Starting an online sweepstakes casino: Opportunities and challenges

Renzo A. • Last updated on 28 October 2024

An illustration of a man beside a castle full of flying cards.

Sweepstakes casinos are a growing trend that allow players to win compelling rewards without risking money. Adding social gaming elements draws and motivates users to continue playing and compete for in-game or cash prizes.

Despite the fact that sweepstakes casino platforms have no deposit or real money wagering requirements, players can choose to purchase virtual currency (Gold Coins) in order to win redeemable Sweepstakes Coins. Their unique position within the broader online gaming industry makes them a fantastic business opportunity.

Check out the latest online casino statistics – including market values for social and sweepstakes platforms.

Online casino market aspects	Statistics
Online casino market size (2022)	$63.53 billion[1]
Online casino market growth (2019–2022)	$9.83 billion[1]
Online casino market growth projection (2027)	$152 billion[1]
Social gaming market size (2023)	Nearly $30 billion[2]
Social gaming market growth projection (2030)	$100 billion[2]
Sweepstakes casino market size (2023)	$9.5 billion[3]

Are you an entrepreneur investigating the online casino market? Are you a business owner looking to expand into the sweepstakes casino industry? Or perhaps you are an investor evaluating the potential of funding a sweepstakes casino venture?

If so, learn about the unique opportunities and challenges that come with entering this booming space.

Key takeaways: Sweepstakes casinos operate on a sweepstakes model where players enjoy casino-like games and win game-specific or monetary rewards without risking any money. This means a favorable legal environment. However, players can purchase virtual currency, creating a sustainable revenue stream.

Market opportunities

Some of the most notable market opportunities for online sweepstakes casinos include but are not limited to:

Untapped demographics – There are many online casino enthusiasts who don’t want to spend money to play casino-style games. The sweepstakes model provides this opportunity while allowing casinos to expand globally.
Technological advancements – High-definition graphics, innovative game design, VR, AR, gamification, mobile gaming applications and mobile-friendly platforms dramatically enhance the gaming experience and attract new players and retain existing ones.
Favorable legal landscape – Because they don’t involve money, unlike traditional online gambling platforms, sweepstakes casinos can operate legally in all US states except Washington.[4]

However, there are certain laws and regulations that must be followed by sweepstakes casinos.

Legal considerations

The legalities that need to be considered when starting a sweepstakes casino include the following:

Licensing – Generally, sweepstakes casinos need to be licensed by regulatory authorities. In the U.S., these authorities include state gaming commissions, while the most prominent international counterparts include the UK Gambling Commission (UKGC) and the Malta Gaming Authority (MGA).
Regulatory compliance – Data protection laws, responsible gaming practices, and cybersecurity measures are all specific to each jurisdiction.
International, federal, and state laws – In order to operate a sweepstakes casino globally, it is mandatory to comply with the regulations of the target jurisdictions. The same is true in the US states where sweepstakes casinos are legal. In fact, the only federal law you must comply with is the DMPA (Deceptive Mail Prevention and Enforcement Act), which requires transparency and no misleading or false information in mailings.

To operate in legal waters, researching the laws and regulations is key.

Technical setup

Online sweepstakes casinos contain many technical components. These are critical to providing a secure, user-friendly gaming experience:

Gaming software – Regardless of whether you develop or buy gaming software, offer a variety of casino-style games, including sweepstakes slots, online poker, online blackjack, baccarat, roulette, and other high-quality card and table games. Make sure you use tested and certified Random Number Generators (RNGs) for fairness and integrity.
Reliable tech providers – In addition to software developers, partner with reputable providers of payment gateways, account management systems, customer support tools, and compliance solutions (e.g., for incorporating responsible gaming options and age and location verification).
Platform security – Along with trusted web hosting, implement robust cybersecurity measures, including SSL encryption, two-factor authentication (2FA) or multi-factor authentication (MFA), and network monitoring tools.

These requirements are just the tip of the iceberg, so you need to dig deeper to ensure a flawless platform experience that attracts players like a magnet.

Winning and keeping customers

While we are on the subject of player acquisition, these strategies will also help you with customer retention:

Marketing tactics – Focused blog and social media content (such as educational articles and entertaining videos), highly targeted ads, and personalized email campaigns are essential to attracting new players and retaining existing ones. Using social media influencers, sponsors and affiliates can all help. The most powerful incentives, however, are sign-up bonuses, loyalty programs and referral deals.
Customer service excellence – Having a responsive 24/7 support team available for questions and technical issues is a must. High-quality service and quick response times show that you care about the player experience.
Player engagement techniques – Regular online sweepstakes casino bonuses, promotions, tournaments, giveaways and social media contests keep players engaged. So do VIP programs, gamification, personalized offers, social media interactions, and frequent game updates.

It all comes down to building a community and making sure that players feel like they are part of it.

Challenges and risks

Running an online sweepstakes casino isn’t all fun and games. Here are some potential challenges to consider:

Changing regulations – Laws and regulations regarding sweepstakes casinos are not constant. To avoid potential problems, casino owners must monitor the laws in all jurisdictions in which they operate.
Competition – The online casino industry continues to boom with more and more competitors. Breaking through the noise can be challenging, especially in jurisdictions with restrictions on online casino advertising.
The need for constant innovation – Regularly updated game libraries and latest technology are what players expect. As platforms implementing AR and VR spring up like mushrooms, other casino operators are forced to follow suit. However, some don’t have the capital to keep innovating.

The good news is that you can use the tips and strategies listed above to help you overcome these challenges.

Financial projections and funding

Here’s an overview of the finances involved in starting an online sweeps casino:

Startup costs – It can cost hundreds of thousands of dollars to set up a website, a sweepstakes casino application and back-end infrastructure, develop or purchase gaming software, buy or create games, obtain a casino license, and implement payment processing and security features. Then there are operational costs, including marketing, advertising and employee salaries.
Revenue models – Ads, sponsorships, in-app purchases and a house edge are how online sweepstakes casinos make their profits.
Potential funding sources – In addition to self-funding or bootstrapping, sweepstakes casinos can forge strategic partnerships with gaming providers or raise capital through crowdfunding. Equity funding, however, is the best method as many investors are eager to fund platforms in this growing market.

Put everything on paper for an assessment of your project’s viability.

Sustainable practices

Follow these tips to maintain a sustainable sweepstakes casino for long-term success:

- Promote responsible gaming – Put in place time and purchase limits, self-exclusion programs, and other player protection features. It is also important to provide educational resources and gambling helplines on your site.
- Ensure transparency – To avoid misunderstandings and build trust, communicate terms and conditions, changes to terms and conditions, odds, and other features and policies openly.
- Engage with the community – Having an active social media presence, email newsletters and forum interactions will help build and maintain relationships. Supporting charities and local initiatives can also inspire your audience to follow in your footsteps. In addition to contributing to society and the environment, corporate social responsibility is a great way to stand out.

The key to staying relevant is to create a positive online gaming environment and extend your efforts offline.

Conclusion

Prospective online sweepstakes casino owners may face challenges, but what business doesn’t? However, this thriving market offers many opportunities, including a favorable legal environment and multiple revenue streams.

The future is undeniably bright. Entrepreneurs considering this venture can leverage social gaming elements, innovative game design, emerging technologies and responsible gaming features to attract and retain players and drive long-term growth.

Sources

Author: Renzo A.

Renzo is one of the newest additions to the crew. With a extensive background in data gathering and with valuable insights on casinos, he's your go to person for questions about the iGaming industry. He's worked hard to develop his skill for discovering trends as well as crafting well put together reviews. In his spare time, Renzo is a crypto enthusiast/trader who like to explore the exciting and endless possibilities of blockchain technology.