Sweepstakes, a major threat to the gaming industry in 2025, have been diminished since then, but they’re far from finished taking revenue away from regulated casinos, a panel said Wednesday.
For years, sweepstakes operators expanded by exploiting the gap between how gaming laws were written and how regulators enforce them, said Victor Rocha, conference chair of the Indian Gaming Association, which hosted an update on the sweepstakes industry in a webinar.
Rocha said that window has narrowed for sweepstakes operators after states accelerated enforcement actions and legislatures advanced new restrictions. The sweeps industry’s longstanding argument that these platforms are merely promotional contests is facing increased skepticism, Rocha said of an industry that was once treated as a gray market and is now becoming a primary regulatory target.
“We’ve been so focused on (sports betting) prediction markets that I thought it was an important time to come back to this issue,” Rocha said. “Sweepstakes haven’t gone away. California put a big dagger right into the heart of that industry (with legislation), but you find out they have no heart.”
Rocha was joined Wednesday by Howard Glaser, global head of government affairs and legislative counsel for Light & Wonder, and Melissa Blau, founder and director of IGaming Capital.
Glaser said New York and California cracking down on sweepstakes, which mimic igaming, have made a difference, but noted that they need to be seen in context with the proliferation of prediction markets over the last year under the guise of federal regulation rather than by states, – stances that are the subject of court fights nationwide.
“You can’t view sweepstakes alone,” Glaser said. “There’s a tendency to think that battle is done and won and now we’re on to prediction markets. It’s all of a piece. The illegal offshore gaming, skill games, and prediction markets threaten to strangle the regulated industry and Indian gaming. You can’t take your eye off the ball. A lot of progress has been made with sweepstakes and can to be learned about prediction markets. It was the gateway drug to prediction markets and run-up test for the lobbying efforts. But despite the victories in New York and California, it’s still a formidable threat.”
Glaser said $12 billion in gross gaming revenue was projected in 2026 for sweepstakes, but that has been lowered by Eilers & Krejcik to $3.5 billion.
“The smaller players have left the markets, but we still have some of the larger players,” Glaser said. “Even though six to seven states moved to ban with legislation, Texas, Florida, Illinois, and Georgia are still accepting bets. Those are big states, so the job isn’t finished yet. You try to slow them down, but tomorrow, it will be something else. You can never let up on illegal gaming, and there’s been progress in getting the regulators, attorney generals there, and lawmakers there. And you and the team at IGA in California have been at the forefront of making that happen.”
While enjoying success so far, Rocha said that the sweepstakes industry tries to work around new state laws. After California banned the use of dual currency, for example, operators switched to a tri-currency model.
“I’m not so sure we should be taking the victory lap quite yet,” Blau said in weighing in on sweepstakes. “I feel like that $3.5 billion number isn’t accurate. It’s the number that’s out there, but I think it’s closer to the original number, because of creativity and innovation. California and New York hurt, but they’re working around the issues. They’re not only doing better than before, but they’re keeping a low profile — unless the attendance at the SBC (Summit Americas in south Florida) last week is a wake-up call. Compared to the prior year, which was dominated by these people, there weren’t as many there. It was pretty quiet.”
Blau pointed out how the Florida attorney general is going after payment processors like Visa, Mastercard and others that expose them to the state’s Racketeer Influenced and Corrupt Organizations Act (RICO) when it comes to funding sweepstakes and prediction markets.
“I think we should see more of that and it’s incumbent upon us to share that information with our allies,” Rocha said. “Sweepstakes was a dry run into this and it got us up and running. Sweepstakes caught us flat footed, but we went into prediction market with eyes wide open. That was very important in this fight.”
Sweepstakes companies are now trying to create a legalized path that involves lobbyists talking to states, but there’s been no interest in that from regulators and lawmakers.
“The other (push by them) is to tax us and there’s zero traction in any states for that,” Glaser said. “But you have to be vigilant. You have to keep an eye on Florida and Texas and get those two states shut down. That’s very detrimental to the remaining business models out there. Some of the biggest companies out there have some significant problems now. I’m not saying it’s the end for them, but I’m more worried about prediction markets than sweepstakes at this stage of the game.”
The liability for payment processors, affiliates, or celebrity promoters is what Glaser said they put into a lot of the bills last year and were successful in California and to some degree in New York.
“That’s the most effective way,” Glaser said. “You choke off the capital and processing. That may be a lesson for prediction markets going forward. We haven’t seen much of that yet. I’ve seen the indirect ways to go at the suppliers.”
While Glaser said they aren’t done with sweepstakes yet, they’re fortunate in that they were “a Keystone Cops opponent” that mishandled their legislative and regulatory issues.
“You got a good draw on the opponent on that one and prediction markets aren’t making the same mistakes,” Glaser said. “They have lobbied up and have tried multiple defenses. We’re going from single-A ball with the sweepstakes guys right to the World Series with prediction markets. It’s a winner-takes-all World Series. We’re still in the early innings and have a ways to go.
“Now it’s just a matter of keeping up with adjustments (by sweepstakes) and getting regulators to enforce it,” Glaser said. “The regulatory system is overwhelmed. If it was sweepstakes alone, it would be challenging for them. Layer on top of that prediction markets and offshore casinos. It’s overwhelming the defenses in the United States gaming market to have all of this flowing at once. You have to be willing to play a lot of different games at the same time to force these guys back.”
