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Starting an online sweepstakes casino: opportunities and challenges

Jerard Alonzo Profile Picture

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Renzo A.

Date Post

Jan 26, 2024

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The sweepstakes casinos are a growing trend, enabling players to snatch compelling rewards without risking money. Their social gaming elements attract and engage users, enticing them to keep playing and competing for game-specific or monetary prizes.

Although sweepstakes platforms have no deposit or real-money wagering requirements, players can purchase virtual currency (Gold Coins) to win redeemable Sweeps Coins. This unique position within the broader online gaming industry makes them fantastic business opportunities.

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 interested in the online casino market? Are you a business owner looking to diversify into the sweepstakes casino industry? Do you wish to evaluate the viability of funding a sweepstakes casino venture as an investor?

Check out your unique opportunities and the challenges you may face.

Key takeaways: Online sweepstakes casinos operate on a sweepstakes model, allowing players to enjoy sweepstakes casino games without risking money and win game-specific or monetary rewards. That means a favorable legal landscape. However, players can buy virtual currency, unlocking a sustainable revenue stream.

Market opportunities

The most notable market opportunities for online sweepstakes casinos include the following:

  • Untapped demographics – Many online casino enthusiasts don’t want to spend money to play casino-style games. The sweepstakes model gives that opportunity and enables casinos to expand globally.
  • Technological advancements – High-resolution graphics, innovative game design, VR, AR, gamification, mobile casino apps, and mobile-friendly platforms significantly enhance the gaming experience, attracting new and retaining existing players.
  • Favorable legal landscape – Unlike traditional online gambling platforms, sweepstakes casinos can operate legally in all US states except Washington because they don’t involve money.[4]

Still, sweepstakes casinos must adhere to specific laws and regulations.

Legal considerations

The legalities to consider when starting a sweepstakes casino include:

  • Licensing – Sweepstakes casinos typically need a license from regulatory bodies. In the US, those 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 – Every jurisdiction has specific regulations, including data protection laws, responsible gaming practices, and cybersecurity measures.
  • International, federal, and state laws – Operating a sweepstakes casino globally requires adhering to target jurisdictions’ regulations. The same goes for US states where sweepstakes casinos are legal. The only federal law they must comply with is the DMPA (Deceptive Mail Prevention and Enforcement Act), which requires transparency and no misleading or false information in mailings.

Researching the laws and regulations is critical to operating in legal waters.

Technical setup

Online sweepstakes casinos include many technical components. These are crucial for a safe, user-friendly gaming experience:

  • Gaming software – Whether you develop or purchase gaming software, offer diverse casino-style games, including sweepstakes slots, poker online, blackjack online, baccarat, roulette, and other high-quality card and table games. Ensure they use tested and certified RNGs (Random Number Generators) for fairness and integrity.
  • Reliable tech providers – Besides software developers, partner with reputable suppliers of payment gateways, account management systems, customer support tools, and compliance solutions (e.g., for incorporating responsible gaming options and verifying age and location).
  • Platform security – Besides trustworthy web hosting, implement robust cybersecurity measures, including SSL encryption, 2FA (two-factor authentication) or MFA (multi-factor authentication), and network monitoring tools.

These requirements are the tip of the iceberg, so dig deeper to ensure seamless platform functionality that attracts players like a magnet.

Customer acquisition and retention

Speaking of attracting players, apply these strategies, which will also help you retain customers:

  • Marketing tactics – Relevant blog and social media content (e.g., educational articles and entertaining videos), targeted ads, and personalized email campaigns are vital for acquiring new and retaining existing players. Social media influencers, sponsors, and affiliates can help significantly. However, the most compelling incentives are sign-up bonuses, loyalty programs, and referral deals.
  • Customer service excellence – A responsive support team available 24/7 for queries and technical hiccups is crucial. High-quality service and short response time show you care about the player experience.
  • Player engagement techniques – Regular bonuses, promotions, tournaments, giveaways, and social media contests engage players. The same goes for VIP programs, gamification, personalized deals, social media interactions, and frequent game updates.

It all comes down to building a community and making players feel part of it.

Challenges and risks

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

  • Changing regulations – Laws and regulatory frameworks regarding sweepstakes casinos aren’t constant. Casino owners must monitor the legalities in all jurisdictions where they operate to avoid potential problems.
  • Competition – The online casino industry keeps booming, consistently welcoming more competitors. Cutting through the noise can be challenging, especially in jurisdictions with online casino advertising restrictions.
  • The need for constant innovation – Players expect regularly updated game libraries and cutting-edge technology. Platforms implementing AR and VR are springing like mushrooms, compelling other casino owners to follow suit. However, some don’t have the necessary capital for constant innovations.

The good news is you can overcome these challenges with the tips and strategies above.

Financial projections and funding

Here’s an overview of the financial aspect of starting an online sweepstakes casino:

  • Startup costs – Building a website, app, and back-end infrastructure, developing or purchasing gaming software, buying or creating games, obtaining a casino license, and implementing payment processing and security features can cost hundreds of thousands of dollars. There are also operational expenses, including marketing, advertising, and employee salaries.
  • Revenue models – Online sweepstakes casinos generate profits through ads, sponsorships, in-app purchases, and a house edge.
  • Potential funding sources – Besides self-financing or bootstrapping, sweepstakes casinos can forge strategic partnerships with gaming providers or raise capital through crowdfunding. However, equity financing is the best method since many investors are eager to fund platforms in this growing market.

Put everything on paper to evaluate the viability of your venture.

Sustainable practices

Maintaining a sustainable sweepstakes casino is paramount for long-term success, so follow these tips:

    • Promote responsible gaming – Implement time and purchase limits, self-exclusion programs, and other player protection features. Providing educational resources and displaying gambling helplines on your website is also crucial.
    • Ensure transparency – Openly communicate the terms, conditions, T&C changes, winning odds, and other features and policies to avoid misunderstandings and build trust.
    • Engage with the community – An active social media presence, email newsletters, and forum interactions help create and nurture relationships. You can also support charities and local initiatives, enticing your audience to follow in your footsteps. Besides contributing to society and the environment, corporate social responsibility is excellent for standing out.

Building a positive online gaming environment and extending your efforts offline is the key to staying relevant.

Conclusion

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

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

Sources

Jerard Alonzo Profile Picture

The Author

Jerard Alonzo Profile Picture

Renzo A.

the author

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.

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