Will a federal ban on sweepstakes ever happen in the US?
If you’ve been following the rise of sweepstakes casinos in the US, you’ve probably noticed the heat turning up fast. From coast to coast, lawmakers and regulators are sounding alarms, with serious efforts underway to ban these platforms.
The pressure is exceptionally high in states like New York, where a growing push to prohibit online sweepstakes casinos is gathering steam. Across the country, the legal framework surrounding these sites is murky at best. While sweepstakes casinos operate under federal sweepstakes laws, the way individual states interpret and enforce those laws varies widely. That inconsistency has fueled mounting criticism—and swift action.
According to the American Gaming Association (AGA), which has been outspoken about its concerns, these platforms operate in a legal gray area, taking advantage of antiquated laws and operating without the oversight of regulated iGaming or sportsbook operators. Lawmakers have already started the process of outright banning them in places like Michigan and Washington.
States tighten grip on regulations
The screws are being tightened in other states. SB5935 is a bill that has passed the Senate committee in New York. The law could completely prohibit online sweepstakes casino games and impose steep penalties on violators, which could range from $10,000 to $100,000 (€9,300 to €933,000).
Meanwhile, Mississippi, Maryland, and West Virginia are either considering or have implemented similar measures. In Idaho, sweepstakes casinos aren’t banned, but cash prize payouts are strictly prohibited—effectively limiting their appeal.
These regulatory crackdowns are already causing ripple effects. One of the industry’s major players, High 5 Casino, has announced it will cease operations in New York by April 2025, signaling just how serious this shift has become.
With the legal noose tightening, a big question emerges: Is banning sweepstakes casinos a righteous step? Or could it backfire? To dig deeper, we spoke with Bob Stoddard, Lead Tax Partner for KPMG’s US Gaming Practice, who offered exclusive insights into the growing scrutiny and what it could mean for the future of digital gambling in America.
Sweepstakes crackdown: Expert view
SiGMA: The calls for banning sweepstakes casinos are gaining traction in states like New York and Arkansas. What’s your take on the issue? How might it affect the industry in terms of revenue?
Bob Stoddard: “I think many would agree that if sweepstakes do face broader bans in markets with large population bases, that would likely have a potentially significant adverse effect on revenues generated by sweepstakes operators. For that reason, many are actively watching the ongoing developments in either larger population states where regulators and/or legislators are known to be reviewing the sweepstakes model actively.”
Bob also noted that the current sweepstakes debate feels familiar, echoing the legal battles that surrounded fantasy sports during its early growth phase.
“Many of the key arguments and much of the debate does sound quite similar to what the industry collectively saw during the initial growth of fantasy sports offerings, including similar Attorney General announcements, Cease & Desist orders, legal action, etc. With that in mind, one cannot help but wonder whether we will ultimately arrive at a similar result for sweepstakes,” He added.
SiGMA: Regulatory-wise, it’s often stated that online casinos are safer than sweepstakes casinos. Is this really the case—or just an exaggeration?
Bob Stoddard: “Advocates for sweepstakes point to their KYC and AML processes, use of well-known payment suppliers that also support the regulated industry, recent changes in age restrictions, use of certified game content, more clear/transparent Terms of Use, etc., coupled with what seems to be a clear and significant market demand for more iGaming in the US based upon the revenues generated by social and sweepstakes gaming platforms, even including states that already have regulated iGaming (e.g. PA).” He added.
However, he acknowledged that not everyone sees it that way.
“Conversely, many stakeholders in the regulated gaming industry view sweepstakes as fundamentally no different than an illegal iGaming operator utilising a creative currency model and novel legal argument designed to fit within various state sweepstakes laws that were often enacted decades ago and did not contemplate the legal arguments being made today.” He added.
SiGMA: Problem gambling is a major reason behind these calls for banning sweepstakes. But is banning really a solution after all?
Bob Stoddard: “The debate over banning sweepstakes raises questions about the effectiveness of responsible gaming measures in addressing broader concerns within the industry. Legalising OSB and iGaming with increasingly stringent requirements may create additional customer friction, pushing them towards unregulated or black-market options that may lack proper safeguards or may not fully adhere to equivalent regulations and protections to which regulated operators are subject.” He added.
He warned that well-intentioned regulations can sometimes produce unintended outcomes.
“Gaming regulators face the constant challenge of simultaneously balancing legitimate player protection concerns, holding regulated operators accountable for responsible gaming failures, and attempting to shut down illegal operators, but may also inadvertently make it easier for consumers to turn to gray and black-market products due to lower barriers to entry and reduced friction.” He added.
Musk, Bally’s and Trump: Sweepstakes connection
Amid all the calls to clamp down on sweepstakes casinos, there’s one more aspect that can’t be ignored. While many are pushing for stricter regulation—or even a nationwide ban—the likelihood of a full federal crackdown seems slim. One major reason? Reports have surfaced that President Donald Trump himself might benefit significantly from sweepstakes casino ventures.
A high-stakes bidding war is currently underway over who will get the green light to build a new casino in New York City, and it could end with Trump walking away with a $115 million windfall.
Bally’s Corp., one of the contenders, is eyeing a city-owned golf course in the Bronx that used to be operated by Trump’s company.
Back in 2023, Bally’s paid Trump $60 million (€58.2 million) for the rights to manage the 18-hole public course, which sits along the Bronx shoreline where the East River meets the Long Island Sound. As part of the rebranding, the towering “Trump Links” sign was removed, and the venue was renamed Bally’s Golf Links at Ferry Point.
But here’s the kicker: a little-known clause in the deal reveals that if Bally’s secures one of the state’s three coveted casino licenses, Trump stands to receive another $115 million (€101.5 million) in payout.
And that’s not all. Trump’s close ally, Elon Musk, has also shown enthusiasm for the sweepstakes casino space. During the 2024 campaign trail, Musk grabbed headlines after giving away a $1 million (€0.88 billion) sweepstakes jackpot, this can be interpreted as a public nod to the industry’s appeal.
As regulatory pressure mounts, the interplay of political and financial interests at the highest levels complicates the situation. The future of sweepstakes casinos in the US remains unclear. One thing’s clear: the sweepstakes casino debate isn’t fading into the background anytime soon.
