New York Senator Introduces Bill to Ban Sweepstakes Casinos

Recently, State Senator Joseph Addabbo has filed bill S5935. It aims to ban sweepstakes casinos, which have operated in an unregulated market until now. It would also make it illegal for software providers to work with such platforms. Read on to learn more about this bill and its current progress.

What are Sweepstakes Casinos?

Some sweepstake casinos operate in a grey area and are unregulated in most states. Unlike regular casinos, you can play for free using virtual currency that can be acquired without deposits. However, they also have sweep coins, which can be redeemed for real money prizes. The way redeeming prizes at these casinos works is as follows:

• Players receive sweep coins as a bonus for gold coin packs
• They play games using these coins
• Any winnings are awarded as sweep coins and can be redeemed as cash prizes

Since these casinos can be played without depositing funds, they aren’t considered online casinos and don’t require licenses. Many US players even play at offshore casinos, which can make it difficult to regulate them. That’s why some states like Mississippi prepare bills to completely ban sweepstakes casinos, imposing fines and imprisonment for any illegal operators.

Senator Addabbo’s Proposal

The bill filed by State Senator Addabbo intends to ban all online sweepstakes that use a dual currency that can be exchanged for prizes. All licensed suppliers and vendors will also be prohibited from working with sweepstake casinos. The bill also defines several game types as “casino-style gaming”, which will be prohibited from these operators, such as:

• Slots
• Blackjack
• Roulette
• Poker
• Craps
• Keno
• Bingo
• Lottery
• Instant Win Games
• Sports Betting

The reason for the ban is that these sweepstakes casinos are unregulated. They operate in a grey market and do not pay taxes. Additionally, the New York Gaming Commission cannot protect players in case of fraud, and most court cases involving sweepstakes casinos have ruled them as illegal gambling.

States Cracking Down on Sweepstakes

New York may become the second state to ban online sweepstake casinos if the bill passes. These bans and discussions arise from the ongoing Knapp vs VGW Holdings lawsuit in Florida. Two gaming attorneys commented on this case, highlighting the fact there’s growing tension between states and sweepstakes casinos due to the lack of proper regulation.

The sweepstakes in these sites are permanent, contrary to most sweepstake promotions. Sweep coins have a 1:1 exchange rate, and additional coins can be obtained as bonuses for buying packs. These casinos also take business away from other legitimate gambling sites or establishments like Indian casinos.

Future of Sweepstakes Casinos

Sweepstakes casinos have had a significant rise in popularity recently, which is one of the reasons state regulators are eager to create regulations. The Racing, Gaming and Wagering Committee is still reviewing state Senator Addabbo’s bill. It remains to be seen if it will succeed and become law.

Meanwhile, many social casino companies argue that their games do not violate US laws. Players buy gold coins for entertainment and do not have to pay to enter the sweepstakes. Most states have not taken action against sweepstake casinos, so these cases may set a precedent.

Senator Addabbo’s Other Bill

Aside from the one affecting sweepstakes casinos, State Senator Addabbo has also introduced one for digital wagering licenses. It would increase the number of licenses to 16 by 2027 and allow operators who couldn’t get one in 2021-22 to reapply. It would also introduce a new tax rate that lowers as more operators enter the market:

• 4-5 operators – 64%
• 6 operators – 65%
• 7 operators – 60%
• 8 operators – 58%
• 9 operators – 51%
• 10-12 operators – 50%
• 13-14 operators – 35%
• 15 or more operators – 25%

This new rate will likely motivate more operators to apply, eventually improving the industry’s situation. However, having fewer operators would also increase the rate, which is currently 51%. Lawmakers are working to help the online casino industry, allowing it to better compete with sweepstakes casinos.