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Senator Joseph Addabbo introduced a bill on Tuesday that would prohibit sweepstakes casinos in New York.
The bill comes as no surprise. For several years running, Sen. Addabbo has has consistently pushed for the regulation of online casinos in the Empire State. This year, his renewal of that effort came alongside a promise to address the sweepstakes casinos that have recently become popular as an alternative to legal real-money options.
The phrasing of that initial statement left some room for the possibility of regulating sweepstakes casinos rather than banning them. However, in the end, the Senator has opted for prohibition.
SB 5935 takes a straightforward approach, targeting the use of the “dual currency” system that social casinos use to offer cash prizes under federal sweepstakes law. Under that system, players can buy play money virtual currencies with no value, while receiving a secondary currency for free. The latter “sweeps coins,” once wagered on games, can be exchanged for cash or other prizes.
By closing what he calls a “loophole,” Sen. Addabbo would effectively shut down sites offering any kind of payout on casino-styled games like slots, poker, and blackjack. Social casinos that are truly play-money-only could continue to operate.
What’s in the New York sweeps ban bill
SB 5935 states that:
- The state of New York will prohibit any form of operating, conducting, or promoting online sweepstakes games.
- No establishment or person will be allowed to accept “revenue that is directly or indirectly derived from online sweepstakes games.”
- Any establishment or person that violates the law will face fines ranging from $10,000 to $100,000 for each violation and may also lose their gaming license or be ineligible for one.
The sweepstakes industry, through its trade organization, has condemned the bill. The Social and Promotional Games Association (SPGA) has said the bill would potentially harming small businesses and infringe on players’ freedom to choose their own games.
By contrast, it has embraced the proposal currently afloat in New Jersey, that would classify the sweepstakes model as a form of real-money gambling and require operators to seek licenses.
What are Sen. Addabbo’s concerns on sweep casinos?
Sen. Addabbo’s reservations about sweeptakes casinos match the arguments of other states that have pushed out these operators, or that are looking to do so.
Firstly, he believes that sweeps are effectively exploiting a loophole in federal law to get around state-level gambling regulations. Because the prizes take the form of a sweepstakes, they are technically compliant under federal regulations. However, they’re not licensed by any in-state regulatory body, and in many ways “feel” like real-money gambling.
New York doesn’t have legal online casinos, but it does have retail slots parlors and online sportsbooks. The American Gaming Association, which serves as a voice for the regulated real-money gambling industry, began last year to campaign against what it sees as unauthorized competition.
Secondly, the lack of consumer protection is another of Sen. Addabbo’s concerns when it comes to sweepstakes casinos. The regulated industry has comprehensive regulatory measures in place, such as Know-Your-Customer (KYC), Anti-Money Laundering (AML), and Responsible Gaming (RG) protocols. Although sweepstakes casinos have some similar measures in place, many lawmakers see them as operating in a Wild West of sorts. According to the Senator, this means players are left vulnerable to exploitation and problem gambling.
For instance, many sweepstakes casinos allow players as young as 18 to participate and win cash prizes, although some have moved to raise their age limit to 21. Conversely, all legal, real-money online casinos in the US require players to be at least 21, which is also the minimum for commercial casinos in most states. Sen. Addabbo’s statement on sweepstakes casinos indicated that he has serious concerns about the potential for underage gambling and the long-term consequences for young players.
In a press release dated Jan. 21, he said:
By addressing the Sweepstakes Casinos issue and allowing a regulated iGaming casino option, we are demonstrating our commitment to protecting New Yorkers, dealing with gaming addiction, while adding tax revenue beneficial to all state residents
Without an option for safe, regulated online gaming, many individuals will fall victim to sweepstakes casinos that entice customers through free play advertising with the potential for prizes through the purchase of gold coins.
The AGA issued a similar warning to gaming regulators on August 21 last year. It urged them to exercise due diligence in vetting operators that are bringing their services to their states because some operators come up with “misleadingly claims that they are not gambling and that the rules, therefore, don’t apply to them.”
States divided on sweepstakes casinos’ future
Gambling and gambling-adjacent products are a hot topic in legislatures around the country. Lawmakers are asking tough questions about what types of gaming they want to exist in their state. In the meantime, actions are being taken by regulators and sometimes even by the operators themselves.
Michigan, which has a thriving regulated gaming industry, was one of the first states to take action against sweeps, as part of a larger crackdown on unregulated gaming. Its regulator sent a series of cease-and-desist letters to sweeps operators in late 2023, informing them that it considered their operating model illegal. Connecticut is a more recent example.
Operators have grown more cautious in the wake of that action. Some, like High 5 Casino and Stake.us, are proactively exiting states that appear likely to ban sweeps, or where they compete with legal real-money operators.
So far, that does not include New York, perhaps because it is too valuable a market to abandon voluntarily.
However, not every state is looking to take a hard line like Michigan and Connecticut.
New Jersey Assemblyman Clinton Calabrese is exploring ways for sweepstakes casinos to coexist with their real-money peers. His proposal, which the SPGA supports, would expand real-money gambling laws to encompass sweepstakes social casinos. That wouldn’t force them out, but would require them to seek licenses, pay taxes, and partner with land-based casinos to operate lawfully.
