Drawing the Line
Illegal gambling is one of the most pervasive threats to the gaming industry. As the regulated market has grown, so have attempts to replicate its success—without adhering to longstanding state and tribal authorities that protect consumers and communities. So-called “sweepstakes casinos” are a clear example.
Sweepstakes casinos claim that, because they don’t require real money to play their games, they fall outside the legal definition of gambling. In reality, they look and play like online casinos and offer a real-money gambling experience to the public.
By using a dual-currency system, they allow players to buy virtual currency, or Gold Coins, to play with. Gold Coins cannot be redeemed for cash, but when players buy them, they’re given Sweeps Coins, which can be redeemed for real money. The result is consumer confusion: 90 percent of sweepstakes users consider this to be gambling. Yet many are unaware they are engaging with unregulated operators.
State gaming regulators and attorneys general see this sham for what it is: an attempt to offer online casino gaming for real money to consumers without having to comply with the safeguards that states with legal iGaming require. They offer it in states where it isn’t legal by exploiting what they perceive to be a loophole.
The consequences are significant. Illegal operators deprive consumers of critical protections including responsible gaming tools, guaranteed payouts and dispute resolutions. They divert considerable tax revenue from states and undermine the integrity of the legal, regulated market by driving players to unregulated markets.
The American Gaming Association is working closely with policymakers, regulators, law enforcement, state attorneys general and industry stakeholders to support action against these operators. In the last year, more than 15 states have issued cease-and-desist orders, and several have enacted legislation to shut these operations down, most prominently in California and in New York—two of the four most populous states in the country. More than 10 additional states are currently considering legislation to address sweepstakes casinos this year. The direction is clear: states are not willing to tolerate unregulated gambling activity in their jurisdictions.
While addressing sweepstakes casinos is critical, it’s only one part of a broader effort to combat illegal gambling. Across the country, an estimated 625,000 so-called “skill games” machines continue to operate outside regulatory frameworks, appearing in bars, gas stations and restaurants across multiple jurisdictions. They look and act like slot machines—because they are—yet provide none of the consumer protections or public benefits required of legal gaming. States from Pennsylvania to Virginia to Missouri are wrestling with this issue, but the answer is clear to us—these slot machines should not be allowed where they attract crime, prey on the vulnerable and, in most cases, operate completely unregulated.
The latest and most existential threat to Americans and the legal gaming industry is the proliferation of prediction market platforms offering sports gambling to the public. Fourteen state attorneys general are in active federal and state litigation against these platforms, with 40 attorneys general signing onto amicus briefs in opposition to the undermining of their states’ rights, tribal sovereignty and consumer protection laws. State legislatures in 15 states have introduced bills to deal with this issue and Congress has begun to pay attention, with bipartisan concern increasing every day.
Whether Congress or the Supreme Court ultimately decides the legality of this issue, one thing is clear—the AGA will continue to fight this effort that challenges the state regulation of gambling. And we believe we will win.
Today, 47 states have made deliberate decisions about what forms of gambling are legal, how they should be regulated and who is authorized to operate. When states make the decision not to legalize any form of gambling, that choice is equally intentional. Illegal operators ignore those decisions—undercutting state and tribal authority and the communities those laws are designed to protect.
The progress we’ve made in addressing illegal gambling demonstrates what’s possible through coordinated action. We’ve built strong momentum. But there is still work ahead. Protecting the integrity of the legal gaming market requires continued collaboration and a shared commitment to ensuring that growth occurs within a responsible and regulated framework.
If it looks and acts like gambling, it must be regulated like gambling.
Tres York is vice president, government relations, of the American Gaming Association.
