ARB Interactive CEO Patrick Fechtmeyer: Indiana Should Tax & Regulate Sweepstakes Gaming

Indiana wants to ban sweepstakes gaming. ARB Interactive co-founder and CEO Patrick Fechtmeyer wants Indiana to regulate it instead. ARB Interactive owns Modo Casino and recently acquired Publishers Clearing House (PCH).

When legislators signaled they were moving forward with legislation to close the door on sweepstakes-style gaming platforms, Fechtmeyer traveled to Indiana to make the case himself. 

Fechtmeyer’s pitch was direct and to the point: regulation, not prohibition, would protect consumers, capture tax revenue, and keep younger users from taking their dollars to offshore sites. Lawmakers weren’t convinced, but Fechtmeyer isn’t backing down.

What’s at stake is HB 1052, a bill that would classify sweepstakes-style games as illegal gambling under Indiana law. If enacted, the Indiana Gaming Commission could impose civil penalties of up to $100,000 on operators or individuals who knowingly offer these games in Indiana.

A few days after the hearing, Fechtmeyer spoke to CasinoBeats about what he thinks Indiana should do instead: regulate the market, set clear rules, and tax it.

On February 18, the Indiana Senate passed an amended version of HB 1052, sending the bill back to the House for concurrence before it can move to the governor’s desk.

As other states weigh similar bills, Indiana’s debate has hit a familiar crossroads. Do policymakers treat sweepstakes as an end run around gambling laws, or as a digital-first product category that needs its own rules?

Fechtmeyer argues the answer is in the incentives. A ban, he said, doesn’t eliminate demand. It just changes where the demand goes.

Sales Tax Model Instead of Prohibition

During our conversation, Fechtmeyer said his team and industry allies already have a plan for how Indiana could bring sweepstakes platforms into its state-regulated system: register operators, collect a fee, and apply sales tax to purchases tied to the platforms’ virtual currency packages.

“Specifically in Indiana, we proposed, the SGLA [Social Gaming Leadership Alliance] proposed, a framework where companies can basically register, pay a fee, and then there’s a sales tax on top of the gold coin packages that are purchased,” he told CasinoBeats.

Fechtmeyer brought that argument to lawmakers when he testified before the Indiana legislature on HB 1052: “I’m here not to defend a loophole or argue for deregulation; I’m here to advocate for clear modern rules that reflect our digital reality.” 

In his view, there’s a mismatch between older sweepstakes laws and what today’s online social gaming platforms offer, leaving regulators to interpret rules never intended for this kind of product.

“I’ve argued for this idea of modernizing sweepstakes laws. Sweepstakes laws were written a long time ago, before the internet age had ever come about, mainly for mailing stuff in and other promotions that don’t exist now with digital economies and digital tokens. All these things that just didn’t exist are not explicit in sweepstakes law, so it leaves room for a lot of interpretation,” he said.

A policy win from where Fechtmeyer is sitting would be to modernize the legal definitions, then tax the transactions that already exist at scale. And he sees updating existing laws as the easiest path for states to build a framework to regulate the market and collect revenue.

He pointed to an estimate from the SGLA that a regulate-and-tax model could generate more than $20 million a year for Indiana and said he believes the number likely doesn’t capture the full market. 

The SGLA is an industry group representing “social plus” sweepstakes-style gaming operators. The alliance has pushed for Indiana to regulate the industry rather than pass an outright ban. 

“I think that number is a conservative estimate. My understanding is that it’s based on the market participants in the SGLA, and that specific number was brought forward by the SGLA. I think there’s a lot of room for that number to grow as the market matures. But I think that $20 million is honestly conservative for the size of the industry,” he said.

‘It’s Not Going Away’ & Offshore Migration Problem

Fechtmeyer warned that when states like Indiana move to ban sweepstakes casinos, that prohibition doesn’t remove consumer access to this type of gaming. Instead, it pushes players to platforms the state can’t oversee, regulate, or meaningfully police.

As he put it: “It’s not really a question of, ‘We ban this industry, and it’s going to go away.’ It’s, ‘Where does that money shift to? How do you capture that?’” 

He spoke to his own experience, observing how industries are marketed to younger audiences and how often those sponsorships come from offshore operators.

“Growing up in the digital era, I’ve watched streamers. Ninety percent of them have gaming sponsorships. And of that, 90% are offshore gaming sponsorships,” he said.

That’s why he thinks the real consumer-protection risk isn’t that sweepstakes exist. It’s that bans can make the least accountable operators more attractive.

Pointing to California, Fechtmeyer said, “If you look at a state like California banning this, the people celebrating the most are probably not the San Manuel tribe, who lobbied heavily for a ban. It’s probably actually offshore operators.”

California: A Cautionary Example

Fechtmeyer returned to the topic of California several times, citing it as a case study of what can go wrong when sweepstakes casinos are banned. He thinks it would be helpful for Indiana lawmakers to take a closer look at what unfolded after sweepstakes operators were pushed out of the California market before moving forward with a ban. 

“I’ve always advocated for, ‘Let’s look at what happened to California.’ We see players shifting to offshore operators, and so I’m just like, ‘Hey, let’s go take a look,’” he said.

If Indiana’s bill takes effect as written, he expects a familiar outcome: consumers look for alternatives, and the state loses both visibility and leverage.

“The main risk is that offshore operators won’t stop. You’ll have no ability to capture any tax revenue. More importantly, you’ll have no consumer protection. You’ll just have a shift of consumers,” he said.

The bottom line for Fechtmeyer is clear: “The spot I believe Indiana will end up in if they pass this bill is that the consumer will be worse off, the state will be worse off, and everyone kind of loses when bills are passed like this, in my opinion.”

The Problem With an Analog Enforcement Mindset

One of Fechtmeyer’s key points is that the policy instinct behind sweepstakes bans often comes from an analog model: ban something, seize something, problem solved. The problem is that’s not how things work in the digital world.

“When it comes to digital economies, you ban something, but the internet is frictionless, so it’s not difficult for someone to go to the next website,” he said.

He talked about the generational gap in how many young people browse the internet and how some policymakers picture enforcement, comparing it to removing gambling kiosks. 

“The state should first look at enforcement as, ‘What are our realistic possibilities of enforcing this ban and protecting consumers?’ … It’s not like there are kiosks you can wheel away. It’s a frictionless, in-the-cloud ecosystem … even sitting in a Senate or House session, you can just pull up an offshore operator on your phone.”

And that disconnect is part of the reason he thinks lawmakers rarely get around to having the consumer-protection conversation. It’s not because they don’t care; it’s that the debate moves too quickly to a yes-or-no outcome.

“Lawmakers really aren’t weighing it, because there’s just not a lot of education,” he said. “The advocacy is newer for social casinos and sweepstakes, so when you ask how lawmakers are weighing consumer protections, I don’t think they really are. It’s like you walk into a room and they’re like, ‘What sweepstakes?’ … ‘So-and-so told me to ban it, so I’m just going to stamp this letter.’”

Still, Fechtmeyer is cautiously optimistic and believes that as lawmakers learn more over the next year, they’ll be more willing to slow down and treat sweepstakes as its own model. He compared sweepstakes to the relationship between daily fantasy sports (DFS) and sports betting.

“I think once they do weigh it, they’ll realize that it’s a different model than iGaming. The actual numbers are different, the type of user is different, and so it deserves its own kind of subsection. We kind of consider it like DFS to sportsbook,” he said.

From Mailers to Mobile: PCH as ‘Legacy’ Example

PCH was his go-to example for what he sees as the core problem in this debate: laws built for mail-in promotions now being applied to digital tokens and app-based games.

Fechtmeyer pointed out that the PCH sweepstakes model predates mobile gaming, even if the mechanics changed when it moved online.

“It started as a mailing company. They would send out mailers, people would fill out the sweepstakes form and send it back, and then they switched over to digital,” he said.

Today, PCH operates as a digital-first business where users play casual games to earn tokens for sweepstakes entries. For Fechtmeyer, that evolution is part of the problem lawmakers are trying to solve with statutes that were written for mailers and entry forms, not digital tokens.

“Even though PCH has been around for 70 years, with the new digital economies and the games, there’s just a lot of work to be done,” he said, pointing to the need for clearer definitions in state law.

Establish Gold Standard for Consumer Protection

Speaking about consumer safeguards, Fechtmeyer emphasized that his company already uses tools that are standard in the regulated gambling market. 

“I’m a big believer in consumer protection, so our company has plenty of protections built in, age verification, AML, geolocation, and responsible play tools that people can easily access,” he said.

And this is exactly where he argues regulation outperforms prohibition. With a regulated model, safeguards can be mandated industry-wide. However, when bans are in place, consumers are left to navigate between legitimate platforms and unaccountable offshore sites on their own.

In an article published on Medium in January, Fechtmeyer outlined his vision for a “Sweepstakes Modernization Act.” He said the framework would update state statutes for the internet age, including requirements such as prize protection, mandatory audits, and data protection protocols, details that can get lost in the rush to prohibit the industry.

The challenge, he added, is getting lawmakers to engage with those technical details rather than skipping straight to a ban.

“It’s just a matter of getting to that layer of the conversation,” he said. “That’s what we’re offering lawmakers.”

What Success Looks Like

Fechtmeyer framed success as a three-part outcome: consumers can play, users are protected, and the state can collect revenue based on what residents consider fair.

“I would say it’s pretty simple,” he said. “It would be a system whereby players can enjoy these games. They’re safe doing so, and the state is collecting tax revenues.”