Explosion Of Sweepstakes Is The Top Gaming Story Of The Year
A rumbling can often be felt throughout the gaming industry whenever there is new competition on the scene, and that was absolutely true with sweepstakes in 2024.
What may have started as a low rumble continued to grow all year until it registered on the Richter scale at G2E. The vast majority of those attending gaming’s biggest trade show said sweepstakes operations were the topic du jour, with plenty wondering how the growing vertical would impact regulated sports betting and online casino operators.
Whether sweepstakes are here to stay for good or not may very well be the story of 2025.
What are sweepstakes gaming sites?
Sweepstakes operators function under the “no purchase necessary” rules that are most commonly known for commercial contests including the McDonald’s Monopoly contest.
Customers can wager two types of currency on sweeps platforms. The first option is a currency that is similar to coins at social casinos, meaning they cannot be played for real money.
The second option is where real-money gambling comes in. When users buy more social coins, sweepstakes operators will also offer a second currency as a bonus for buying those chips, and that second option can then be gambled for a chance to redeem real-money prizes.
To satisfy the sweepstakes portion of the business, operators will also give out limited amounts of the second type of currency for free.
Some states have said no
Regulated online casino and sports betting operators have taken exception to what they say is a substantial exception for those sweepstakes operators: not paying licensing fees and taxes while operating in an unregulated environment.
The response from states with online gambling has not been uniform. Various states — including Connecticut, Delaware and Michigan — have sent cease-and-desist letters to multiple sweepstakes operators to end their operations in those states.
The American Gaming Association, the lobbying group for casino gambling companies in the US, asked state regulators to look into sweepstakes over the summer.
Meanwhile, a proposed iGaming legislation framework introduced by the National Council of Legislators from Gaming States would include a ban of sweepstakes operators. Fines could reach $100,000 under the proposed language.
Sweepstakes tighten up operations
Another common concern from the regulated gaming industry is that sweepstakes operators are not as careful with their “know your customer” protocols as regulated operators have to be based on state regulations.
Operators heard that and addressed that argument in a relatively short fashion. September saw the launch of the Social and Promotional Gaming Association, which is meant to advocate for the responsible operation of such games.
“The formation of the SPGA is a critical step toward establishing a clear and cohesive voice for the social sweepstakes industry,” said Seth Schorr, CEO at FSG Digital Inc. “By creating this association, we are committed to helping regulators and policymakers understand how our industry’s products work and how they comply with the appropriate state and federal laws.”
SPGA then released a video in October explaining just how sweepstakes operators follow the law, using the McDonald’s Monopoly game as a key example. In December, the SPGA announced a code of conduct that its members must adhere to:
- Age verification to limit purchases to users 18 and older
- Proper identity verification (KYC)
- Location verification of customers
- AML policies to ensure proper transaction monitoring
Growth of sweeps good for gaming?
There is little evidence that sweepstakes cannibalize regulated iGaming dollars, according to Chad Beynon of Macquarie. These operations could actually be a catalyst for iGaming legalization as sweepstakes operators draw attention to the missed tax revenue opportunities, he added.
The fact that there are only a handful of states with legal online casino gambling, though, means “far less impetus” to look into the segment, he added.
“Ultimately, we believe the fate of sweepstakes casinos will depend on whether states believe the industry legitimately falls under the sweepstakes category when the product looks, feels and functions very similar to gambling,” Beynon said.
“However, with only seven states offering legal iGaming, we see far less impetus for states to take a harder look at sweepstakes casinos in the absence of consumer protection concerns.”
Sweepstakes by the numbers
Beynon used proprietary research as well as public sources to offer some financials to compare across the verticals.
Sweepstakes had an estimated $4 billion in gross revenue in 2023. That comes in lower than the $7 billion from social casinos, but their growth rates show changing tides: social revenue shrunk by 1% in 2023 compared to 36% growth for sweepstakes operators.
At $18 billion in gross revenue, the online casino and sports betting market is still comfortably ahead of sweepstakes casinos in significantly fewer states. That segment is not standing still either, though, with growth of 38% in 2023.
All three combined come nowhere close to land-based gaming in the US. Casinos raked in $91 billion in revenue in 2023, up 3% from the prior year.
https://www.legalsportsreport.com/215316/explosion-of-sweepstakes-is-the-top-gaming-story-of-the-year/