SPGA insists on legitimacy of social sweepstakes games as sector scrutiny mounts

The Social and Promotional Gaming Association (SPGA) held its first briefing on Tuesday this week moderated by Chris Grove, Managing Director, Digital & Interactive Gaming at Eilers & Krejcik Gaming.

The video briefing sought to drive home an important message that the association, and its 11 founding partners, have been adamant on – that social sweepstakes games are a legitimate form of entertainment with a well-established regulatory basis of operation.

It’s not about how something looks, but what it actually is

Grove touted the "social casino sector" as one of the fastest growing categories in the gaming ecosystem but elaborated on the need to use precise terms in describing the sector as a "classic social casino model with a sweepstakes prizing layer on top."

Grove elaborated that the vertical has been garnering significant interest from consumers, name-brand venture backers, publicly traded companies, and stakeholders from the regulated gaming industry. This is a nod to Gaming Innovation Group’s recent plans to capitalize on the sweepstakes sector in the United States.

The SPGA’s briefing comes in response to increasing scrutiny of the sector and several moves against high-stakes players, including VGW, which has been asked to leave Connecticut this month, and the American Gaming Association, as well as policymakers, issuing a public rebuke against the sector.

The briefing focused on better addressing the growing attention and interest in the sector, and why the vertical, enjoyed by millions of Americans, is a safe and legal form of entertainment—joined by Jon Kaplowitz, CEO and Co-Founder of Clubs Poker and Matt Kaufman, Managing Director of Digital & Interactive Gaming at Eilers & Krejcik Gaming.

Kaufman began the conversation by carefully delineating the extensiveness of the sweepstakes format, as something that is clearly documented in history and modern-day business circles, whether this is McDonald’s or Budweiser’s trying to boost sales or a corporation running another form of a sweepstakes contest.

However, in understanding the historical context of sweepstakes, it must be observed that the usage of casino-styled game mechanics does not necessarily signify that a sweepstakes casino is offering gambling products, as the model itself will proliferate to games such as Clash of Clans, Angry Birds and Candy Crush.

"The reason why sweepstakes contests exist as a dynamic legally is to give operators of a game, to give the runners of any kind of business, the ability to give away promotional prizes as a tool for promoting their underlying game content," Kaufman noted, adding that the social casino industry is a multi-billion industry.

Importantly, however, there is nothing unique about the way social casinos utilize the sweepstakes business model, as Kaufman demonstrated by drawing from experience with well-established, non-gaming corporations that have similarly utilized the sweepstakes model.

Kaufman did not hesitate to offer criticism to "certain actors" that have been trying to purposefully "draw a line" that shows what is gambling and what is not in a way that seeks to serve the business interest of the aforementioned actors, rather than, as Kaufman said, looking at the definition of gambling which comes down to "prize, chance, and consideration."

Grove chimed in and clarified that it is important for the audience to understand that for the purposes of US laws, it’s important to understand how something truly works rather than how something "looks."

Kaplowitz was happy to join the discussion on a similar note. Kaplowitz also wanted to elaborate that as a business, sweepstakes casinos are indeed focused fully on offering their services for free, rather than trying to incentivize player bases in roundabout ways to spend more money to buy currency.

He explained that the majority of players remained keen on using the free model, whereas a small minority of players were keener to purchase the platform currency in order to access more gameplay before a free drop was allocated.

Kaplowitz insisted that Clubs Poker, for example, tends to do two things differently from other sweepstakes platforms, when it comes to the manner in which value is given to players, and also the robust AML and KYC procedures, along with responsible gambling tools, and geolocation software tracking to ensure compliance.

Grove welcomed the explanation by Kaplowitz and added that viewers would be pleased to find out that the platform seeks to not only engage users and make sure they are having a good time, but that, when they play, they do so in a safe and responsible manner.

If not gambling, what are social sweepstakes casinos?

The format then shifted, with Grove asking the participants several questions that had been received in advance. The first question did not try to avoid the issue, and came down to "if sweepstakes games are not gambling, what are they?"

Kaplowitz argued that they are a form of entertainment and a way for players to play online for free. People simply love playing those games, he continued and added that the overwhelming majority of players continue to play for free.

He noted that only 1% to 5% of social casino players, based on information from public social casino companies, pay to purchase a designated currency and play more than their allotment of free currency. He summed up that all of this, the way the games are designed and the number of people who opt for free play time and again just shows that this is a different form of entertainment.

Importantly, the second question was equally interesting and addressed the recent criticism the AGA has mounted against the sector. Kaplowitz offered his thoughts here as well. He suggested that the memo was a little "misguided," but acknowledged that this was his personal take on the memo. He discussed certain points of the industry memo, including the claim that sweepstakes businesses failed to provide consumers with sufficient responsible gambling tools, a claim that Kaplowitz politely disagreed with.

Clubs Poker, he argued, has created what he insisted was one of the best-in-class responsible gambling tools in the market. The company has tapped into a lot of the knowledge from the regulated market to ensure that the resulting product serves its intended purpose, including self-exclusion tools.

Another point that Kaplowitz took issue with was the memo’s claim that there was no "independent assessment of fairness," however the business, in particular Clubs Poker, works with GLI, an international certification body that assesses the fairness of games of chance.

The memo also suggested, Kaplowitz hazarded, that the industry is not honoring age verification processes, but speaking from the perspective of Clubs Poker, he insisted that this simply was not true. All told, Kaplowitz said that he was keen on having a collaborative discussion with the American Gaming Association.

The next question was addressed to Kaufman who was asked if "traditional social casinos offered prizes in the past" and if any "offered prizes now?" He argued that yes, every traditional social casino has tapped into the sweepstakes format to incentivize players and promote products.

Kaufman also answered the last question: "The SPGA has said that most players play for free, and those that do spend typically only spend a few dollars per purchase. There have been reports that some social casino companies make many millions of dollars. If both are true, where do the large revenues come from?"

He argued that social casino games with or without sweepstakes prizing see the same behavior in players, where a small number of people spend usually big amounts. But it is not just the social casinos where this model is enacted.

Whether it’s Candy Crush or Monopoly Go, all type of social gaming has a model where there is a small percentage of highly engaged players who spend a lot and thus drive the business revenue. However, this model is really not contingent on the integration of a sweepstakes prizing model, Kaufman insists.

Grove thanked both industry representatives for their time and reminded viewers that it is important to understand what the social sweeps category is, but equally importantly – what it isn’t.

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