Sweepstakes casinos: the full analysis for builders

A sweepstakes casino sells one currency that wins nothing and gives away a second currency that pays out in cash. The legal case for the model rests on one claim: because the second currency is free to anyone who asks, nobody pays for the chance to win, and a game without payment is a sweepstakes, not a lottery. That claim still carries the model in most states. Since mid-2025, though, states have answered it in at least seven different ways, and only one of them turns on the claim itself.

This piece brings the week’s five briefs together for anyone building in this market: operators, the studios that supply games, and the payment, geolocation and platform companies that serve them. It sets out the structure in the operators’ own rules, the test the structure is designed around, each state theory in the words of the authority that holds it, where the cases stand as of September 28, 2026, and the designs that each body of law leaves standing, with their conditions.

Part 1. The structure, in the operators’ own rules

The largest operators build the same frame. The player buys a play currency (Gold Coins at Chumba Casino and Stake.us, Game Coins at High 5 Casino) that plays the games and redeems for nothing. A second currency (Sweeps Coins, or Stake Cash at Stake.us) plays the same games and redeems for prizes. The second currency is never sold. It arrives by other routes, and Chumba’s rules list four of them:

Stake.us puts the same structure in capitals, and adds the conversion rate at the cash end:

Chumba adds two design features that matter more than they first appear. Only coins won in play redeem, and every coin must be played before it redeems:

The three operators’ current documents set out the economics side by side:

The pattern holds across all three: a paid currency that redeems for nothing, a prize currency at one dollar, a free route that yields a handful of coins per request, and a list of excluded states that has grown with each version. Chumba’s December 2023 rules excluded three states from Sweeps play; its September 2026 rules exclude sixteen. Stake.us’s own change log records ten versions between February 2025 and July 2026 that add states to its excluded list.

Part 2. The test the model is built around

A lottery has three elements, and the Supreme Court set them out in 1954 in terms every state still uses:

Map the product onto the test. The prize is the Sweeps Coin, redeemable at a dollar. Chance is the slot or table game every coin must pass through. Consideration is the element the model is designed to remove, and the free method of entry, known in the trade as the AMOE (alternative method of entry), is the device that removes it. The operators state the claim at the top of their rules, together with the parity promise that gives it force:

The AMOE answers one element of one test, and it answers it only if the state reads consideration the way the operators do: as payment for the chance, rather than payment for anything that happens to arrive with the chance. That is the whole of what it does. It says nothing about a statute that asks whether something of value is risked, a statute that defines the product by its structure, or a statute that names the free coin itself as consideration. Those are the routes most states have now taken.

Part 3. Seven answers from the states

The table maps each theory to where it has been used and to what the free method of entry does under it. The sections after it show each in the authority’s own words.

Theory 1: the lottery, and the purchase as consideration

Tennessee’s Attorney General took the theory that meets the operators on their own ground. The release names consideration’s constitutional home rather than a new statute:

Florida’s Attorney General pleads the same idea in court. Its August 19, 2026 complaint against the VGW group alleges that players “provide consideration (e.g., purchase Sweeps Coins and wager the Sweeps Coins)”, and it relies on Florida’s general gambling chapter, including a loss-recovery statute from 1951 that reaches “whoever promotes, sets up or conducts the gambling transaction”. Kentucky’s Attorney General sued VGW on June 17, 2026 under the state’s consumer protection law, its Loss Recovery Act and its gambling laws. Both are allegations. Brief 5 sets out the Florida complaints in detail.

Theory 2: a thing of value risked, however the coin arrived

New York’s Attorney General set the free route aside before the legislature acted. The June 2025 release states the office’s reading of existing law:

Fifteen months later the office announced a settlement with VGW, and the release adds a factual finding that goes to the free route directly:

Theory 3: internet gambling for a thing of value

Illinois used a criminal statute that asks a different question entirely:

The Gaming Board’s February 5, 2026 letters asked operators to block Illinois residents or stop offering them prizes; the release does not mention consideration or purchase. Washington’s law reads “thing of value” the same broad way: the Ninth Circuit held in 2018 that a social casino’s virtual chips, which paid out nothing in cash, were a thing of value (Kater v. Churchill Downs). Chumba’s terms exclude Washington from the whole site, not only from Sweeps play.

Theory 4: define the product by its structure

New York’s statute describes the product and leaves consideration out. It also hands the key term to the regulator:

Theory 5: count the free coin as consideration

California keeps the consideration element and defines a free coin as “indirect consideration” that is “provided for free through a promotion, bonus, or with the purchase of a related product” (Penal Code § 337o(c)(2); Brief 2 quotes it in full). Tennessee took its Attorney General’s position into statute in May 2026, and the enacted text reaches every route by which the coin arrives, and every business that helps:

Theory 6: the no-purchase design as the marker

Maine’s statute, approved April 6, 2026, goes one step further. It treats the very feature the free-entry argument depends on, that the prize coin cannot be bought, as part of what identifies the product:

Maine makes operating, promoting or supporting an online sweepstakes game a civil violation carrying a fine of $10,000 to $100,000, and a crime of unlawful gambling under its criminal code.

Theory 7: online casinos as internet gambling, unless no currency is used

Montana amended its definition of internet gambling in 2025 without mentioning sweepstakes at all:

Part 4. The supply chain is inside most of these laws

The newer statutes do not stop at the operator. California’s § 337o(b) reaches a “financial institution, payment processor, geolocation provider, gaming content supplier, platform provider, or media affiliate” that acts “knowingly and willfully”. New York’s § 912(2)(b) names the same list with no knowledge element, and § 912(2)(a) reaches investors and board members. Tennessee’s Public Chapter reaches anyone who supports, facilitates or assists the operation (§ 47-18-5902(b)(5), quoted above). Maine’s reaches a person who “supports the operation or promotion” of the game. Florida’s complaints name payment companies as co-defendants under the loss-recovery statute, and a private class action filed in New Jersey sued Apple and Google over sweepstakes casino apps offered through their stores.

The practical result is that a vendor’s exposure follows the operator’s legal position state by state. A game studio, a payments company or a geolocation provider serving a sweepstakes operator is answering the same seven questions as the operator, on the vendor’s own record of what it knew and when.

Part 5. Where the cases stand on September 28, 2026

No court record we read contains a ruling on whether the dual-currency model is gambling. What exists is enforcement by letter and settlement, pleadings, and procedural rulings.

• New York: resolved without a court case. The Attorney General’s June 2025 letters ended coin sales by 26 platforms, and the September 9, 2026 release reports that VGW will pay $8 million in disgorgement, penalties and costs.
• Florida (two Attorney General suits, Hillsborough County Circuit Court, filed August 19, 2026) and Kentucky (Attorney General v. VGW, Franklin Circuit Court, filed June 17, 2026): allegations only. The state-court dockets were not checked for this piece, so no later filing or ruling is reported here.
• Bargo v. Apple (D.N.J.): the players alleged that the app stores carried unlawful sweepstakes casino apps. On June 29, 2026 the court granted Apple’s and Google’s motions and transferred the whole case to the Northern District of California on forum grounds. The opinion does not decide whether the apps are gambling.
• Doe v. Medium Rare N.V. (S.D.N.Y.): the Stake defendants have moved to compel arbitration, with supporting declarations served September 8, 2026. The docket shows no ruling as of September 28, 2026.
• Knapp v. VGW Holdings (3d Cir. No. 26-1844): an appeal docketed April 14, 2026 from a District of Delaware order of March 12, 2026; the last docket entry is dated April 20, 2026. The order under appeal was not read for this piece.

Arbitration is the recurring defence in the private cases. Chumba’s Sweeps Rules incorporate a class-action waiver and individual arbitration, and Stake.us’s terms open with the same notice. Where those clauses hold, the question of whether the model is gambling moves from public courtrooms to individual arbitrations, and the public record grows more slowly than the number of claims.

Part 6. The structures each body of law leaves standing

The seven theories do not leave the market empty. Each leaves room for some designs, and each design carries conditions. None of the options below is a way around a statute; each is a product that the statute’s own words place outside it, with the other laws that still apply.

Design 1: a social casino with no cash prize

Remove the prize currency and the model is a social casino: players buy coins that play and redeem for nothing. California’s AB 831 says in terms that its paragraph does not reach that product:

Chumba’s two lists show the design alongside the dual-currency one: its Sweeps Rules exclude sixteen states from Sweeps play, but its Terms exclude only six from the site, so read together they leave Gold Coin play in the other ten. The conditions: neither California nor New York defines “cash equivalents”, so a new prize type (gift cards, merchandise, tradeable items) needs its own analysis; Washington reads “thing of value” to reach chips with no cash-out; and Montana’s exception covers only an online casino with no currency of any kind.

Design 2: a promotion incidental to the sale of something else

California’s § 337o(f) preserves sweepstakes “conducted by for-profit commercial entities on a limited and occasional basis as an advertising and marketing tool that are incidental to substantial bona fide sales of consumer products or services”. New Jersey’s safe harbour allows a paid route ancillary to merchandise up to $20, but excludes coins, tokens and online credits from the merchandise that qualifies. Both are written for a retailer’s promotion, not for a platform whose product is the game. A builder whose core product is something else (a retail app, a consumer brand) and who uses a sweepstakes to market it sits in the space these provisions describe, and must meet every condition in them.

Design 3: the licensed product

California’s and Tennessee’s statutes preserve what each state already licenses. California’s § 337o(e) leaves alone games of a gambling enterprise licensed under the Gambling Control Act and the State Lottery; Tennessee’s Public Chapter leaves alone games under its Sports Gaming Act, Fantasy Sports Act, nonprofit gaming laws and education lottery. Where a state licenses online casino or sports wagering, the licence is the structure the statute is written to protect, and the path runs through that state’s regulator.

Design 4: the dual-currency model, state by state, with the free route made real

In states that have not adopted theories 2 through 7, the dual-currency model continues to operate, and the lottery test still decides it. There, the New York finding shows what a regulator will look at: not what the rules say about the free route, but how players in practice obtained the prize coin and at what ratio to money spent. The conditions for this design follow from that:

• Parity in fact, not only in the rules: a free coin and a bonus coin play the same games at the same odds and redeem on the same terms, and the rules say so at the top.
• A free route a player actually uses: the operators’ routes yield three to five coins per request, against packs sold for dollars. Keep records of how many prize coins arrive by each route.
• A location check before the first coin, not at redemption: Chumba’s terms say it checks “precise geolocation” to confirm a player is not in an excluded territory.
• A current exclusion list, re-read before each release, and an exit plan for every state served: High 5’s Maine notice stopped registrations and purchases on June 26, 2026 and allowed play and redemption until July 10, 2026.
• Vendor terms that settle who bears the cost if a state names the vendor, and how the vendor leaves a state in an orderly way.

This design carries the most conditions and the most exposure to change. The list of states where it is available has shrunk repeatedly since 2025 (Stake.us’s change log alone records ten additions to its excluded list), and every statute above reaches the vendors as well as the operator.

What a builder does with this

1. Build the state map by theory, not by a yes-or-no list. For each state, record which of the seven theories applies and the instrument that states it.
2. Treat the free method of entry as an answer to theory 1 only. Under theories 2 through 7 it does not change the result, and under Maine’s text the no-purchase design is part of the definition.
3. Read the regulators’ definitions as closely as the statutes. New York’s Gaming Commission and Maine’s Gambling Control Unit hold the power to define “dual-currency system”.
4. Choose the design state by state: a no-cash social casino, a promotion incidental to other sales, a licensed product, or the dual-currency model where no statute reaches it, each with the conditions above.
5. Keep the evidence a regulator will ask for: how players obtained prize coins, by which route, at what ratio to spend, and which version of the rules governed each entry.
6. Vendors: underwrite the operator’s position state by state, keep the record of that analysis, and revisit it when a state acts.

The dual-currency model was designed for a single question, whether the player paid for the chance to win. States now ask six other questions as well, and the designs that last are the ones that answer the question each state is actually asking.

Citation appendix

1. Operators: Chumba Casino (VGW) Sweeps Rules v26.1 and Terms and Conditions v27.1 (Sept. 16, 2026); High 5 Casino Sweepstakes Official Rules v43.0 (June 26, 2026); Stake.us Terms & Conditions v18.0 (July 10, 2026).
2. Case law: FCC v. American Broadcasting Co., 347 U.S. 284 (1954); Kater v. Churchill Downs Inc., No. 16-35010 (9th Cir. Mar. 28, 2018).
3. Statutes: Cal. Penal Code § 337o and Bus. & Prof. Code § 17539.1 (AB 831, Stats. 2025, ch. 623, approved Oct. 11, 2025); N.Y. Racing, Pari-Mutuel Wagering & Breeding Law § 912 (L. 2025, ch. 605, signed Dec. 5, 2025); Tenn. Code Ann. §§ 47-18-5901 to -5904 (Pub. Ch. 1117, signed May 22, 2026); 8 M.R.S. §§ 1351–1352 (P.L. 2026, c. 645, approved Apr. 6, 2026); Mont. Code Ann. § 23-5-112(23) (Ch. 626, L. 2025); 720 ILCS 5/28-1(a)(12); N.J. P.L. 2025, c. 128 (approved Aug. 15, 2025); Conn. Public Act 25-112 (approved June 24, 2025); Fla. Stat. § 849.29.
4. Enforcement: Tennessee Attorney General PR25-61 (Dec. 29, 2025); New York Attorney General releases (June 6, 2025; Sept. 9, 2026); Illinois Gaming Board release (Feb. 5, 2026); Florida Attorney General release and complaint (Aug. 19, 2026); Kentucky Attorney General release (June 17, 2026).
5. Dockets: Bargo v. Apple Inc., No. 2:25-cv-02025 (D.N.J.); Doe v. Medium Rare N.V., No. 1:26-cv-05975 (S.D.N.Y.); Knapp v. VGW Holdings Limited, No. 26-1844 (3d Cir.). Each read on CourtListener on Sept. 28, 2026.