
The New Jersey legislature will consider classifying sweepstakes casinos as a form of regulated, real-money internet gaming under a bill submitted by Assemblyman Clinton Calabrese.
If passed, the bill would be the first of its kind in the country. Although they offer the chance to win cash prizes, sweepstakes casinos are generally considered to be play-money social casinos with an attached sweepstakes offer. Although states vary in their stance on sweeps casinos, New Jersey would be the first to place them in the same regulated category as real-money operators.
Calabrese told Gaming Today the bill is meant to bring regulatory boundaries to a corner of the NJ online gaming industry that he says needs it:
Sweepstakes casinos have operated in a regulatory gray area, which has led to significant challenges, including consumer protection concerns, underage gambling, and economic losses for the state. Recognizing these issues, I have introduced this legislation to address the lack of oversight for these platforms.
How bill could impact $40 billion industry
Sweeps and social casinos allow users to play casino-style games, such as slots, without requiring a cash deposit. However, users have the option to buy credits or chips they can use to play the game. The difference between sweeps and social casinos is that the sweepstakes sites offer free sweeps coins with each such purchase, which can then be used to try to win cash prizes.
Data indicates plenty of sweepstakes casino customers spend money to play the game: more than $40 billion over the past 10 years, according to the Social & Promotional Games Association
Sweepstakes casinos give consumers a free-to-play casino option while enjoying less oversight than real-money online casinos. Because of that, though, states miss out on sweeps-casino revenue because they don’t impose a privilege tax on sweeps casinos as they do on regulated real-money operators.
Calabrese’s bill would eliminate the differing oversight in New Jersey and bring sweepstakes casinos under the same framework as real-money casinos.
“This bill aims to establish clear regulatory requirements and create a level playing field for all operators, ensuring that sweepstakes casinos meet the same standards as other forms of internet gaming in New Jersey,” Calabrese said.
As part of the bill’s updates to state gaming regulations, sweeps casinos would have to submit to an audit of their operations and financials before being licensed and bi-annual operational and financial audits to maintain their license.
Will Atlantic City welcome sweeps partnerships?
New Jersey regulations require the real-money gambling operators to work in partnership with a land-based casino, as only the brick-and-mortar establishments can hold a master license. Under Calabrese’s proposal, it would work the same way for the sweeps sites.
It’s unclear how either the sweeps operators or the land-based casinos would respond to such a system. The relationship between the two is currently tense, with the American Gaming Association having taken a position against the sweepstakes model last year.
It’s possible that in New Jersey, at least, the two sectors would work together to their mutual benefit. On the other hand, many sweeps operators may simply withdraw from the state in order to focus on other markets, or may have a hard time finding a willing partner.
Calabrese’s legislation, if passed, would be the first of its type in the country. However, while lawmakers in other states have been slow to take action one way or another, some regulators are taking matters into their own hands. The Maryland Lottery and Gaming Control Agency recently sent a slew of cease-and-desist letters to sweeps casinos, for instance, while that state’s lawmakers continue to mull the possibility of calling a referendum on real-money iGaming.