One lesson from the Indian Gaming Association’s conference in San Diego is that the fight has just begun against sweepstakes and unregulated gambling, both encroaching on tribal sovereignty.
Sweepstakes operators, offshore betting sites, and crypto-based gray markets are exploiting legal loopholes, threatening the integrity of the regulated gaming industry. At the conference, tribes discussed legal strategies, enforcement efforts, and policy solutions to protect the future of tribal gaming.
“Illegal online gaming is the biggest threat to tribal sovereignty in the modern era,” said Howard Glaser, head of government relations for Light & Wonder. “That’s a strong statement.”
Glaser said when googling “California online casinos,” many operators come up, even though it’s illegal in the state. One report said $330 billion a year in the U.S. in wagering translates to $20 billion of online gaming in California.
“What that means is, the decision the tribes have in front of them, whether to be in online gaming and online sports betting, has already been taken away from them. It’s already here,” Glaser said. “It’s not a decision about what we do next. Online igaming is here. Unless there’s significant and much more activity to push the illegal market out, it doesn’t matter what you decide, because the illegal operators will own your market.”
Glaser said he doesn’t blame the players; they’re the targets of the marketing and don’t know that it’s illegal. One company spent $400 million marketing in the U.S. in 2024 and many use celebrities as paid sponsors.
James Siva, chair of the California Nations Indian Gaming Association, said the problem popped up on their radar as a threat two years ago. When they saw how quickly it was growing in the U.S., it became a priority.
“The main thing we try to protect in California is our gaming exclusivity,” Siva said. “If there’s expansion of gaming that doesn’t come through the tribes, it’s flat-out illegal. Dealing with this growing illegal industry is difficult. We’re trying a multi-pronged approach, like advocating for regulatory fixes with the state, through our gaming commission, and through the payment processors on the finance side. For us right now, there are so many threats to our exclusivity and sovereignty, but sweepstakes is first and foremost.”
By allowing the current sweepstakes operators to continue, it allows others to find creative ways to enter the market, especially when it comes to sports wagering, Siva said. These operators take the position that they don’t have to partner with the tribes, but move in on their own and gain access to the market.
“Everybody knows that California’s market is the golden goose,” Siva said. “Everybody wants to be here with the size of the population and economy. If it’s not approved by the tribes, we’re going to come after you one way or another.”
Dustin Gouker, a consultant and analyst with Closing Line Consulting, said he suspects all forms of gaming will find loopholes and tribes will continue to play “whack-a-mole” to try and deal with the problem. “People keep pushing the envelope. They’re not going to stop. ‘Hey, we have sports contracts. What else can we let people bet on?’”
Tres York, vice president of government relations with the American Gaming Association, said while the illegal operations have been on the radar for the past two years only in the past 12 months have AGA members raised them as an issue and asked the trade group to get involved.
“We produced a policy memo that we sent out to gaming regulators and state attorney generals across the country to raise awareness,” York said. “We’ve been having dozens and dozens of meetings and discussions with gaming regulators, state AGs, and legislators to raise awareness of the issue and attempt to educate them on how these operations are conducted, to look at the laws and regulations on the books in their states, and to see if they’re violating the law or not.”
York isn’t surprised by what’s happening. Operators look at the laws and for ways to exploit loopholes, then offer gambling without adhering to regulations and obtaining gaming licenses.
“In my opinion, it’s like the proliferation of unregulated skill-game machines that look and operate like slot machines and pop up in bars and gas stations across the country,” said York. “They claim not to be gambling, because some element of skill is required. Sometimes that argument is effective and sometimes it’s not. In the meantime, they don’t ask for permission or work with gaming regulators to be certified, but still put their machines across the country.”
In the U.S., igaming is legal in only seven states and while there’s sweepstakes sportsbooks and sweepstakes bingo, the online casino component is by far the largest, generating the most revenue, York said.
“Everybody supportive of igaming is frustrated, because it’s legal in only seven states. But in 40-plus states, online casinos are offered under the guise of a sweepstakes model.”
York said there’s momentum with state regulators and AGs sending out subpoenas and legislators looking at the issue.
“They aren’t being fooled,” York said. “The regulators that have made a determination say it’s illegal gambling. The more states that look at it, the more this issue makes headlines.”
Scott Crowell, a founding partner with the Crowell Law Office, called it a “serious threat,” adding that for years, people have tried to circumvent the law to offer products. In the last two years, the money invested in it and the growth of the platforms are “mind boggling.” It’s not only an intrusion of tribal sovereignty, but it siphons away tribal gaming dollars.
“Sweepstakes’ argument that it’s legal doesn’t even pass a smell test,” Crowell said. “You open it like any other social site and they give you free play in gold coins. When you lose them, if you buy $100 in coins, they give you $100 in sweepstakes coins. They say they’re free. They say you’re buying the gold coins and you can’t win anything with those, but they’re giving you for free the sweepstakes coins that you can gamble dollar-per-dollar for real money. It’s a bogus argument.”
Crowell said a lot of state regulatory agencies have issued cease-and-desist orders over the last several months, which have proven to be effective. Operators get out of that state.
“At one time, regulators had the wherewithal to talk to one another. If one, two, or three states were taking enforcement action against illegal gaming, the others had to do the same thing,” Crowell said. “We don’t see that happening now.”
Crowell argued that not enough state AGs are stepping up and taking enforcement action. There’s always talk of a task force or opinion work group, but and nothing comes out of it.
“It’s astonishing that the California Attorney General (Rob Bonta) hasn’t acted,” Glaser said. “This state could put a stop to a lot of it around the country, and no one has more to lose than the tribes in California. In Connecticut, the attorney general in conjunction with their state regulator (in March) issued 1,065 criminal counts against one of the illegal casinos where it’s exclusive tribal gaming. In New York, action was taken. Enforcement can work. What the strategy is for these companies they think they’re going to be legalized at some point when igaming is legalized and that they may be a partner. By the time they do that, they will own the market.”
Glaser called it similar to what DraftKings and FanDuel did with fantasy sports. “Casinos were looking the other way, thinking they owned the market, and DraftKings and FanDuel spent a lot of time building the customer bases. These companies today are acquiring customers that would otherwise be gaming legally, whether brick-or-mortar or online.”
Glaser said the $20 billion in online gaming in California is worth about $2 billion to tribes, 25% of current revenue in tribal gaming.
“They’re using residents as ATMs to suck out money that’s primarily spent abroad,” Glaser said. “There are no anti-money-laundering or responsible-gaming rules. This money is traceable in some instances to organized crime and drug trafficking. It’s the largest source of money laundering that exists today internationally. All you have to do is set up a website, say it’s not gambling, and evade the law as long as you can. Billions of dollars are passing beyond the tribes, the state, and the country at cyberspeed.”
Siva isn’t surprised Bonta hasn’t acted in California; past Ags didn’t enforce the laws either. It’s always on the tribes in the end. “The AG continues to turn a blind eye. We’ll probably have to do the enforcement ourselves. We’re ready for that fight.”
There should be no need for the legislative route, since the AGs have the authority, York said. He noted that some states, like Michigan, West Virginia, and Connecticut, are willing to take the interlopers to court. These companies don’t want to go to court and get their financials out there, he added.
“Those kinds of tactics send a message,” York said. “States have to tell these people that they will comply with our laws or we’re willing to go all the way.”
Glaser said relying on other parties to protect rights, however, doesn’t always work. There are 15 class-action lawsuits ongoing and tribes are losing billions in revenue. Many have legal standing in their states and that option doesn’t rely on any third party.
It takes payment processors to make the illegal operations work and they should be among those targeted, Glaser said. The sweepstakes model also started with untraceable foreign investment, but now U.S. investors include venture capitalists pouring money into the industry.
“Choking off the investors, vendors, and suppliers is another element that shuts it down, so you can preserve the tribal members’ decision of whether to get into this market,” Glaser said. “This is being stolen by people who are otherwise regulated and licensed in this industry.”
“The real question to enforcement is all of the above— criminal actions, civil lawsuits, regulatory cease-and- desist orders, revisiting suitability determinations, and going after payment processors and investors,” Crowell said. “To address this threat, we need to do it all.”
