How Sweepstakes Casinos Intrude on Legal Gambling Operators: Expert Opinion

Sweepstakes casinos have already paved their way in the US market, becoming a regular choice for millions of players. The increasing spread of sweep casinos poses a threat to the legal gambling market in the country as sweepstakes platforms circumvent legal norms and operate without state supervision.

Legal experts, James Meggesto, a partner at Holland & Knight LLP law firm, and his colleague associate Samir Patel have analyzed the current situation and challenges for the regulated gambling market in the sense of sweepstakes casinos and their increasing operation.

Legal Loophole and Open Questions:

America has fought for the legalization of online gambling for a while now, and several states have already issued licenses to qualified operators. At the same time, tribal casinos have a huge contribution to the local economy through regulation and tax collection. Sweepstakes casinos are a threat to legal operators who have eagerly waited for the green light from the regulator to start providing their services. The recent spike in social casinos is not a thing that stakeholders want to see in the market, and now they are stepping up to protect their operation.

Legal Initiatives Against Sweepstakes Casinos:

State attorneys general from Michigan, Connecticut, Delaware and Washington have joined their forces and sent cease-and-desist letters to operators in the sweepstakes market, emphasizing their concern over illegal gambling.

The first lawsuit is filed for the Middle District of Florida, in the case – Knapp v. VGW Holdings Ltd and the trial will take place later this year. This will be a huge challenge for the sweepstakes casino model in Florida.

The plaintiff, Eric A. Knapp claims that VGW Holdings, which stands behind well-known brands Chumba Casino and Luckyland Slots violate Florida’s gambling regulations by providing games that require users to buy virtual coins and win real money prizes.

At the same time, plaintiff seeks VGW’s accountability for illegal gambling activities organized in the form of sweepstakes and violating Florida’s consumer protection law and gambling statutes.

Alleged Violations:

According to Chapter 849 of the Florida Statutes, it is not allowed to engage in unlicensed lotteries and any game of chance that includes wagering money or certain value. Based on the plaintiff’s arguments, VFW’s games violate these prohibitions, since players need to pay real money for an opportunity to claim real prizes, despite the company’s attempt to display such transactions as sweepstakes masking their gambling nature.

Moreover, that plaintiff insists that the VGW has also infringed the Florida Deceptive and Unfair Trade Practices Act (Section 501.201 of the Florida Statutes), which forbids “unfair, deceptive and unconscionable” business practices.The complaint said that the VGW mislead customers by presenting their games as legal sweepstakes.

Freemium Model or Two Coins System in Sweeps Casinos:

VFW is famous for using a two-coin model, freemium, typical for sweepstakes casinos. It involves one sort of virtual coin, which players get for free or buy from the platform’s store.

Players can use coins for playing casino-like games. Apart from virtual coins, operators also provide sweep coins to users, which they acquire by signing in, via particular promotion or as bonus offer for purchasing virtual coins. Sweep coins are redeemable and users can exchange them for real money at a rate $1 per sweep coin.

VGW claims that the freemium model is different from traditional gambling as players don’t wager real money, but they purchase entertainment in the form of gold coins and get access to sweepstakes fun through sweep coins. The company is trying to defend itself in several similar cases by arguing that its operational model falls under a sweepstakes system rather than illegal gambling.

What Are Illegal Games of Chance

Florida is one of the US states that benefits from a three-part test to determine whether a game Presents a lottery. Based on the Florida Supreme Court, a lottery must include three elements: (1) consideration, (2) random selection by chance, and (3) a prize. If the game in the sweepstakes casinos fulfills all these criteria, it’s a lottery and falls under FL gambling law. The opposite is also true, so if one element is missing, it’s not a lottery.

VGW’s will probably defend itself by claiming that players do not need to wager consideration to access their online casino, which implies they don’t need the lottery test.

Tribes Against Sweepstakes Casinos in California:

Tribes have also stood up against sweepstakes in California. They formed a coalition to deal with the rise of illegal sweepstakes operators like VGW. Tribal leaders claim that unlicensed casinos compete unfairly with legal gaming and prevent the state from collecting tax revenues that are important to the community.

The tribes seek stricter application of gambling laws and explicit regulations to cease the spread of unregulated casinos. They believe that sweepstakes games ruin the integrity of the legal market, hurting the job market, local economies and the state’s ability to gather gaming revenues.

When it comes to Florida, the certain requirements for sheltering the Seminole Tribe’s exclusivity in gaming are part of Florida Gaming Compact of 2021 signed between the tribe and the state. Based on this agreement, the state is required to enforce this exclusivity by utilizing the Florida Gaming Control Commission to close illegal venues and operators across Florida.

If the state keeps the exclusive rights for arranging gambling market, it will also help tribes keep the benefits of operation and the state gets its revenues based on the compact economic benefits. One of the examples when the Seminole Tribe kept $350 million occurred because the state didn’t take appropriate measures to grant the tribe’s exclusivity which offered special banked card games such as blackjack.

At the moment, there’s an urge to protect tribe’s rights including those from other states such as Oklahoma and California.

Final Say

The exiting case The Knapp v. VGW Holdings Ltd. shows how critical gambling states need clarification and enforcement of their gambling laws as a reaction to growing sweepstakes gaming models. If sweeps operations continue to extend, they will question traditional interpretations of gambling rules, opening key questions about what’s legal and what’s not.

If the court rules against VGW in the most recent case, this could set a precedent in Florida showing the state’s readiness to address sweepstakes casinos’ concern and strictly protect regulated gambling operators while keeping full integrity of national laws. This could also invoke interest of Congress to adopt legislation setting the clear line between sweepstakes contests and sweepstakes casino gaming.

It’s still to be seen what the latest case will bring to Florida and the overall gambling community in the United States, as sweepstakes become a hotter topic than ever. If Florida succeeded in its endeavours, it could serve as a model for other states to start fighting for a fully regulated and fair gambling industry.

Sources:

• HK Law( 2025, February 21). A Look At Sweepstakes Casinos’ Legal Issues In Fla., Beyond. Retrieved from https://www.hklaw.com/-/media/files/insights/publications/2025/01/a_look_at_sweepstakes_casinos.pdf?rev=74891de109354440b1fdb7057c96cb96&hash=C388A1C2599D1931D7BA404968AE99E2