If you’re in Delaware and enjoy playing at sweepstakes casinos like Wow Vegas, Chumba Casino, or High 5 Casino, your days playing at these sites may be numbered.
Last month, the Australian Financial Review reported that Virtual Gaming Worlds (VGW), owners of Chumba Casino, were issued a cease and desist letter.
If the company complies, it could set a precedent that could lead to other sweepstakes casinos being banned.
Meanwhile, the American Gaming Association (AGA) is lobbying for additional regulation for sweepstakes casinos, claiming that sites offer unlicensed real-money online gambling.
Social casinos are under increasing scrutiny after multiple companies were forced out of Michigan in 2023.
Key Highlights
- Delaware issued a cease and desist order to Virtual Gaming Worlds, owners of Chumba Casino.
- Michigan has successfully forced VGW and Stake.us to cease operations in-state.
- American Gaming Association seeking regulatory clarity from states on sweepstakes casinos.
Delaware Issued Cease and Desist Letter to Virtual Gaming Worlds
“Permitting those people who reside in Delaware to participate in these games is in violation of Delaware law.”
-Delaware Division of Gaming Enforcement
On July 1, the Australian Financial Review reported that Virtual Gaming Worlds had been issued a cease and desist letter from Delaware.
According to a report in SBC Americas on August 19, that letter was issued by the Delaware Division of Gaming Enforcement on February 23, 2023.
That letter addressed the company’s slots and casino games that operate in the state.
The letter claims that “permitting those people who reside in Delaware to participate in these games is in violation of Delaware law.”
Virtual Gaming Worlds COO Tim Moore-Barton spoke to the Australian Financial Review about the letter and stated, “Since becoming aware, we have reached out to the relevant Delaware authorities. [We are] confident that it is operating lawfully in all jurisdictions in which it makes available its games, including Delaware.”
AGA Lobbying for Regulation of Sweepstakes Casinos
In the online space, some unlicensed casinos and sportsbooks are thriving by employing a “sweepstakes-based” model to potentially skirt gaming laws and regulations.”
-American Gaming Association
The American Gaming Association is also applying pressure to sweepstakes casinos, seeking to have those entities regulated similarly to real-money online casinos.
The organization recently released a memo seeking “regulatory vigilance” to protect consumers.
Part of the memo states, “In the online space, some unlicensed casinos and sportsbooks are thriving by employing a “sweepstakes-based” model to potentially skirt gaming laws and regulations.”
As a result, consumers are being deprived of protections and states are forgoing significant tax and revenue opportunities as this gambling replaces that conducted through regulated channels.”
The AGA recommends that state attorneys and gaming regulators investigate sweepstakes platforms to determine if they comply with regulatory models for online gambling.
They also recommend enacting legislation to close any potential loopholes or clarify sweepstakes casinos’ status.
Michigan Could Be the Model For Sweepstakes Compliance
The sweepstakes model for Stake.us was said to violate the law because it promoted an unlicensed online lottery and/or raffle for customers who buy products through its site.”
As pointed out in the AGA Memo for sweepstakes casinos, Michigan recently took action against VGW and Cypress-based Sweepstakes Limited, owners of Stake.us.
The Michigan Gaming Control Board issued both companies cease-and-desist letters in November and December 2023.
Both companies agreed to withdraw from Michigan.
The GBC claimed that the sites were unregulated and unlicensed online gambling offerings.
The sweepstakes model for Stake.us was said to violate the law because it promoted an unlicensed online lottery and/or raffle for customers who buy products through its site.
VGW was in violation because it offered internet games that offered something of monetary value for the chance to win something of monetary value.
With Michigan successfully pushing sweepstakes casinos out of its market, other sites could use it as a template for doing the same.
Delaware has issued cease and desist letters, but VGW has yet to comply.
In Georgia, VGW also faces a class action, claiming that sweepstakes casinos violate a 2012 state law prohibiting internet cafes from offering casino-style gaming.
While Michigan is the only state to ban sweepstakes casinos thus far, we expect more states to follow suit, especially those with established legal online gambling.
We also expect that future iGaming bills will begin adding clauses to define the legality of sweepstakes casinos.
Sources
https://www.afr.com/companies/games-and-wagering/escalante-raises-stakes-as-gaming-empire-loses-dominance-20240627-p5jpgp
https://sbcamericas.com/2024/08/19/virtual-gaming-worlds-exit-delaware/
https://affpapa.com/lawsuit-against-vgws-social-casinos-in-georgia/
https://www.playusa.com/vgw-shutdown-lottery-delaware-online-casinos/
AGA Sweepstakes Memo
