New Jersey is moving to outlaw sweepstakes casinos in a bill aimed at plugging what state officials call legal loopholes allowing untaxed and unregulated gambling.
The Assembly Tourism, Gaming and the Arts Committee voted to ban such operations Thursday, joining a growing list of states attempting to close these web-based gaming sites.
Key takeaways
- New Jersey advanced a bill to ban sweepstakes casinos, citing unregulated and unconstitutional gambling concerns.
- Officials say sweepstakes platforms mimic online casinos while avoiding taxes, licensing, and consumer protection rules.
- The bill exempts promotions offering free entry or tied to small food or drink purchases.
State authorities and business stakeholders protested against such websites' consumer risks and defects in the law. Stephen Finkel, Director of Legislative Affairs at the New Jersey Attorney General's Office, argued sweepstakes casinos don't belong under the state constitution. To Finkel, voters must approve gambling growth through a public referendum, something sweepstakes casinos circumvent by taking advantage of legal loopholes.
Finkel stated New Jersey's gambling laws, most products of the mid-20th century, were never designed to compete with the sophistication of modern-day digital gaming websites. In his view, new forms of online gaming outpace antiquated rules, letting operators use outdated laws to the disadvantage of consumers and competitors to run what he described as illegal businesses.
Eric Shuffler, who represents the Sports Betting Alliance and whose members include online gaming entities like Fanatics, DraftKings, and BetMGM, testified sweepstakes casinos are a severe threat to the regulated gambling infrastructure. He denigrated the industry model, which evades licensing, regulation, and taxation but emulates the experience of online casinos.
Shuffler described how these websites let consumers buy virtual currency for entertainment purposes and then reward customers with sweepstakes coins that are accepted at casino-like games. These prizes are typically convertible to real-world rewards or cash equivalents.
He grumbled about the absence of protections for players, financial indemnity, and unregulated expenditure of cryptocurrency as a medium of exchange.
Sweepstakes casinos walk thin line
Additionally, Shuffler stated sweepstakes casinos employ marketing strategies that would be prohibited for licensed gaming businesses. He highlighted their accessibility to children as a significant concern, noting kids can easily gain entry to social casino sites and participate in games without oversight. New Jersey's legislative effort tracks broader national momentum to ban or license sweepstakes casinos. Connecticut introduced a comparable bill last month.
Other legislatures—New York, Maryland, Mississippi, Louisiana, Montana, and Michigan—introduced or considered similar bills. Meanwhile, Florida lawmakers failed to pass their own anti-sweepstakes law this week.
The Garden State proposal does contain a carve-out. It would allow sweepstakes casinos if there's a free method of entry or if access is tied to the purchase of either food or soft drinks, not to exceed $20 in value.
This carve-out replicates elements of traditional promotional contests and attempts to distinguish between legitimate marketing promotions and unregulated games.
