Social Gaming Casinos: Increasing Legal Scrutiny
Why differences between single-currency and dual-currency models matter
Social online casino-style games have recently exploded in popularity, creating a rapidly expanding market for gaming companies, marketers and technology platforms. Along with that popularity has come increased attention from regulators, plaintiffs’ lawyers and state legislatures.
Unlike formally regulated, licensed online gambling casinos, operators offering these games (sometimes called “sweepstakes casinos”) have frequently relied on the state law principles undergirding promotional sweepstakes rather than obtaining formal regulatory gaming licenses to offer legal casino-style online games.
While that approach has generally worked for many platforms in much of the United States, in the past year several states have passed laws explicitly prohibiting online sweepstakes gaming platforms that use dual-currency models to offer casino-style gameplay. Moreover, recent enforcement actions in New York and other states, along with a growing wave of class action litigation, demonstrate that the legal bases upon which certain of these games are based can be attacked via allegations of violating state gambling or lottery laws.
For companies entering or operating in this space, the legality of a platform often turns less on the games themselves than on how the platform structures its virtual currency ecosystem.
Single-Currency vs. Dual-Currency Platforms
In analyzing these platforms, it’s important to first understand whether the model operates using a single-currency or dual-currency model. With a single-currency platform, consumers are allowed to purchase virtual currency to use solely for entertainment purposes. The virtual “coins” (or other currency) cannot be redeemed for cash, merchandise, gift cards or other items of value, but instead can be used only for continued gameplay. Because no redeemable prize is available, these platforms typically present substantially lower gambling-law risk.
By contrast, many “sweepstakes casino” game operators offer a dual-currency model, which offers players the opportunity to purchase an entertainment currency often called “gold coins” and to separately receive promotional “sweepstakes coins” for free via methods such as daily login bonuses, alternative methods of entry (AMOE), mail-in requests, promotional giveaways and/or complimentary bonuses accompanying Gold Coin purchases. Sweepstakes Coins may then be redeemed for real-world currency or prizes.
Operators generally take the position that consumers are purchasing only entertainment currency (the gold coins) and that Sweepstakes Coins are distributed for free solely as part of a promotional sweepstakes and not sold directly. This structural separation has become the foundation upon which much of the industry relies.
Nonetheless, for game operators it’s not enough to rely on this distinction. Dual-currency models are specifically addressed in a growing number of state laws focusing on new social casinos, but it’s not fundamental to the definition of sweepstakes gambling in these statutes.
The older and broader tests remain: the definitions of prize, chance, consideration, staking or risking value and unlicensed operation, and many state laws do not mention dual or single currencies at all. Thus, a state-by-state analysis becomes necessary.
Federal Law Provides Only Limited Guidance
Contrary to popular perception, there is no federal statute expressly authorizing these online social gaming or sweepstakes casinos. Instead, operators generally look to provisions of the Unlawful Internet Gambling Enforcement Act (UIGEA). UIGEA primarily regulates payment processing for unlawful internet gambling rather than the games themselves, and its definition of a prohibited “bet or wager” excludes sweepstakes or games in which participants risk nothing of value other than personal effort or free points or credits supplied by the game sponsor.
Regulation GG defines a bet or wager through the staking or risking of something of value on a chance-based outcome and excludes free promotional or entertainment credits provided by a sponsor that are usable or redeemable only for the sponsor’s games or contests. As a result, pure entertainment platforms that do not award redeemable prizes—the single-currency model—generally fit more comfortably within the federal framework than dual-currency platforms that ultimately permit cash redemption.
Likewise, although the Wire Act continues to generate debate regarding its application outside sports wagering following the First Circuit’s decision in New Hampshire Lottery Commission v. Rosen, (2021), it has generally played a secondary role in evaluating social casino legality because these platforms typically avoid accepting traditional bets or wagers; the only payments accepted are for the purchase of entertainment currency or gold coins that are used solely for game play, and are not used to obtain prizes.
State Law is the Primary Battleground
The principal legal risks to social or sweepstakes casinos arise under state gambling statutes. Most states define illegal gambling using some variation of the familiar three-element lottery test: prize, chance and consideration. Social casino operators therefore focus their compliance efforts on eliminating the consideration element by providing meaningful free methods of obtaining sweepstakes coins.
That approach borrows from well-established promotional sweepstakes law, which has long permitted sweepstakes giveaways and promotions so long as consumers are not required to provide consideration to enter. As long as there’s a method of entry that does not require any kind of purchase, payment or cost to win prizes (AMOE), the operator can legally offer other paid methods of entry alongside the free entry method.
However, offering an AMOE is only part of the analysis. Operators must ensure that free entrants benefit from so-called “equal dignity” with those who pay to enter. If purchasing gold coins effectively provides better odds, greater access to prize-eligible games (or prizes) or enhanced redemption opportunities, plaintiffs and regulators may seek to argue that the platform has crossed the line from a lawful sweepstakes into illegal gambling.
Further, operators must clearly and conspicuously disclose the AMOE (a requirement that has been the subject of considerable enforcement and litigation over recent years). Consequently, careful product design, user experience, promotional messaging and terms and conditions all become critical compliance considerations.
Increasing Regulatory Risk
Perhaps the most influential judicial decision in the social gaming space remains Kater v. Churchill Downs Inc. (2018), in which the Ninth Circuit held that virtual casino chips used in Big Fish Casino constituted a “thing of value” under Washington state’s unique gambling statute, because it allowed users to continue playing the game without making additional purchases.
Although the decision turned on Washington’s unusually broad statutory definition, which expressly includes playing additional games without cost as a prize, it has fueled numerous class actions challenging social casino operators under other state gambling laws. The resulting litigation has extended beyond traditional social casino operators to a number of dual-currency sweepstakes platforms that have become increasingly popular over the past several years.
Recent regulatory developments, however, indicate that private litigation is no longer the only source of risk. At this time, approximately 14 states have passed new laws regulating social or “sweepstakes” casinos, including Connecticut, New Jersey, California, Montana, New York, Indiana, Iowa, Tennessee, Utah, Iowa, Indiana, Maine, Louisiana and Oklahoma.
New York passed Section 912 of the New York Racing, Pari-Mutuel Wagering and Breeding Law, effective December 2025, to make it unlawful to “operate, conduct or promote online sweepstakes games within the state of New York.” This new statute defines sweepstakes games as those that “utilize a dual-currency system of payment allowing the player to exchange the currency for any cash prize, cash award or cash equivalents, or any chance to win any cash prize, cash award or cash equivalents, and simulate casino-style gaming, including but not limited to slot machines, video poker, table games, lottery games, bingo or sports wagering.”
Even before New York’s legislature passed that law, though, in June 2025 New York Attorney General Letitia James, working with the New York State Gaming Commission, announced that 26 online sweepstakes casino operators had agreed to stop offering sweepstakes coin sales in the state following cease-and-desist letters asserting that platforms allowing virtual sweepstakes coins to be redeemed for cash constituted unlawful gambling under New York law.
The attorney general emphasized that these platforms operated outside New York’s licensed gaming framework and therefore lacked the consumer protections applicable to regulated gaming operators, relying on the state constitutional lottery prohibition and penal law to order sweepstakes-casino operators to stop serving New York. The attorney general treated virtual and redeemable credits as “something of value” and rejected the proposition that the availability of a free entry method necessarily resolved the gambling issue.
Other states have brought similar actions in the past couple of years. Illinois criminalizes knowingly operating an internet site that permits a person to play a game of chance or skill for money or another thing of value. It also separately addresses lotteries and other gambling conduct, without defining dual currency. In 2026, the Illinois Gaming Board, acting with the attorney general’s office, announced that it had issued more than 60 cease-and-desist letters to alleged illegal online casino and sweepstakes-gaming platforms. Individual letters invoke 720 ILCS 5/28-1(a)(12), a statute of the Illinois Criminal Code, where online slots or table games offer cash, gift cards or other prizes.
Similarly, Minnesota’s attorney general sent enforcement letters to multiple online gambling operators, including social sweepstakes casinos, under the state’s general gambling and consumer-protection laws. Minnesota’s gambling statutes regulate bets, gambling devices, lotteries and related operations without including a dual-currency requirement; the state also has narrow exceptions for specified social skill and social dice games. In a sweepstakes-casino letter sent in 2025, the attorney general described a dual currency system but relied on general law. The letter reasoned that purchased “gold coin” packages accompanied by bonus sweepstakes coins could supply consideration and identified the casino atmosphere, perpetual nature of the promotion and redemption or payout features as relevant.
Other states bringing regulatory enforcement actions against sweepstakes gambling websites in the past few weeks include Michigan, Kentucky, Nevada and Tennessee.
Practical Considerations for Companies
Companies considering whether to offer social casino-style games should recognize that legal compliance extends well beyond drafting sweepstakes rules or other terms and conditions or even simply whether a free method of play is available, and a state-by-state feature analysis of the specific game will be necessary.
A single product can simultaneously be within a dual-currency ban in one state, prohibited under a model-neutral casino-simulation rule in a second, potentially lawful only as a limited registered promotion in a third and exposed to private loss-recovery claims in a fourth. Geofencing only the states with statutes that use the words “dual currency” could therefore leave substantial residual risk. Game architecture, virtual currency design, redemption mechanics, advertising claims, alternative methods of entry, geolocation controls, age verification, responsible gaming disclosures and state-by-state availability all affect the overall legal analysis.
Nonetheless, single-currency entertainment platforms and free-to-play entertainment platforms are lower risk. Dual-currency platforms, though, increasingly face scrutiny from regulators and private litigants alike. As the recent state enforcement initiatives demonstrate, companies should expect heightened examination of sweepstakes casino models and should periodically reassess whether existing game structures continue to satisfy evolving state gambling laws.
Ultimately, any monetized portion of the game may carry risk under some state law, absent registration under state gambling law. And it’s clear that the changing nature of the regulatory landscape means even after a game has launched, the operator must be prepared to continuously monitor new legislative and enforcement developments to determine whether new modifications and state exclusions may be necessary.
Barry M. Benjamin, a partner in the New York City office of Venable LLP, has more than two decades of experience advising clients on marketing law, privacy compliance and high-stakes disputes. He can be reached at [email protected].
Melissa Landau Steinman, partner in the Washington, D.C. office, focuses on counseling and compliance matters related to advertising, marketing, promotions, consumer protection, antitrust, trade regulation, and consumer product safety. She can be reached at [email protected].
