NCLGS Proposes Ban on Sweepstakes Casinos and Severe Penalties for Operators

Ban on Sweepstakes Casinos

NCLGS aims to clarify the legal status of sweepstakes casinos, which have operated in a legal gray area in many states. The proposed legislation seeks to define and prohibit sweepstakes operations explicitly.

Sweepstakes have been a contentious topic, often debated in public forums due to the lack of clear regulations. This ambiguity has allowed such casinos to operate in a quasi-legal manner.

According to NCLGS’s definition, sweepstakes refer to any online game, contest, or promotion that simulates casino games, awards prizes based on chance, and enables players to exchange in-game currency for a prize or its monetary equivalent.

The draft suggests empowering state gaming regulatory bodies to investigate and enforce these new regulations. Violations could result in penalties ranging from $10,000 to $100,000 per infraction.

Recommended Tax Rates

The draft also recommends that states impose a tax rate of 15% to 25% on adjusted gross revenue (AGR) from iGaming operators.

This range, according to NCLGS, would maximize state revenue while maintaining a competitive market. A tax rate set too high could deter operators from entering the market or push gambling activities into the unregulated gray market.

Currently, the average tax rate on iGaming in the United States is 19%, excluding Pennsylvania, where online slot games are taxed at a significant 54% rate.

Advertising Guidelines

Chapter 18 of the draft outlines strict advertising guidelines to promote responsible gambling practices:

• Age Restrictions: Advertising should target individuals aged 21 and over and clearly indicate that iGaming is intended for adults only.
• Appropriate Media: Ads should avoid using characters, performers, or influencers who primarily appeal to individuals under 21. Ads should also refrain from appearing on platforms geared toward children, such as children’s television or social media networks.
• Responsible Gambling Messaging: All advertisements must include language promoting responsible gambling, state-mandated disclaimers approved by regulators, and toll-free helpline numbers, such as 1-800-GAMBLER.
• Restricted Locations: Advertising on college campuses is prohibited, and phrases like “risk-free” are not allowed.