Sweepstakes casinos · Brief · 7 min read
Sweepstakes casinos: what the statutes leave standing
California’s and New York’s bans define the product in cumulative parts. What each part leaves open, what the operators have done with it, and why outside a statute is not the same as lawful.
A sweepstakes casino statute reaches a game only if the game has every part the statute lists. A game that lacks one part is outside that statute. That is a narrower thing than lawful.
Four parts, all required
(3) “Online sweepstakes game” means a game, contest, or promotion that meets all of the following conditions: (A) Available on the internet or accessible on a mobile phone, computer terminal, or similar device. (B) Utilizes a dual-currency system of payment that allows a person to play or participate with direct consideration or indirect consideration, and for which the person playing or participating may become eligible for a prize, award, cash, or cash equivalents or a chance to win a prize, award, cash, or cash equivalents. (C) Simulates gambling, which, for purposes of this section, includes, but is not limited to, any of the following: (i) Slot machines. (ii) Video poker. (iii) Table games, including, but not limited to, blackjack, roulette, craps, and poker. (iv) Lotteries, as defined in Section 319. (v) Bingo. (vi) Sports wagering. (D) Awards cash or cash equivalents.
Four conditions, joined by “all”. The list of simulated games is open (“includes, but is not limited to”); the cash condition is not.
New York’s § 912 is built the same way: an online game, a dual-currency system that exchanges for cash or cash equivalents, and simulated casino-style gaming. The rest of this brief takes the parts one at a time, with what the market has done with each.
Design choice: no cash prizes
Chumba keeps two lists. Its terms exclude six states from the site altogether:
Excluded Territory means the states of Washington, Michigan, Montana, Connecticut, Nevada, and Delaware in the United States, as well as any outlying U.S. territories or possessions, and any other jurisdiction outside of the United States.
Chumba’s lobby loads in New York, a state its Sweeps Rules exclude from Sweeps play; the games stay on the page.
Its sweeps rules exclude sixteen states from Sweeps Coin play. In the ten on the second list and not the first, among them California, New York, New Jersey and Tennessee, the documents leave Gold Coin play, which awards nothing, and remove the currency that pays out. California’s companion amendment speaks to exactly that product:
This paragraph does not make a game that does not award cash prizes or cash equivalents unlawful.
Neither California nor New York defines “cash equivalents”. Where a non-cash prize becomes one is the open question for this design.
This design has a limit outside these statutes. Washington, where the Ninth Circuit held that a social casino’s chips with no cash-out were a “thing of value”, is on Chumba’s site-wide list, not only its sweeps list:
We therefore reverse the district court and hold that because Big Fish Casino’s virtual chips are a “thing of value,” Big Fish Casino constitutes illegal gambling under Washington law.
Design choice: a limited promotion
(e) This section does not make unlawful or otherwise restrict lawful games and methods used by a gambling enterprise licensed under the Gambling Control Act or operations of the California State Lottery. (f) This section does not make unlawful game promotions or 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 and that are not intended to provide a vehicle for the establishment of ongoing gambling or gaming.
Every condition in (f) must hold, including that the promotion is incidental to substantial sales of other products. That fits a retailer’s promotion more readily than a platform whose product is the game. Subsection (e) preserves what licensed operators and the State Lottery already do.
New Jersey’s safe harbor allows a paid route when it is ancillary to merchandise, and excludes coins, tokens and online credits from the merchandise that qualifies:
(1) there exists a method of entry to participate in the sweepstakes at no cost to the participant; (2) any method of entry that is not free to the participant is ancillary to the purchase of food, non-alcoholic beverages, or other merchandise, such as mugs, trinkets, or mementos, not exceeding $20 in value or such other amount to be determined by the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, provided, however, that such other items of merchandise shall not include coins, tokens, or online credits that have no value other than permitting sweepstakes entry or that are able to be exchanged for money or merchandise from the sweepstakes operator or an affiliated company;
Design choice: state-specific terms
Operators already write state-specific mechanics into their terms. Stake.us caps redemptions in one state:
b) In Florida, the maximum redemption value of Stake Cash won on any Game or play, via a Customer’s participation in the Sweepstakes, is USD $5,000 (five thousand US dollars) per day. Any redemption of a Prize valued in excess of USD $5,000 (five thousand US dollars) per day will not be allocated or paid.
The figure is the one Florida’s game-promotion statute uses. Once a promotion’s announced prizes total more than $5,000, its operator files the rules and the prize list with the state before it starts and sets the full prize value aside:
The operator of a game promotion in which the total announced value of the prizes offered is greater than $5,000 shall file with the Department of Agriculture and Consumer Services a copy of the rules and regulations of the game promotion and a list of all prizes and prize categories offered at least 7 days before the commencement of the game promotion. … Every operator of such a game promotion in which the total announced value of the prizes offered is greater than $5,000 shall establish a trust account, in a national or state-chartered financial institution, with a balance sufficient to pay or purchase the total value of all prizes offered.
Florida measures the announced prizes of the whole promotion. Stake.us’s term limits what one player redeems in a day. The two numbers match; what they measure differs.
New York draws its line at the same amount, with a longer clock: a filing with the Secretary of State thirty days before the start, and a trust account or a bond for the full prize value:
without any consideration therefor, where the total announced value of the prizes offered is in excess of five thousand dollars shall file with the secretary of state, at least thirty days prior to the commencement of such game, contest or promotion … In lieu of establishing such trust account, said operator may furnish a bond, with sufficient sureties, in an amount equal to the total value of all prizes offered
Rhode Island draws the line for a retailer’s promotion at $500 (R.I. Gen. Laws § 11-50-1). These promotion thresholds are where a state’s filing, bonding and winners-list duties begin, so a fixed prize or redemption figure in an operator’s terms is read against them. The sweepstakes casino statutes above do not turn on the amount; the promotion statutes do.
Outside the statute is not the same as lawful
California added § 337o to existing lottery and gambling law, and Tennessee and Illinois show what existing law does on its own. Tennessee treated the promotional sweepstakes model as an illegal lottery under its constitution; Illinois treated internet games of chance that award money or items of value as a crime. Neither needed a sweepstakes statute. A product outside a sweepstakes statute has answered one question. It still has to answer the state’s other theories.
What a builder does with this
- Read each definition as a checklist, and record for each condition whether the product meets it and why.
- Treat a no-cash-prize design as the one with the most room and the most conditions: a new prize type can restore the cash-equivalent condition, and a “thing of value” statute reaches past it.
- Test a promotion exemption against every one of its conditions; it is written for promotions incidental to other sales.
- Set any fixed prize or redemption figure against the promotion thresholds in each state served: $5,000 in Florida and New York, $500 for a Rhode Island retailer, each with its own filing and prize-security duties above the line.
- Then ask the second question in each state the product serves: which other theory reaches it.
A sweepstakes statute applies only to a game that has every part it lists. Removing a part takes the game outside that statute. It does not take the game outside the state’s other laws.