‘The Pulse’ on Sweepstakes Casinos Amid US Legal Scrutiny & Model Shifts

Editor’s note: CasinoBeats is publishing a recurring feature called “The Pulse” that analyzes the current state of a specific “beat” in the gaming industry. This installment focuses on sweepstakes casinos, which are undergoing intense legal scrutiny by state regulators and lawmakers.

Sweepstakes casinos have come under intense legal scrutiny of late, and with constant changes in state laws, it can be hard to keep up with the industry. Here, we offer “The Pulse” on the industry.

Founder of Richt Law Firm, Harry Richt, told CasinoBeats, “The ‘sweepstakes casino’ model is facing a coordinated, multi-front legal challenge that is rapidly redrawing the U.S. market map. From my vantage point, operators need to track three distinct risk buckets simultaneously: legislative bans, attorney general enforcement under existing law, and private class-action litigation.”

Companies Shift to Prediction Markets

Richt and fellow lawyer Stephen Piepgrass believe the new emerging industry of prediction markets is causing operators to alter their business models.

Richt said, “The most interesting shift in my opinion…is the migration of both operators and customers into the burgeoning ‘prediction market’ space. As these platforms navigate the tension between CFTC federal oversight and state-level gaming laws, they are opening a new gray area that is increasingly siphoning market share from the sweepstakes casino model.”

Sweepstakes operator MyPrize partnered with prediction market Crypto.com at the end of last year, while Novig raised $18 million in funding for its platform, which combines sweepstakes and prediction markets.

“For operators, this is increasingly a ‘pivot or perish’ moment. Those who read the regulatory trajectory clearly and adapt their operational and compliance frameworks will be the ones most well-positioned to remain viable operators when the dust settles,” said Richt.

Regulators Also Shifting

The regulatory focus on prediction markets can also benefit sweepstakes casinos, according to Piepgrass. Experienced in the gaming industry, he told CasinoBeats, “In 2026, I think sweepstakes casinos will continue to be beneficiaries of the current focus of the industry on prediction markets.”

As licensed sportsbooks set up their own platforms, Piepgrass believes this could create a break in the alliance among sportsbooks, casinos, tribes, and other traditional gaming operators.

These groups had been united against sweepstakes casinos, but “The rapid development of prediction markets has disrupted that alliance, with sports wagering platforms embracing the opportunities presented by prediction markets while casinos, tribes, and other traditional gaming operators oppose them,” said Piepgrass.

He added, “I’m not suggesting that state regulators cannot ‘walk and chew gum’ at the same time, but they do have limited resources. State regulators, and especially state attorneys general, often marshal those resources to address the issues that are foremost in the public conversation. Today, those issues all surround prediction markets.”

The legal battles between states and prediction markets continue to intensify. Commodity Futures Trading Commission (CFTC) Chair Michael Selig has vowed to defend the industry against state regulators, who he says are overstepping their authority.

Also read: ‘The Pulse’ on Prop Bets & Their Future in American Sports Betting

Lawmakers Continue Targeting Sweeps

The focus on prediction markets can only spare sweepstakes casinos so much, however. State lawmakers remain active in opposing the platforms, with active bills in 11 states.

Piepgrass says he believes “some of those states will pass that legislation and it will be signed into law. The question of which states will pass such legislation and which states will let another legislative session pass by without acting is a tougher one to answer, because it is highly dependent on the idiosyncrasies of each state legislature.”

Indiana appears to be the closest to banning platforms, with both the Senate and House passing legislation. Patrick Fechtmeyer, CEO of ARB Interactive, the company behind Modo Casino, says he believes the state should regulate and tax the industry, rather than implement an economy-stifling ban.

Fechtmeyer told CasinoBeats, “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. “

Bill Updates

Here is an update on the status of the legislation bans proposed in each jurisdiction:

• Florida

The House Commerce Committee approved HB189. The bill, which increases penalties for illegal internet gambling, will now move to a full vote on the House floor. If approved there, it will be up to the Senate to progress the legislation, which also targets game centers that offer illegal slot machines.

• Hawaii

SB3281 primarily seeks to ban “fish games” in the state, but also includes language about “sweepstakes gambling machines and similar devices.” This could be used to target both online operators and physical machines. The bill remains in committee.

• Indiana

The state is on the verge of prohibiting platforms. HB1052 passed the House and Senate. The bill proposes an outright ban on platforms utilizing a multi-currency system to facilitate casino-style games. As amendments were made in the Senate, the legislation will move back to the House for further approval.

• Iowa

Iowa’s House Study Bill 586 was approved 20-2 in a committee vote on February 11. A companion, Senate Study Bill 3040, has since been changed to SF 2289, and a committee report has recommended that the Senate also approve the legislation. The bills both require further votes to be enacted. If passed, the legislation will not explicitly prohibit sweepstakes casinos, but will empower the state’s gambling regulator to take action against operators, such as issuing cease-and-desist letters.

• Maine

Senate Bill 2007 has not made any progress since its introduction at the end of last year. It remains in the Joint Veterans and Legal Affairs Committee. With the state legalizing online casinos, lawmakers may want to clamp down on operators that take users away from licensed platforms.

• Maryland

SB112 had a hearing scheduled for the end of January, but has made no progress since then. The bill proposes banning multi-currency gaming platforms, with offenders facing up to 3 years’ imprisonment or fines of up to $5,000.

• Mississippi

As of last year, the Senate unanimously approved a ban on sweepstakes casinos in a 51-0 vote. It has now been passed to the House. Last year, the House added an amendment to legalize online sports betting, but the Senate rejected it. This year, the House has passed a separate bill focused on sports betting, which could allow the sweepstakes ban to be enacted.

• Oklahoma

Senate Bill 1589 was introduced at the start of February as the new legislative session opened. The bill targets the dual-currency model of sweepstakes casinos and, if passed, will come into force in November this year.

• Tennessee

House Bill 1885 is scheduled for a committee hearing next week. It defines an online sweepstakes game as a platform that utilizes a virtual-currency system, allowing players to engage in “gambling of any kind.” The state has already been active in issuing cease-and-desist letters to companies, leading to an exodus last year.

• Utah

HB 243 passed the House but stalled in the Senate. The bill would have clamped down on “fringe gambling”, including sweepstakes casinos. However, Senators rejected the proposal, arguing that the definition of fringe gambling is too wide. There were concerns that legitimate businesses may be affected, and it could lead to tensions with federal laws.

A consumer protection bill, SB38, could target sweepstakes casinos. It would empower the Division of Consumer Protection to take action against platforms whose business models involve virtual currency, promotional credits, prize schemes, or similar digital inducements. The Senate approved the legislation, and it had a favorable recommendation in the House Business, Labor, and Commerce Committee.

• Virginia

Lawmakers shelved SB579, a bill that would have made sweepstakes casinos illegal. In a hearing, Sen. Bryce Reeves, who introduced the legislation, said it needed more consideration. The state’s lottery will compile a report, and the bill may be considered next year.

Meanwhile, both chambers have passed bills proposing to legalize online casinos. The legislation also includes text that explicitly categorizes sweepstakes casinos as “illegal internet gaming.” Operators would face civil penalties of $100,000, rising to $250,000 if deemed to be operating unlicensed sweepstakes casinos.

What States Have Banned Sweepstakes Casinos?

The 11 states with active legislation that could prohibit sweepstakes casinos could join the seven that passed laws against the platforms last year. Richt said, “The legislative tide has turned aggressively. With New Jersey, New York, California, and other states passing explicit bans that took effect in 2025 and early 2026, the ‘dual-currency’ loophole is closing in the nation’s largest markets.”

The states that have already passed bans include:

• California
• Connecticut
• Idaho
• Montana
• New Jersey
• New York
• Washington

Fechtmeyer says a ban on operators is only helping offshore gambling platforms, stating, “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.”

Other gambling regulators claim the platforms are already prohibited by law. In Louisiana, Gov. Jeff Landry vetoed a bill approved by lawmakers. The state has instead been active in issuing cease-and-desist letters to companies.

As Richt added, “Legislative action isn’t always a prerequisite for a crackdown.” The New York-based lawyer cited the example of Attorney General Letitia James issuing cease-and-desist orders before the state passed legislation banning operators.

Richt continued, “Many regulators are finding that existing ‘illegal gambling’ and consumer protection statutes are already robust enough to target these platforms if the political will is there.”

Illinois has taken a similar stance. The state’s gaming regulator sent cease-and-desist letters to 65 companies earlier this month. Delaware, Arizona, and Pennsylvania have followed a similar path, with most platforms exiting those states.

While in Alabama, there has been a flurry of lawsuits against operators. Richt said these challenges represent another danger for sweepstakes operators, stating, “Beyond the state-led enforcement, a third and perhaps more volatile risk is the surge in private class-action litigation. Plaintiffs’ firms are increasingly successful in arguing that these platforms constitute illegal gambling under various state statutes, leading to large settlements and jury verdicts.”

Looking Forward

Operators have various options. As some have, they could shift their business models towards prediction markets, although that industry is also facing legal scrutiny.

An alternative, Piepgrass says, is to push forward efforts to legalize the sweepstakes model. He said he anticipates sweepstakes casinos to advance “their own efforts to formally legalize, regulate, and tax their operation.” But admits that, “the success of those efforts will largely be based on the particular dynamics of each state where legislation is introduced.”

Fechtmeyer is pushing for that in Indiana and other jurisdictions, putting forward a “Sweepstakes Modernization Act,” which he says would update state statutes for the internet age, including requirements such as prize protection, mandatory audits, and data protection protocols. 

The Social Gaming and Leadership Alliance (SGLA) has pushed for legalization in Florida. The group, led by sweepstakes operator VGW, is attempting to rebrand sweepstakes casinos to “Social Plus,” a new term that defines the category of “freemium social games provided by SGLA partners who are dedicated to player protections, responsible innovation, and integrity.”

The term used will not necessarily change the approach. Piepgrass said, “At the end of the day, I think we will see sweepstakes casinos continue to operate in those states that have not enacted bans. And those operators will continue to fend off challenges by regulators and plaintiffs’ attorneys who view them as a form of illegal gambling.”

Richt, similarly, does not believe the “Social Plus” label will spare sweepstakes casinos legal challenges, concluding, “Looking ahead, I expect the viable geographic footprint for sweepstakes casinos will continue to contract, with the only real question being the pace.”