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Is the future of US gaming firmly in the hands of Sweepstakes Casinos?

Updated: Nov 26, 2024, 10:42 AM ET

Written by Damien Souness, Chief Innovation Officer

Highlights

Sweepstakes casinos are growing rapidly and could reach $6.9 billion by 2025.
Legal challenges and regulatory uncertainty could harm sweepstakes casinos' growth.
Sweepstakes casinos face increasing competition from regulated gambling options.

Sweepstakes Casinos are certainly a large part of the US gaming scene. In time, they have grown in influence and usage, becoming an excellent outlet for states with strict restrictions. But is this the future of US gaming?

Offering games through a virtual currency with no immediate value allows sweepstakes casinos to navigate the complex nature of the US restrictions. We have a page for you if you would like to learn more about sweeps casinos. The market has seen significant growth, but with recent developments, we could see those restrictions loosened.

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How Have Sweepstake Casinos Performed?

Sweepstakes casinos are much more accessible to people. This means they can provide a service to more people than traditional methods, and the success is plain to see. Sweepstakes casinos have snowballed in the U.S. because their business model lets players enjoy casino-style games and win prizes without the financial risks of regular gambling. These casinos are popular, especially in states with strict gambling laws. In 2022, the sweepstakes casino market made about $3.1 billion, and it's expected to grow at a rate of 31% per year and is projected to reach $6.9 billion by 2025. These casinos operate in a way that avoids being classified as traditional gambling, allowing them to expand in states with tight gambling laws.

What is New in the US?

This section will provide some of the latest news from the US gaming Industry and what these developments may mean for the future of sweepstakes casinos and the US Gaming landscape.

Recently, we have seen that gambling legislation is relaxing in some states, and those states are slowly integrating more traditional betting. One state that is refusing to budge is Texas. In the last few weeks, we have seen a Bill pushed back for social casinos and sports betting to be made available. This Bill would have been pushed for 2025, but that now looks dead in the water with little hope of change. Moments like this show how sweepstakes casinos could be the future of US gaming. With accessibility not being an issue and other forms of gambling struggling to be readily available across the country, it is hard to see how sweepstakes casinos are not firmly in control.

New Jersey's internet gambling market set a new record in October, with casinos and their online partners winning $213.6 million, surpassing the previous record of $208 million in September. Overall, the state's nine casinos, two horse tracks, and online partners earned just under $500 million in October, a 2.6% increase from the previous year. However, in-person casino revenue continues to falter, with only three casinos, Borgata, Hard Rock, and Ocean, posting higher in-person winnings.

The shift from in-person to online gambling is becoming more permanent. While in-person gambling revenue fell 8.5% year-over-year, total casino revenue increased by over 9% due to online gaming. For the first time since the pandemic closures in 2020, internet revenue surpassed in-person casino revenue in October. Many casinos saw declines in in-person gambling but gains in online gaming.

This trend highlights the growing importance of online gaming as a significant part of New Jersey's casino business. This can be taken as good or bad news for sweepstakes casinos. It is good that more and more people are seeking online options compared to in-person ones. However, New Jersey has much more relaxed laws than others and allows sports betting and other online gambling. So yes, online traffic has increased, but is it beneficial for sweepstakes casinos?

VGW Holdings Ltd., the owner of sweepstakes casinos like Chumba Casino, Sweepstakes Casino, and Luckyland Slots, is facing a class action lawsuit from Connecticut residents. The lawsuit claims VGW defrauded users by conducting illegal gambling while falsely advertising its operations as legal and distinct from traditional online casinos. Despite a cease-and-desist order from the Connecticut Department of Consumer Protection in February, VGW allegedly continued to operate in the state until September or October. VGW’s defense is that these operations comply with gambling and sweepstakes laws. This legal battle over sweepstakes casinos parallels similar disputes over skill-based gambling machines in certain states. News such as this is not good for sweepstakes casinos as it harms their reputation as a sector. So, would news such as this push users away? Or is it quickly forgotten as time moves on?

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Are Sweepstakes Casinos the Future of the US Gaming Market?

The future of U.S. gaming is unlikely to be firmly in the hands of sweepstakes casinos. While sweepstakes casinos are a growing niche within the broader gaming landscape, they are unlikely to dominate the industry. There are a few reasons as to why this is likely the case.

Firstly, the legality of it. Sweepstakes casinos operate in a grey area in many states. Their legality depends on specific state regulations and how the games are structured (often relying on a distinction between games of chance and skill). This could limit their long-term growth, especially if more states pass laws that more clearly regulate online gambling.

Secondly, the competition is tough. Sweepstakes casinos face competition from other traditional forms of gaming, such as online casinos and sports betting. These have recently seen increased investment and more relaxed legislation, positioning them for success in the future of U.S. gaming.

Thirdly, the technological advances the competition produces could impact. The major online platforms and traditional casinos invest in technology to offer a better gaming experience. This includes live dealer games, mobile apps, and AI-powered features. Sweepstakes casinos may need help matching the technological innovation level and overall reshaping of the broader gaming industry.

Lastly, the growth of relaxed gambling regulations. The U.S. gaming industry has seen explosive growth in other areas, especially after the 2018 Supreme Court ruling that legalized sports betting across states. Traditional casinos, online gambling, and sports betting are rapidly expanding, with states like New Jersey, Pennsylvania, and Michigan.

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Final Thoughts

To summarise, while sweepstakes casinos will continue to exist and likely remain a niche part of the U.S. gaming market, the future of U.S. gaming will likely be shaped by the continued growth of regulated gambling, including online casinos, sports betting, and technological innovations. However, the timeline for this shift is anyone's guess. At present, sweepstakes casinos are the most accessible option, which is likely to be the case for years. So, at least for now, sweepstakes casinos are firmly in control of the sector, and this will continue until more legislation is altered.