Exploring the legal parameters of sweepstakes casinos in the US vs globally

Sweepstakes casinos have revolutionized the online gaming world, introducing something quite unique from traditional gambling. Ultimately, aside from making the industry more social and interactive, this type of casino aims to cover the gap in the legal requirements preventing normal casinos from operating in some locations. But is this ploy effective?

In this article, we will delve into the legalities of sweepstakes casinos in the US, comparing them with regulations across the different countries in the world. In addition, we’ll explore the rules governing these casinos’ operations, so that operators and players may avoid potential legal issues. Then we’ll discuss user safety and legal ramifications, as data protection is crucial in any online platform, including sweepstakes casinos.

Overview of legalities surrounding sweepstakes casinos in the United States

Various agencies, including the Department of Justice¹, govern sweepstakes casino laws in the United States. The laws also vary according to state, but locations such as Washington state, Idaho and Nevada don’t allow this form of gambling. Every other state allows social casinos, as long as they abide by the following laws:

The platform must be free to join, and offer its games at no monetary cost.

Casinos must provide a free, alternative means of entry (AMOE).

Eligibility requirements and entry conditions must be clearly stated or outlined on the platform.

The rules explaining how to exchange sweeps and win prizes must be brought to the players’ notice.

Platforms must provide clear start and end dates for competitions (for example, Jan 1 to Dec 31).

Note that these laws may differ according to state. However, for sweepstakes casinos to remain legal and operational, they must follow these rules².

Furthermore, legal entities, such as the American Bar Association (ABA), provide guidance on the criteria that a lottery organization dealing with promotions, such as sweepstakes, must meet:

Chance: Competitions must be based on chance and not skill.

Consideration: A participant buys a product or service, or pays as a means of entry.

Value: The prizes must have value.

According to ABA, a sponsor must eliminate at least one of these three components. This is necessary for a sweepstakes casino to remain within the legal framework. Most sweepstakes owners choose to provide a means of free entry for players, which negates the consideration element.

Are sweepstakes casinos legal in the US

Social casinos are legal in most states in the United States. However, the regulations vary slightly across different locations³. For example, players can find and join sweepstakes casinos in any US state besides Washington and Idaho, due to their strict sweepstakes laws. While Michigan formally allows citizens to enjoy games on sweepstakes platforms, it recently started cracking down on them.

The Golden Hearts Games explosion, for allegedly violating Michigan laws, was the most famous of all. Meanwhile, VGW, the brand behind top sweepstakes platforms such as LuckyLand Slots, Global Poker and Chumba Casino, has also left the state. Rumors of other top operators abandoning the state are also on the cards, thus adding Michigan to the list of the few states that don’t allow sweepstakes casinos.

Montana is another state that seems to be scrutinizing and frustrating the operations of casinos. Recently, Pulsz pulled out of MT, without providing any explanation. On the other hand, states like Florida and New York apply purchase and withdrawal restrictions. Some of them include capping players’ single win redemption limits at $5,000.

Legal considerations of sweepstakes casinos in the UK

The Gambling Act 2005 (amended 2005) governs betting, lotteries and gaming in Great Britain (England, Scotland and Wales) ⁴. However, the rules in Ireland are quite different but must be taken into consideration when running a UK-wide promotion. The Act clearly defines and differentiates betting (can include some competitions), gaming (playing a game of chance for a prize) and lotteries. Competitions (winner is chosen based on skill) and prize promotions (sweepstakes or free prize drawings) remain outside the Gambling Act.

The Gambling Commission monitors the boundary between prize promotions and lotteries and competitions to ensure that the operators are properly licensed. Under the Act, a competition or promotion (such as sweepstakes) will not be considered illegal if no form of payment (or purchase) is required to enter.

In Northern Ireland, gambling, promotions and lotteries are governed by the Betting, Gaming, Lotteries and Amusements (NI) Order 1985. Advertisements of such promotions fall under the jurisdiction of the Advertising Standards Authority (ASA).

Sweepstakes casinos laws in Canada

Canadian sweepstakes law differs in several ways from sweepstakes law in the US. Here are some of the provisions to consider:

Skill-testing questions: The Canadian Criminal Code considers games of pure chance an illegal lottery. In this context, illegal lotteries are sweepstakes where a random winner is chosen from a pool of participants. Therefore, a skill-testing question for winners is required to ensure compliance.

Consideration: Canada prohibits sweepstakes that require payment or considerations to enter. The code also includes requiring actions with a monetary value, such as completing a survey or watching a video. It is deemed a consideration if a participant must give up something of value to enter.

No purchase necessary: A casino may elect to utilize a survey, video or another method of entry. In that case, they must also include clarification of a “no purchase necessary” option (or AMOE) for players to enter, typically via a mail-in entry form. Additionally, the entries must not have any disadvantage against entries gained through other methods⁵.

Disclosure and informed consent: Canada’s Competition Act states that all sweepstakes casinos must have a written set of official rules. They must at least include the minimum disclosure requirements contained in the Act. Likewise, Canadian privacy laws state that casinos must provide informed consent before collecting any personal information for marketing purposes.

Must abide with Quebec: Quebec makes up about 25% of Canada’s population and has laws regarding sweepstakes. An operator must register with the Régie des alcools, des courses et des jeux (RACJ) if they want to include Quebec in their sweepstakes. This board was established by the government of Quebec to regulate promotional contests, gambling, racing, alcohol and combat sports industries. To register, the company must be willing to translate the rules and advertising of their sweepstakes into French and pay duty to the Régie.

Sweepstakes casinos laws in Australia

Australian laws regarding sweepstakes casinos, (known there as competitions or draws), aren’t so different from those in the US. However, there are some considerations to take into account when entering a sweepstakes based in Australia.

Skill and chance: Similar to the United States, skill-based competitions are separated from chance-based competitions. If there is any element of chance involved in the sweepstakes, it’s a chance-based competition. On the other hand, if the sweepstakes only involve participants’ skills it’s skill-based (often referred to as a “Contest” in the US).

Considerations: Unlike the US, there are no restrictions preventing a sweepstakes casino sponsor from charging participants for entry. However, this is as long as the entry fee doesn’t exceed the recommended retail price. Therefore, Australian promotions are deemed legal even if they have all three of the elements: a draw to determine the winners, a purchase required to enter, and a prize.

Australian state laws: Like in the US, different states in Australia may have separate laws regarding sweepstakes. For instance, the Northern Territory needs a permit for chance-based competitions if the prize pool is worth $5,000 or more.

How legal sweepstakes casinos work

Sweepstakes casinos are only legal when they follow sweepstakes regulations. In summary, most of the laws state that social casinos are allowed to offer games of chance and real money prizes only if no purchases necessary to enter.

But then, you may wonder how sweepstakes casinos make money if entry is free. Well, they created a loophole by using two virtual currencies known as Sweeps Coins (which can be redeemed for cash prizes) and Gold Coins (which aren’t monetary and can’t be redeemed). Talking to a financial expert can help you sort out the odds and make sure participating in sweepstakes is the right financial move⁶.

How it works is that you’ll get virtual currencies through free bonuses – but often, only a small amount. If you want more coins, you can simply purchase a Gold Coin (GC) package and get Sweeps Coins (SC) for free. Any sweepstakes casino that allows you to purchase Sweeps Coins or that doesn’t provide ample free play can draw the attention of legal bodies that may withdraw their license for running an illegal online casino.

Sweepstakes casino operations code of conduct

Another significant sweepstakes regulation that social casinos must abide by is they must offer players an alternate method of entry. This is to make the sweepstakes promotion inclusive. That’s why you may have noticed a unique mail-in bonus at most sweepstakes casinos.

With this bonus, you can send a handwritten letter requesting free Sweeps Coins at a sweepstakes casino to that casino’s HQ, and then Sweeps Coins magically appear in your account. Generally, the standard mail-in bonus is five SC, with some players writing over 50 letters a day.

Furthermore, US sweepstakes casinos must be very careful regarding the language they use. For instance, you don’t deposit – rather, you purchase a Gold Coin package. You don’t withdraw cash – rather, you redeem your Sweeps Coins and earn a real money prize. Also, you aren’t wagering or betting – you’re playing using Sweeps Coins or Gold Coins. The use of any inappropriate language can get a sweepstake casino classed as an unlicensed company.