I Think I Can Beat Mike Tyson
The sweepstakes industry had perhaps its worst week to date, with two states passing prohibitions and the NY AG issuing C&D letters.
The Bulletin Board
THE LEDE: A week of negative outcomes for sweepstakes.
BEYOND the HEADLINE: Busy week for newly minted sweepstakes trade group.
ROUNDUP: CT credit card ban comes up short; Advisory firm weighs in on PENN-HG Vora fight; FanDuel adds transaction fee.
NEWS: Maryland Judge asks Kalshi the tough questions.
AROUND the WATERCOOLER: About those higher tax rates.
STRAY THOUGHTS: Friction isn’t always bad.
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The Lede: Sweepstakes Take It On The Chin
The last week or so has seen several adverse developments for sweepstakes operators in the US.
In a press release, New York Attorney General Letitia James announced that in conjunction with the New York State Gaming Commission, the AG’s office has “identified 26 online platforms offering players slots, table games, and sports betting using virtual coins that could be exchanged for cash and prizes… Attorney General James sent cease and desist letters to the operators of these platforms, demanding that they stop all prohibited gambling activity in the state, and as a result, all 26 platforms are ending the sale of sweepstakes coins in New York.”
The Social and Promotional Games Association (SPGA) said it was disappointed with James’ mischaracterization of legal sweepstakes platforms as “illegal” and “dangerous.”
“Our members operate within well-established legal frameworks, pay appropriate taxes, and adhere to a strict code of conduct that includes consumer protections and responsible gaming practices,” the group said in a press release. “Sweepstakes promotions are not gambling under federal law and are legally permitted in the overwhelming majority of US states, including New York. Despite multiple attempts to engage directly with New York lawmakers and regulators, our outreach has gone ignored.”
The newly formed Social Gaming Leadership Alliance (SGLA) also responded to the New York Attorney General's enforcement action, highlighting its members’ “comprehensive consumer protection standards,” and the difference between sweepstakes and gambling:
“Our partners utilize established sweepstakes promotional frameworks which are distinct from gambling because they are designed to promote a bona fide service (the play-for-fun social games) and always provide genuinely free participation methods through Alternative Methods of Entry (AMOE), including daily rewards and on-request (such as mail-in) options.”
And as I recently noted, the SGLA are less standoffish:
"While we disagree with the characterization of our members' lawful sweepstakes operations in today's enforcement action, we look forward to working with legislators and regulators to develop a comprehensive regulatory structure that protects consumers while preserving innovation," said SGLA Executive Director Jeff Duncan. "We believe there is an opportunity to create a framework that provides appropriate oversight, mandates robust consumer safeguards, and recognizes the legitimate use of sweepstakes promotions."
“The SGLA remains committed to collaborative engagement with New York officials to develop balanced regulations that serve the interests of consumers, the state, and the digital entertainment industry. We believe productive dialogue can lead to solutions that enhance consumer protection while supporting innovation and economic growth.”
At the same time:
A sweepstakes prohibition bill, A 6475, has advanced in the New York House, with companion legislation, S 5935, awaiting a vote on the Senate floor.
Connecticut’s SB 1235, which bans online sweepstakes casinos and simulated gambling platforms, was unanimously passed by both legislative chambers (36-0 Senate, 146-0 House) and now awaits Gov. Ned Lamont’s signature.
Louisiana’s SB 181 also passed unanimously (39-0 Senate, 99-0 House) and awaits Gov. Jeff Landry’s signature, although there are some rumblings that Gov. Landry plans to veto the bill.
Montana and Nevada have also passed sweepstakes prohibition bills in 2025, while efforts in Arkansas, Mississippi, Maryland, and Florida petered out.
Beyond the Headline: Busy Week for New Trade Group
In addition to responding to the New York Attorney General’s action, the Social Gaming Leadership Alliance (SGLA), the newly formed trade group headed by VGW, issued statements on the passage of the above mentioned bills.
“It is disappointing that Connecticut residents have lost access to popular, free-to-play online games enjoyed by millions nationwide,” SGLA Executive Director and former Congressman Jeff Duncan said. “It's unfortunate that this legislation was hastily passed based on incomplete information, with little attempt to engage with legitimate industry operators that prioritize player protections. The result is a win for the black market and other groups with vested interests that campaigned for this bill with falsehoods and misinformation. It is a loss for innovation, competition, free choice, and potential benefits for the State of Connecticut.”
“The SGLA… regrets the passage of legislation in the Louisiana State House that will deprive the state’s residents of popular, free-to-play entertainment enjoyed by millions nationwide,” the press release on Louisiana’s bill reads.
"Louisiana residents will be abruptly cut off from popular, free-to-play online games enjoyed by millions nationwide after lawmakers fell for a campaign of deliberate misinformation from parties with clear vested interests that was designed to eliminate legitimate competition,” SGLA Executive Director and former Congressman Jeff Duncan said. “This legislation was rushed through the legislature without providing the industry any meaningful opportunity to engage, while competitors and critics were given ample voice in a concerted effort that prevented a commonsense solution."
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Roundup: CT Credit Card Ban Comes Up Short and Advisory Firm Weighs In on PENN-HG Vora Fight
Connecticut bill restricting credit cards falls short [Complete iGaming]: The Connecticut House passed HB 5269, a bill that restricts online gambling by prohibiting the use of credit cards to fund accounts and by banning inducement-based advertisements. The bill was not acted upon in the Senate before the legislature adjourned sine die on June 4. STTP Thoughts: Credit card prohibitions and marketing bans are something to watch in 2026.
Advisory firm supports HG Vora in PENN battle [Earnings+More]: There’s a new player in the battle between PENN and activist investor HG Vora: Institutional Shareholder Services (ISS). Per E+M, ISS supporting HG VOra’s board recommendations and is critical of PENN’s leadership for poor performance, failed interactive strategies, and costly M&A missteps like theScore, Barstool, and ESPN Bet, which led to $4 billion in costs and $1 billion in losses. PENN acknowledged ISS’s partial support but disputes Clifford’s exclusion. Another firm, Egan-Jones, also backs HG Vora’s candidates, citing Penn’s lack of accountability and disappointing shareholder returns. Previous STTP coverage of the PENN-HG Vora fight.
FanDuel will add a $.50 transaction fee in Illinois [Press Release]: “In response, from September 1, 2025, FanDuel, Flutter’s US market-leading brand, announces that it will introduce a new $0.50 transaction fee on each bet placed on its platform in Illinois. This decision reflects the significant increase in the cost of operating in Illinois, driven by the new Illinois Transaction Fee. The introduction of this fee by the state follows a substantial increase in the betting tax rate in Illinois in 2024. Following the 2024 increase, extensive efforts were made by FanDuel to absorb the cost fully without impacting customers.”
News: Maryland Judge Skeptical of Kalshi’s Arguments
After a string of legal victories, Kalshi has encountered far more resistance in its Maryland lawsuit as it seeks to block the cease-and-desist order issued by state regulators. For the latest summary updates on all the lawsuits, I recommend this podcast with Daniel Wallach and Chris Gerlacher.
The Maryland lawsuit follows similar legal battles in Nevada, where Kalshi’s arguments found sympathetic ears. That is not the case in Maryland, where, as attorney Andrew Kim noted in the Event Horizon newsletter, “Kalshi’s lawyers got some hard questions in Maryland — the preliminary injunction fight there isn’t playing out like it did in Nevada or New Jersey.”
As attorney Daniel Wallach noted, Kalshi has been arguing both sides of sports contracts (Wallach cited seven examples in a LinkedIn post):
“Based on these prior in-court statements which are inconsistent with (and expressly contradict) Kalshi’s present position, Kalshi could be judicially estopped from asserting that its sports event contracts are “lawful” under federal law.”
Kim notes that his early thoughts on what these cases would boil down to may have been off, as the cases are playing out around sports events contracts designation as swaps (rather than sports bets) and the economic consequences of these wagers:
“I’ll be honest. When I first started following the legal fights over sports event contracts, I wasn’t really expecting the fights to turn on whether the contracts are “swaps,” and whether sporting events are associated with economic consequences… I also can’t help but wonder whether the “swap” issue has been a double-edged sword for both Kalshi and the states.”
Kim is pointing out something I’ve been saying all along: Precisely what Kalshi is allowed to offer (what sports bets have economic consequences) will determine whether prediction markets are an existential threat or just another sports betting-lite offering.
As Barry Jonas of Truist Securities (h/t Front Office Sports) put it, “The question is whether the difference between Kalshi and regular sportsbooks is meaningful or just technical.”
As I previously noted, “This is the question.”
“If the difference is technical (a legal technicality), and Kalshi can offer parlays and SGP products, then Kalshi et al. are an existential threat to the current sports betting model and the entrenched sportsbooks.
“If the difference is meaningful (sports contracts offered through prediction markets are sports betting-lite), then the threat is significantly reduced, and more along the lines of DFS 2.0 — a threat to revenues for sure, but not an existential one.”
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Around the Watercooler
Social media conversations, rumors, and gossip.
Online casinos may be one of the only gambling expansions left in a lot of states, but there’s more than one way to skin a cat, and operators should be very concerned about three convergent things I’ve pointed to for quite some time:
The more you tout your rising numbers (handle, revenue, hold rates) for investors, the more states will come calling.
Claiming anything over X% is unsustainable, and then agreeing to much higher rates elsewhere, all but assures future tax increases.
Still, the Sports Betting Alliance’s Jeremy Kudon is of the mind that the recent tax increase in Illinois is a tipping point:
“But I hope/believe the Illinois per-wager tax will serve as a sort of tipping point for the legal online gaming industry and its partners, the state legislatures, governors, and regulators. Establishing a legal and licensed market where operators can provide individuals with a safe and entertaining venue to place responsible wagers on their favorite team, game, or player while making a fair and reasonable profit is in everyone’s best interest. This is especially true when you consider the alternative - an illegal market that targets teenagers and college students, extends loans to people who lack the means to repay them, and engages in who knows what with their illicit profits.”
Time will tell.
Stray Thoughts
Friction. That’s a topic I’ve been writing about for quite some time and something I’m hearing more and more lately…