Matt Kaufman, Managing Director, Digital & Interactive Gaming at Eilers & Krejcik, emphasised his belief that pushback was inevitable towards the growth of sweepstake casinos, although he doesn’t believe cannibalisation from the sector is high.
He joined Brad Allen on the Zero Latency podcast to discuss the American Gaming Association’s call for closer scrutiny of sweepstakes casinos and warning about what it views as the need for more regulation of the sector.
Kaufman insisted that strictly speaking, “sweepstakes are operating within the confines of legal constructions of sweepstakes contests and are acting entirely within their rights”.
He added that this had created a “sticky situation” which had generated much negative coverage from actors who he believes “wish they had a better case against sweepstakes”.
The fact that the companies taking aim at the sweepstake sector chose to do so through the media, rather than going down the legal route, is indicative of the lack of a substantial case, according to Kaufman.
“Just because you are operating a casino-style product in an adjacent space, doesn’t mean that you have the indefinite moat around it in all directions, forever – this is a free market economy,” stated Kaufman.
He added that payment processors requiring KYC and AML checks nullifies a significant amount of that argument against sweepstake casinos.
Looking ahead, Kaufman predicted that states which have embraced online casino regulation are more likely to clampdown on sweepstake casinos, with there being a likelihood that some states follow the lead of Michigan and issue cease and desist orders.
That being said, he emphasised that in the majority of the country, sweepstakes are just legal and compliant businesses and in most states, it is difficult to envisage action being taken.
Kaufman offered his prediction that an increasing number of licensed operators will also enter the sweepstake space, as he revealed that “nothing is stopping them”.
Mixed stances on thriving sector
The views were expressed in light of an AGA policy paper that talked of sweepstakes in scathing terms. It claimed that sweepstakes avoid regulations and licensing through a dual-currency system, but do still “look and play like an online casino”. It warned that the “opaque nature” of such operators could also significantly elevate the risk of bad actors having an opportunity for illegal activity.
The AGA stated: “The lack of regulatory oversight presents many risks for consumers as well as the integrity and economic benefits of the legal gaming market through investment and tax contributions. These sweepstakes-based operators have weak,if any, responsible gaming protocols and few, if any, self-exclusion processes.”
This criticism prompted Laurence Escalante, the owner of the Virtual Gaming Worlds, to also bat back as he dismissed the notion that his business operated outside an established legal framework.
Furthermore, stakeholders from the technology and affiliate marketing sectors have backed the sweepstakes industry as a key growth sector for the US market.
GiG Chairman Mikael Riese Harstad revealed that having signed up one of the largest land-based casino operators to its SweepX platform, the group saw significant appetite from remote operators to be involved in the digital sweepstake space.
Harstad emphasised that the potential for sweepstakes may well open up in other regions and won’t be exclusive to the US.
Additionally, Catena Media group’s CEO Manuel Stan revealed that sweepstakes are the fastest growing vertical for the company and that he believes the business is “very well positioned to capitalise on that growth” in the sector.
Speaking to investors, he said: “Our products are focused on growing the sweeps vertical. I think it’s two-fold. Right now, we see that generally overall in the industry as one of the fastest-growing verticals and we capitalise on it. But also, we position ourselves for post-regulation in the bigger states in the US, where we will be able to have built our databases around our brands to capitalise when the likes of California and Texas will be regulating.”
