New York Attorney General shutters 26 illegal online sweepstakes casinos
New York Attorney General Letitia James (featured in the image above) has spearheaded a crackdown on illegal online gambling, leading to the cessation of operations for 26 online platforms that were functioning as unlicensed sweepstakes casinos within the state.
“The New York Attorney General’s action on Friday represents an important inflection point in the ongoing debate over online sweepstakes casinos. James is the first state AG to be directly involved in enforcing state law against sweepstakes casinos. I suspect that she will not be the last, and this could mark the beginning of the next wave of enforcement actions against sweepstakes casinos, being handled at the state attorney general level,” US-based iGaming attorney Daniel Wallach told SiGMA News.
The practice of converting virtual currency into tangible value was found to be a clear violation of New York’s stringent gambling statutes. Following the Attorney General’s cease-and-desist letters, all 26 of the websites identified have agreed to stop selling sweepstakes coins to residents of New York.
Taking advantage of the grey area
The office of the Attorney General, in cooperation with the New York State Gaming Commission, carried out a comprehensive investigation into such sites. Their conclusions indicated that these sites were operating illegally under state law by engaging people in gambling using virtual money that could be converted into real money or significant prizes. In New York law, any game that provides valuable winnings, either in the form of cash payments or exchangeable digital tokens, is categorically deemed gambling and thus subject to strict state regulation.
One of the biggest concerns was that these sweepstakes websites operated completely outside of regulatory control, which raised significant questions about the integrity of their games, the safety of players’ data, and the overall well-being of players. The business model for these sites was to provide “free play” in the form of bonus tokens, but they actively courted users to spend more virtual coins. These purchased coins would then be exchangeable for actual prizes, essentially duplicating the mechanics and charm of actual, regulated gambling venues. The central issue present was not so much the act of “gambling” per se, but rather the artificial imitation of gambling by using virtual currency that could be exchanged for real value. This practice attempted to utilize a perceived “grey area” in current law. This situation highlights the ongoing challenge regulatory bodies face in adapting to evolving online gaming models that are cleverly designed to circumvent traditional legal definitions. The repeated emphasis in official statements on the use of “virtual coins” that could be “cashed out for real prizes” stressed the state’s legal interpretation: if real value can be obtained, the activity constitutes gambling, irrespective of a “sweepstakes” label. This indicates that these platforms consciously structured their operations to exist in a legal ambiguity, aiming to avoid the stringent licensing and oversight required for legitimate gambling enterprises.
While speaking to SiGMA News, Daniel Wallach also highlighted how this could be a tight rope for the online sweepstake casinos.
“Unlike gaming regulatory agencies which may not have statutory enforcement powers, the state attorney generals typically have vast civil enforcement powers, including the ability to pursue wide-ranging remedies such as injunctive relief, restitution, disgorgement of profits, sequestration of assets, dissolution of business and civil penalties to address fraudulent and illegal activities, all without being burdened by arbitration clauses or issues of standing that often plague private civil party lawsuits.“
Attorney General Letitia James discussed the deep financial and psychological dangers of these unregulated sites. She stressed that such operations exist “without checks or state supervision” and have the potential to “seriously ruin people’s finances”. A particular concern was whether these settings would enable addiction, recruit underage players, and provide openings for a variety of scams.
The position of the Attorney General was seconded by State Gaming Commission Chairman Brian O’Dwyer, who described the sweepstakes casinos as being “unscrupulous, unsecure, and unlawful” and by nature “misleading”. He recommended that all New Yorkers conduct gambling activities only through licensed and regulated operators so as to provide fair play and user protection.
Adding to these issues further, Senator Joseph Addabbo Jr. said he was worried about the “potential exploitation of vulnerable groups, especially young people.” He pointed out that these platforms frequently featured minimal barriers to entry, rendering them attractive yet hazardous for casual users who might not fully grasp the inherent risks. Assemblywoman Carrie Woerner, who chairs the Assembly’s Committee on Racing and Wagering, echoed these sentiments, noting that the sweepstakes model “influences risky gambling behaviours among teenagers” and can “serve as the on-ramp to problem gambling for teenagers”.
Prominent platforms targeted
The platforms that have ceased sweepstakes coin sales in New York include:
- Chanced
- Chumba
- DingDingDing
- Fliff
- Fortune Coins
- Fortune Wheelz
- Funrize
- FunzCity
- Global Poker
- Golden Hearts Games
- High 5 Casino
- Jackpota
- Luckyland
- McLuck
- Mega Bonanza
- NoLimitCoins
- Play Fame
- RealPrize
- Sidepot
- SpinBlitz
- Sportzino
- SweepSlots
- Sweeptastic
- TaoFortune
- Yay Casino
- Zula Casino
VGW, the parent company of prominent sites like Chumba and Global Poker, had already announced its withdrawal from the New York market prior to Attorney General James’s public clampdown.
The Social and Promotional Games Association (SPGA), an industry trade body, expressed “disappointment” with the decision. The association asserted that sweepstakes promotions are “not gambling under federal law and are legally permitted in the overwhelming majority of US states, including New York”. The SPGA claimed that their attempts to engage in dialogue with New York lawmakers and regulators had been “ignored,” arguing that the enforcement action “stifles innovation, limits consumer choice, and disregards the legal status of sweepstakes promotions”. This counter-narrative from the industry highlights the ongoing legal and definitional dispute at the heart of the issue, where different interpretations of “gambling” versus “promotional sweepstakes” clash.
National trend against sweepstakes models
New York’s recent move is not an isolated event, but rather part of a larger, developing national trend toward regulation of sweepstakes-based gambling models. The models have come under growing examination throughout the United States for their reputation of using regulatory loopholes to exploit, typically marketing themselves as promotional games instead of wagering sites.
A number of efforts to prohibit sweepstakes casinos are presently in motion, with Montana having previously voted in favour of prohibition. Additionally, Connecticut and Louisiana states are said to be near approving similar bills. The fact that more than one state is in the process of banning or legalising sweepstakes casinos shows increasing agreement among state legislatures and regulators. This agreement implies that such sites are increasingly being viewed as presenting a serious threat, such as concerns with consumer protection, underage betting, and an overall lack of regulation, and not adequately addressed by current gambling legislation. New York’s high-profile enforcement action, given its market size and influence, could accelerate this national trend, potentially putting pressure on other states to follow suit.
