Gaming executives and tribal leaders said Wednesday they believe they have sweepstakes operators on the run. They also waxed optimistic that they’ll ultimately rein in prediction markets that continue to threaten the casino industry.
Wednesday’s Indian Gaming Association webinar featured Howard Glaser, head of government affairs at Light & Wonder, and Tres York, vice president of government relations at the American Gaming Association. They were hosted by Brian Giles, IGA’s executive director and Victor Rocha, chair of IGA’s annual conference and tradeshow.
The show focused on how the sweepstakes gambling industry is finally facing coordinated resistance. What started as a quiet legal loophole has become a disruptive force, prompting state attorneys general, regulators, and lawmakers to take action.
With billions in unregulated play flowing through these platforms, the risks to consumers, and to the legitimacy of state and tribal gaming, states are realizing it can no longer be ignored, Rocha said.
On Tuesday, the Louisiana Gaming Control Board said it has issued 40 cease-and-desist letters to 40 illegal gambling operators, including sweepstakes casinos and offshore operators. That action followed the disappointment last week when Louisiana Gov. Jeff Landry vetoed a bill banning sweepstakes casinos. He said the state already had the power to target those illegal operations, hence Tuesday’s action.
New York became the fourth state this week to pass a bill banning online sweepstakes. The Empire State joins Nevada, Montana, and Connecticut; the latter suspended the gaming license of High5Games and made more than 1,000 criminal counts of illegal gambling.
The panel discussion also touted that on Monday, 65 tribal entities filed an amicus brief in federal court on how Kalshi and other prediction market operators mimic sports betting with their event contracts. The tribes were followed Tuesday by the AGA and 34 states filing briefs arguing against Kalshi’s ability to operate under states’ rights.
“We’ve been raising awareness about sweepstakes and a lot of people were shocked how brazen this industry is and its bald-faced lies,” Rocha said. “It felt like a total betrayal. People that worked in the commercial gaming industry for years all of a sudden are sticking all of their money and reputation on sweepstakes gaming. For a moment there, it looked like they might succeed. But according to everything that’s happened in the last week, (that doesn’t look to be the case). It felt like the momentum shifted yesterday.”
Glaser dubbed it as “Black Tuesday” for those deemed illegal operators, given what happened in Louisiana and New Jersey. He called it an “interesting moment” and said about a year ago, the AGA issued a policy statement on sweepstakes at a time there was little attention paid to a rapidly growing market.
“As of yesterday, 16 states have issued hundreds of cease-and-desist orders, introduced or passed legislation to ban sweeps, or taken other regulatory actions,” Glaser said. “That’s in a one-year period and not an easy thing to accomplish, but it demonstrates the understanding among regulators and lawmakers that the casino regulatory system they have built in 30 to 40 years, that integrity is significantly threatened by unregulated and untaxed entities that can swoop into a state and deploy products that look and play close to a legal product. Consumers don’t know the product isn’t legal and that’s damaging overall as well. I think Louisiana was the capstone.”
York said that every attorney general and regulator who has investigated the operation has deemed it illegal gambling.
California tribal casinos have lamented that the state’s Attorney General Rob Bonta hasn’t cracked down on sweepstakes operations, but Rocha told the panel that legislation to that effect is expected to be introduced in the California legislature in the coming weeks.
“His lack of action tells us where his mindset is,” Rocha said. “We’re not ones to sit and wait around for someone, so we’re going to get this thing done. I guarantee you it will have teeth.”
Glaser said the approved bill in New York is feared by the sweepstakes industry, because it would target the funding source and stop their operation. He expects a lot of pushback from the financial community to get the governor to veto the bill.
York added that regulators and attorneys general willing to go to court have resonated with those companies who have pulled out. It happened in Connecticut and other states. “If a sweepstakes-ban bill gets signed into law, that’s pretty much the ballgame. The industry as a whole will pull out.”
Glaser agreed that sweepstakes operators are getting the message and pointed out that none have challenged the states in court.
“It’s like a cockroach when the light is turned on with these sweepstakes operators,” Rocha said. “They’re just scattering.”
Glaser said sweepstakes operators were confident, because offshore illegal gaming operated unfettered and they had a theory they would be legal under sweepstakes law. That gave these operators “a false sense of security” that U.S.-based companies could do this, since igaming hasn’t spread into many states. There was a void for them to try and fill.
“They miscalculated the risk on that and it’s clear everyone has said it’s gambling in every state,” Glaser said. “How can you be a sophisticated investor and not appreciate the risk that was involved? If it’s too good to be true, it’s not real. The money was big and easy and they had a couple of legal opinions. It’s just like running a raffle or Monopoly at McDonalds or like a Starbucks card, except it’s a casino. What’s not to like? Even the most sophisticated ones can be blinded by the potential profitably here. Now they’re starting to pay the price.”
What’s happening with the sweepstakes industry, however, is unlike the prediction market where operators are seeking federal approval from the Commodities Futures Trading Commission. The prediction market operators have victories in federal court as states have sought to shut them down.
Glaser said he’s bolstered by the bipartisan group of state attorneys general’s filing a brief in the Kalshi prediction-market case in federal court. That unity, along with involvement by the tribes, shows the level of concern.
“You have sweeps, prediction markets, and offshore,” Glaser said. “These are all different versions of the same product that tries to create a gambling product that evades traditional regulation. We’ll see some other types as we go. You have this Iron Dome between the regulators, attorney generals, and tribes and it’s been quite effective at this point.”
While sweepstakes defeat is promising, Giles warned that they haven’t won anything yet when it comes to the prediction markets. There are 270 gaming tribes and IGA needs to get more on board to oppose this.
“It’s been a tough topic to get across and we’ll keep hammering them,” Giles said. “I think the sweepstakes momentum helps on the prediction market side as well.”
