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The gambling industry is lining up against sweepstakes sites, arguing that they are nothing more than illegal gambling operators.

“Let’s band together and root out unregulated gambling… It’s a pandemic right now.”

Jeremy Kudon

The Indian Gaming Association’s New Normal Webinar is on a sweepstakes kick, with this week’s episode the second installment of an expected five episodes.

New Normal host and Pechanga.net publisher Victor Rocha brought the issue into the spotlight after his experience at G2E. With the help of California tribal leaders, Rocha is mustering support to kick the sweepstakes industry out of California (and the US).

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According to Rocha, the tribes, licensed commercial online operators, the American Gaming Association, and others are lining up to take down sweepstakes.

As the Sports Betting Alliance’s Jeremy Kudon said in this week’s installment of The New Normal, “It’s much more prevalent than any of us anticipated,” adding that he is surprised by how long it went under the radar.

While sweepstakes are available in most US states, California is their largest market, and the state’s tribes are making it the battleground for this fight.

Rocha has made it clear that the California tribes will not allow sweepstakes operators to waltz through the side door and set up shop in the state.

Paraphrasing Rocha, “We told FanDuel and DraftKings to wait on the sidelines. We’ll tell you when. And then I will find out there’s this whole unregulated industry. It’s like coming how to find your house has a termite infestation.”

As Kudon put it, there are no shortcuts. “There should be no shortcuts here,” he said. “Why would you allow Fliff not to pay the $25m license fee or the 51% tax that my clients pay on every bet?”

“We’re all going to work together to do the right thing,” Kudon said. “Then you have these companies come right in and say we’re just sweepstakes,” and that the lost revenue (to the state and tribes) is both “frustrating and infuriating.”

The tribal belief/fear is that sweepstakes sites will get a multi-year head start and that when mobile sports betting and online casinos are legalized, they’ll say, “Hey, we’re here, so you might as well make us legal.”

You can watch the entire webinar here:

Perception Vs. Reality

In a recent statement to Compliance+More, an SPGA spokesperson said, “The association’s members “and virtually all social casinos with sweepstakes prizes” operate within the bounds of qualified legal opinions issued by experienced gaming firms.”

I would point out that virtually every gray market operator, from skill games to DFS 2.0, has these legal opinions, as do the offshore sportsbook and casino operators. Furthermore, legal opinions didn’t protect PokerStars and other online poker operators in 2011.  

Opponents will say that sweepstakes casinos use their free-to-play and no-purchase-necessary components to mask the actual product. The industry, through the newly created trade group, the Social and Promotional Gaming Association (SPGA), notes that most users (around two-thirds) are free-to-play and never make a deposit.

As Kudon explained during the New Normal webinar, the intent of the McDonald’s Monopoly sweepstakes games wasn’t to promote the prizes but rather to promote the sale of McDonald’s core product, the food. The prizes are incidental.

He then compared this to sweepstakes casinos, noting that the difference is that when you buy more gold coins (free-to-play coins), you get sweepstakes coins, which enable you to play for real money.

According to Kudon, unlike the McDonald’s Monopoly game, the sweepstakes component at these sites isn’t the chance to win an incidental prize; it’s a key to unlock the real-money games offered at the site.

The pro-sweepstakes side disagrees.