A multi-billion-dollar gray market known as sweepstakes casinos
How sweepstakes casinos turned a legal loophole into a multi-billion-dollar business.
Every month, millions of Americans play online casino games, wager real money, and win real cash. Officially, though, these platforms aren’t classified as gambling — they’re labeled as “social games.” We’re talking about sweepstakes games.
How it works
In the United States, online casinos are officially legal and regulated in only seven states. Everywhere else, sweepstakes platforms fill the gap — sites that, by law, aren’t considered casinos at all.
Here’s how it works in practice. You buy Gold Coins with real money. These coins have no monetary value and are meant purely for entertainment, just like in typical social games. But there’s a second layer — Sweeps Coins, which can be redeemed for real cash. They’re usually given as a bonus when you purchase Gold Coins.
That’s the entire loophole. The platforms use two separate currencies: one for play, as in a free mobile app, and another that represents real, withdrawable money.
Sweepstakes casinos use the exact same slot machines you’ll find in fully licensed online casinos. You’re playing the same popular titles — Gates of Olympus, Dead or Alive by NetEnt, or Pragmatic Play, even live roulette and blackjack by Evolution. On paper, though, none of it is considered gambling.
Why it’s considered legal
They look like a casino, talk like a casino, walk like a casino. And they’re trying to tell us they’re not a casino.
The company VGW was founded in Australia in 2010 as a simple social game. When its founder and CEO, Laurence Escalante, studied US gambling laws, he spotted a loophole.
In the United States, sweepstakes are governed by promotional contest rules. For something to be classified as gambling, it must involve three elements: a prize, chance, and consideration — meaning you pay to participate.
Sweepstakes casino operators argue that their model removes that last element. “There’s no payment to play,” they say. “You can enter for free.” Therefore, it’s not gambling — it’s a marketing promotion, similar to McDonald’s Monopoly or Starbucks giveaways.
Technically, they’re right. You can request free Sweeps Coins by mailing a physical letter to the company’s address with specific wording. But that process takes weeks. Buying coins takes five minutes.
Almost everyone chooses to buy.
A multi-billion-dollar industry
In 2024, players spent an estimated $5.6 billion on sweepstakes casinos. Operators kept around $1.7 billion in profit.
For context, licensed online casinos generated $6.1 billion in revenue, and sports betting brought in about $11 billion. Sweepstakes are already competing head-to-head with the regulated market.
Virtual Gaming Worlds (VGW), the company behind Chumba Casino and LuckyLand Slots, reported $4.8 billion in revenue in 2023, with roughly $377 million in net profit.
That success made VGW rich enough to sponsor Ferrari’s Formula 1 team. Others quickly followed. Rapper Drake heavily promoted the platform Stake.us. Michael Phelps, DJ Khaled, and other celebrities endorsed various sweepstakes casinos. Paris Hilton became the face of Wow Vegas.
VGW alone spent $275 million on marketing in a single year. Their ads were everywhere — from Formula 1 and UFC to Twitch and TikTok.
No regulation, no oversight
Signing up for Chumba Casino or Stake.us takes less than two minutes. All you need is an email address and a checkbox confirming you’re over 18. No ID verification. Practically anyone can play.
Sweepstakes casino operators aren’t regulated, don’t hold US gambling licenses, and don’t pay gambling taxes. Even though their target audience is American, most of the biggest companies operate offshore — in Cyprus, Malta, or Gibraltar.
Unlike licensed sportsbooks or casinos, sweepstakes operators have no obligation to provide responsible gambling tools or age verification. There are no self-exclusion options, spending limits, or systems to identify and assist problem gamblers. They’re also not required to fund addiction research or prevention programs.
Advertising is completely unregulated. Sweepstakes are openly promoted even in states like Texas, where gambling is banned altogether.
Still, operators insist they’re doing nothing wrong.
We are fully confident in our compliance with the laws in every jurisdiction where we operate. We don’t see this as a gray area at all, said Tim Moore-Barton, CEO of VGW.
Class-action lawsuits
Players who lost money on sweepstakes casinos have filed lawsuits in more than a dozen states, claiming that operators violated local gambling laws and unlawfully collected money from customers. None of these cases have gone to trial so far, though several were moved to arbitration — as required by the platforms’ terms of service.
Kentucky, however, turned out differently. Some players there managed to recover a portion of their losses, including one woman who said she lost $7,000 on Chumba Casino. In a few instances, four operators in Kentucky, including VGW, agreed to pay users a combined $14.2 million in settlements. VGW agreed to the largest payout — $11.75 million — as part of a class-action case.
The company said it settled the matter to avoid further legal costs and the risk of prolonged litigation.
Regulators fight back
It’s legal — until it’s not.
In May 2024, the American Gaming Association (AGA) urged states to close the sweepstakes loophole. And states began to act.
California, Montana, Connecticut, and New Jersey banned sweepstakes casinos outright. New York issued cease-and-desist orders to 26 platforms. Louisiana did the same to 40. Michigan, Delaware, Maryland, and Pennsylvania followed with similar enforcement notices — and in most cases, the platforms left voluntarily.
Nevada granted its regulators new authority to pursue operators directly, prompting nearly all sweepstakes casinos to exit the state.
At the same time, major game providers started to pull back. In September 2025, following a California lawsuit against Stake.us and several affiliated suppliers, Pragmatic Play officially announced it would stop licensing its games to sweepstakes operators in unregulated US states.
Evolution Gaming followed suit, removing its titles from Stake.us for California users.
Conclusion
More states are expected to shut their doors to sweepstakes operators following the AGA memorandum. The market has stopped growing and is now slowly contracting — but it remains enormous. Major game providers, including Pragmatic Play and Evolution Gaming, have also pulled out, further weakening the industry. The platforms continue to operate in most states, even as regulators tighten the pressure.
Meanwhile, VGW founder Laurence Escalante’s fortune is approaching $4 billion.
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