Sweepstake-casino: legitimate operation in the US market without a license?

Sweepstakes casinos are rapidly gaining popularity amid growing regulatory pressure on traditional gambling. Thanks to their innovative model, which is based on holding draws and lotteries, these platforms offer an alternative to classic online casinos, allowing to bypass the strict licensing requirements in many states. 

What is Sweepstakes Casino?

Sweepstakes casinos are online platforms that combine features of traditional gambling while simulating sweepstakes to avoid being classified as gambling.

Why is Sweepstakes Casino not legally a casino?

At the federal level, the law Deceptive Mail Prevention and Enforcement Act (DMPE) determines “sweepstakes” as a game of chance, participation in which does not require any payments or contributions.

At the state level, gambling is usually defined by three key criteria:
🔹 Payment for participation (consideration)
🔹 An element of chance (chance)
🔹 Chance of winning (prize)

If there is no participation payment criterion, the activity is not classified as gambling.

Dual currency system

Sweepstakes casinos operate on a two-currency system, in which Gold coins and Sweep Coins are used.

1. Goldcoins: used for entertainment only. Players can enjoy the game without risking real money.
2. Swipcoins: allow you to win prizes, which may include cash. 

The names of these currencies do not necessarily have to be exactly the same, but the principle of operation remains unchanged.

Thus, operators create a legally correct model that does not fall under the strict regulation of real money gambling.

Legal aspects and challenges

Although the sweepstakes casino model avoids many regulatory restrictions, it is still accompanied by certain legal risks and challenges:

Regulatory Control

In some jurisdictions, platforms may be subject to increased scrutiny, as states have recently done New Jersey, Mississippi, New York, Florida, Connecticut and Maryland. Operators must be prepared for changes in legislation and regulatory initiatives that may affect their operations.

Data collection and processing

Since participation in sweepstakes usually involves the provision of personal data, it is important to strictly adhere to the requirements for its protection. Apart from CCPA (California Consumer Privacy Act), more US states are implementing new data protection laws, including:

🔹 Virginia Consumer Data Protection Act (VCDPA) – Virginia
🔹 Colorado Privacy Act (CPA) – Colorado
🔹 Utah Consumer Privacy Act (UCPA) – Utah
🔹 Texas Data Privacy and Security Act (TDPSA) – Texas

In light of these changes, companies should closely monitor local regulations and adapt their privacy policies to meet the current requirements in each state.

Advertising campaigns

Advertising sweepstakes casinos can be perceived ambiguously by regulators, which requires operators to have a competent approach to their marketing strategy.

Advantages of the sweepstake model for operators

Sweepstakes casinos have a number of advantages that make them attractive to operators:

Legal flexibility

By masquerading as sweepstakes and lotteries, platforms can operate without a gambling license.

Low entry threshold 

Players can participate in sweepstakes even without significant financial costs, which expands the potential audience and increases the amount of traffic.

Access to international markets

Sweepstakes casinos have already demonstrated their success in North America, opening new horizons for scaling in Europe and the Asia-Pacific region. The dynamic development of the online industry and the loyal regulation of gambling in these markets create ideal conditions for global expansion.

How can DS Solutions help?

If you are planning to launch or optimize your sweepstakes casino, we are ready to provide expert support at all stages of your activity:

1. Legal audit of the platform

We carefully analyze your project, identify potential risks and offer optimal ways to minimize them.

2. Development and updating of documentation

We will prepare all necessary contracts and policies that meet international standards and requirements of local legislation.

3. Consultations on regulation and licensing 

We help you navigate the complex US gambling regulatory system to ensure your platform is fully compliant with the law and avoids being classified as an online casino.

4. Support in data protection

We provide full support in the implementation of personal data protection policies in accordance with the CCPA, VCDPA, CTDPA and other regulations, ensuring that your platform complies with the requirements of the laws of various states.

Conclusion

Sweepstakes casino is an innovative direction in the field of online gambling, which opens up new opportunities for operators, allowing to bypass strict regulatory restrictions and attract a wide audience. However, the successful implementation of such a project requires a deep understanding of legal nuances and thorough optimization of business processes.