Sweepstakes face day of reckoning in the United States

Sweepstakes are coming under increased pressure in the United States with several prominent moves over the past few days. For one, Virtual Gaming Worlds, the operator behind Chumba Casino and Global Poker, among others, has been reportedly asked to leave the market in Delaware.

This is the latest such move against the company, which has seen its market share of the sweepstakes model contract from 90% in 2020 to 50% presently, according to a report by Eilejrs and Krejcik.

The reason for this contraction is easy to trace back to increasingly stringent regulation that has repeatedly restricted the company, ousting it from places such as Idaho and Washington, and Michigan in 2023.

Virtual Gaming Worlds in regulatory crosshairs

Delaware now may be the latest state to have done so according to media reports picked by industry sources, with the Delaware Lottery considering the business model to be unfit with local gambling laws.

A similar objection has been raised by the American Gaming Association, an industry trade group, which published a new industry memo, the "Regulatory Vigilance Critical to Ensure ‘Sweepstakes’ Don’t Threaten Consumers and Undermine Gaming Regulation," which effectively calls for tougher scrutiny of the so-called sweepstakes model.

The trade group has two major objections against the model. The first is that the sweepstakes business fails to introduce sufficient consumer protection measures. First, there are no advanced responsible gambling tools in place, which is chalked up to the fact that the sweepstakes claim they are not gambling operations.

Secondly, there is no sufficient testing of the products available on sweepstakes platforms according to the AGA. Yet another concern has to do with the missed tax opportunity for states. AGA believes that sweepstakes businesses prefer to call themselves such to avoid paying heftier taxes back to states.

AGA further cited the recent Michigan action against the sweepstakes business and has urged other regulators to similarly examine whether these businesses fall short of state laws.

"The lack of regulatory oversight presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions," the memo reads.

Sweepstakes set to face increasing pressure from regulators

It is not yet clear what businesses in the sector intend to do. Before DraftKings and FanDuel entered the regulated sports betting market, for example, they operated daily fantasy sports platforms. However, it’s unlikely for companies such as VGW to pursue growth in the regulated gambling market which has been increasingly cut-throat.

With mounting pressure on the sector, however, VGW and other prominent sweepstakes providers would most likely face a day of reckoning – when they have to figure out exactly where they stand and how they intend to tackle the incoming regulatory headwinds.

Image credit: Chumba Casino