The American Gaming Association recently published a memo asking gaming regulators to scrutinize online sweepstake operators that do not afford the same regulatory protections as U.S. licensed online gaming and mobile sports betting operators.
Regulatory Vigilance
Online gaming operators not part of the domestic regulatory ecosystem have long been a target of the gaming industry trade group, the American Gaming Association (AGA). Everything from offshore sportsbooks to DFS sites operating as sportsbooks with “pick’em” parlay-style gaming has drawn the ire of the AGA. This time the group has focused its attention on online sweepstakes providers that operate outside U.S. jurisdiction yet solicit American customers.
The memo titled, “Regulatory Vigilance Critical to Ensure ‘Sweepstakes’ Don’t Threaten Consumers and Undermine Gaming Regulation” was published last week, beseeching regulators throughout the nation to remain vigilant in guarding against sweepstakes companies operating in the same territory as its online sportsbooks and/or iGaming providers.
“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 memo reads.
Uneven Playing Field
The AGA contends sweepstakes companies using virtual currency that can be purchased and then cashed in for real money are mobile gaming companies in disguise but do not have any of the regulatory restrictions that U.S. gaming companies must abide by. Sweepstakes companies do not pay taxes on their revenues to the states in which they operate, unlike licensed U.S. gaming operators.
“The lack of regulatory oversight presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions,” the memo reads. “These sweepstakes-based operators have weak (if any) responsible gaming protocols and few, if any, self-exclusion processes.
“There is no independent product testing to ensure basic fairness to players, and although many claim players must be 18+, age verification procedures, if they exist are often questionable. The opaque nature of these operations also presents a prime opportunity for illegal activity and enriching bad actors.”
However, some regulatory agencies have been proactive in enforcing restrictions from offshore sportsbooks and sweepstakes companies from operating in their markets. The Michigan Gaming Control Board (MGCB) is one such agency and recently sent a cease-and-desist letter to the popular offshore sportsbook and online casino, Bovada (find out more with our Bovada Review).
Earlier this year, the MGCB also announced it had sent cease-and-desist letters to two U.S. online gaming companies, PredictionStrike Inc., located in Bay Shore, New York, and VGW LuckyLand Inc. (VGW) based in San Francisco, California. Another cease-and-desist letter was sent to a Cyprus-based gaming entity, Sweepstakes Limited.
“Gambling regulations are in place for a reason, and illegal gambling operations are not welcome in Michigan,” MGCB Executive Director Henry Williams said. “We do not want businesses who skirt the law having access to Michigan citizens and leaving them vulnerable because they are playing on unregulated sites that leave them with no recourse, and that siphon funds away from communities because they are not paying taxes like a regulated, legal gambling establishment would.”
All three companies have reportedly complied with the MGCB’s demands.
