated in a legal grey area, launching without explicit state approval but also without direct prohibition. According to Giles, operators aim to establish widespread usage before regulation catches up, a tactic he describes as “saturation” that makes it difficult for regulators to enforce restrictions.

However, while traditional sweepstakes—such as McDonald’s Monopoly game or Publisher’s Clearing House promotions—are generally well-accepted, sweepstakes gaming in the online casino context raises unique regulatory questions. As Cylke pointed out, when sweepstakes principles are applied to online casinos, their legal standing becomes “murky.” This distinction, he argued, undermines claims that sweepstakes gaming is simply a modern evolution of a familiar promotional tool.

The AGA’s involvement reflects growing industry concern over the unchecked growth of sweepstakes. In late 2023, the Michigan Gaming Control Board issued cease-and-desist orders to several sweepstakes companies operating without authorization, including Stake.us and VGW Luckyland. The companies eventually exited the Michigan market, but the incident underscored the complexities of regulating these platforms. Following the Michigan enforcement action, the AGA circulated a memo encouraging state regulators to evaluate sweepstakes games for compliance with state laws. “We’ve seen that with Bovada, we’ve seen that with certain elements of the DFS 2.0 space, and we’ll see something similar with sweepstakes casinos as well,” said Cylke.

Education and Collaboration as Next Steps

The AGA and IGA’s collaboration, Rocha emphasized, aims to foster understanding among California tribes and stakeholders as they assess the implications of legalizing sports betting in the state. Rocha’s goal is to help tribes recognize the impact of unregulated gambling options on their exclusive rights to casino gaming in California. With California tribes contemplating a voter initiative on sports betting, any decisions on legal fantasy sports and similar games could influence the broader regulatory framework.

In the broader context, Rocha likened the push for legal acceptance of sweepstakes and similar games to “manifest destiny,” pointing to lawsuits that challenge unlicensed operators as a sign of shifting public opinion. He cited legal actions against Bovada and other offshore operators as steps toward limiting unregulated gaming options.

The IGA’s educational series has become a platform for key voices in the industry to explore how the regulated gaming sector can work together to address the challenges posed by unregulated and minimally regulated games like sweepstakes. Although no concrete strategy was finalized during the latest session, Rocha and Cylke agreed on the importance of further collaboration, with Cylke concluding, “We educate … and we make a commitment to work together.”

Sources:

Sweepstakes aren’t “clear cut” and that’s a problem, AGA executive says, igamingbusiness.com, October 30, 2024.