Sweepstakes on the Retreat: Can the Dual-Currency Model Weather the Storm?

AB831 The Final Blow for Sweepstakes?

A recent American Gaming Association (AGA) study revealed that 90% of sweepstakes casino players view the activity as gambling. Even more telling, 69% of respondents described sweepstakes casinos as platforms for real-money betting. To them, sweepstakes operators are no different from traditional online casinos.

“The takeaway is simple: consumers overwhelmingly recognize sweepstakes casinos as gambling—that’s what they’re playing for, without realizing these operations are completely unregulated with none of the consumer protections found in the legal, regulated industry,” said Tres York, AGA’s Vice President of Government Relations, in a statement to US iGaming Hub.

The sweepstakes operators’ arguments are starting to crumble. While the dual-currency model once provided a relatively sturdy shield against regulatory scrutiny, the technical nuances of their operations now seem to matter less and less. An avalanche has begun, and it could spell disaster for the sweepstakes industry.

The latest blow, California’s AB 831, awaits Governor Newsom’s signature. The bill criminalizes operating or promoting sweepstakes casinos, with penalties of up to one year in prison and fines reaching $25,000. It extends liability to third parties that “knowingly and intentionally” support these operations. According to Eilers & Krejcik’s industry analysis, California accounts for $2.4 billion of the $14.3 billion U.S. sweepstakes market. That’s the steep cost of Newsom’s potential signature.

Eilers & Krejcik has already downgraded its 2025 U.S. sweepstakes market estimate from $4.7 billion to $4 billion, projecting a further 10% drop to $3.6 billion in 2026, driven partly by “reduced marketing spend in states like California due to impending bans” and “rising customer acquisition costs in a shrinking market.”

“Regulators and policymakers need to keep taking enforcement actions and close loopholes to protect consumers,” York emphasized.

Signs of retreat are already clear. High 5 Casino announced it will cease all California operations by mid-September. Major game providers like Pragmatic Play have pulled their entire portfolios from the U.S. sweepstakes market, while others, including Playtech, Evolution, and Skywind, have withdrawn content from California sweepstakes casinos. As a result, Stake.us, an industry giant, lost games from 11 providers for California players.

If AB 831 passes, California’s 39 million residents will join those in New Jersey, Connecticut, Montana, and Nevada, cut off from sweepstakes casinos. The addressable market will shrink dramatically.

A domino effect is underway, and stopping it may be nearly impossible.

What Are the Charges Against Sweepstakes?

Once the dominoes start falling, rational arguments may lose their weight. Let’s break down both sides.

The AGA study cited earlier frames sweepstakes casinos as gambling hidden behind a flimsy facade. If accepted as gambling, their unregulated nature becomes a glaring issue. “The real question isn’t whether sweepstakes sites are gambling; it’s whether we’ll keep pretending that calling it something else makes it different. A teddy bear by any other name,” Jeff Edelstein wrote in Casino Reports.

Beyond regulation, critics point to inadequate consumer protections. Unlike licensed operators, sweepstakes casinos lack mandated responsible gaming tools. There’s also the charge of deliberate deception. “Sweepstakes operators have resisted meaningful consumer safeguards and continue to spend hundreds of millions on marketing that misleads players,” York told us.

Aggressive marketing, far exceeding what regulated operators are allowed, is another sticking point. Estimates suggest sweepstakes operators dominate the ad space, accounting for over half of casino-related ads seen by consumers last year.

Exploiting legal loopholes also leads to financial losses from unpaid state taxes. In Louisiana, VGW and WOW Vegas face a $44 million lawsuit for unpaid taxes.

Tribes are another key front, arguing that sweepstakes infringe on their exclusive rights to offer casino gaming on tribal lands. The California Nations Indian Gaming Association (CNIGA) and the Tribal Alliance of Sovereign Indian Nations have raised these concerns loudly.

How Do Sweepstakes Defend Themselves?

The sweepstakes community’s core defense hinges on the dual-currency model, insisting it’s not traditional gambling. The Social Gaming Leadership Alliance (SGLA) describes their operations as “online social games that use sweepstakes.”

The industry views its platforms as legitimate entertainment that shouldn’t be banned. SGLA argues that a ban “would strip away lawful entertainment, criminalize legitimate businesses, and undermine an industry that, if rules are modernized to regulate and tax it, could boost state revenue.”

Operators and allies criticize the broad scope of proposed laws, which could harm unrelated entities. They also accuse lawmakers of using “gut-and-amend” tactics.

Similar to prediction market advocates, sweepstakes defenders warn that targeting their sector could have wider repercussions for the broader industry.

Specifically on AB 831, the Social and Promotional Games Association (SGPA) argues that the bill’s failure to define key terms like “dual currency system” risks ensnaring mainstream promotions from companies like Starbucks or Robinhood. SGPA calls this evidence of AB 831’s “poor construction” and predicts a cascade of “unintended consequences.”

What’s the Real Picture?

As noted, the argument that sweepstakes aren’t gambling in the classic sense is losing ground. The debate is growing muddier, drifting from the core issues. With AB 831 looming in California, the sweepstakes community is attacking the bill’s wording. Meanwhile, tribes are divided, with some, like Big Lagoon Rancheria, calling for “meaningful tribal consultation” and criticizing the lack of dialogue on matters impacting tribal interests.

The bill’s progress through the legislature signals that, despite opposition from sweepstakes groups pointing to its flaws and tribal divisions, California, like New York, Mississippi, Montana, Connecticut, and New Jersey, has already dealt its cards. Sweepstakes are set to lose another vital market. A similar ban is under early consideration in Massachusetts.

Of the two disruptive forces in online gambling, sweepstakes face fiercer resistance than prediction markets, though they’ve been on regulators’ and experts’ radars longer than Kalshi or Polymarket. For now, sweepstakes are on the retreat. Advocacy campaigns have failed to gain traction, and the industry may need to step back and reinvent itself to survive.