Introduction: Maryland’s Fight Against Sweepstakes Casinos
Illegal gambling has become a major news issue in the United States in recent years. While the legalization of sports gambling and online casino gambling in many states has caused the explosion of both industries, illegal gambling remains throughout the country. One form of this is Sweepstakes Casinos, which operate in a gray area between U.S. laws on what is legal and what is prohibited. Nowadays, there appear to be weekly state-by-state legislative updates to ban these platforms from existing legally, and Maryland has introduced two bills to join other states cracking down on their operations.
What Are Sweepstakes Casinos?
Sweepstakes Casinos operate under Sweepstakes laws and are not regulated by each state’s Gaming Commissions. On these online platforms, customers can play a majority of the games they will find offered at their own state’s legalized in-person or online casinos. Those can range from table and slot games to peer-to-peer and virtual poker.
Dual-Currency System
To play at a Sweepstakes Casino, players must acquire Sweepstakes Coins and Gold Coins. These coins can be obtained in several ways, including earning daily rewards, signing up for bonuses, or participating in promotions. These two forms of coins allow these platforms to operate under the dual-currency system. Whereas Sweepstakes Coins allow users to win cash and other prizes, Gold Coins are used for entertainment purposes only, with no prizes or cash rewards offered. Using this dual-currency system allows Sweepstakes Casinos to operate in a legal gray area in states that have regulated real-money online casinos. This system of gambling is being challenged by many states, including in Maine, where lawmakers have already moved to ban dual-currency Sweepstakes Casinos.
Regulatory Challenges and Legal Gray Areas
Sweepstakes Casinos are being targeted across the country for their lack of clear safeguards, among other things, and lawmakers are now stepping in to clarify rules and enforce laws against these institutions. States with regulated casinos have guidelines and laws in place, including responsible gambling resources, tax requirements, and several other consumer protections. Many lawmakers view Sweepstakes Casinos as an unregulated and not properly licensed form of gambling and are challenging the legalities of these operations in an effort to ban them.
Controversies Surrounding Sweepstakes Casinos
Sweepstakes Casinos operate under laws that raise many red flags about what constitutes legalized, regulated gambling. These online platforms use “no purchase necessary” language, which separates them from other gambling services. Due to the wording and the availability of the dual-currency system, Sweepstakes Casinos are facing significant pushback from state-legalized gambling regulators who are challenging what they are and how they fall into a gray area of what is and isn’t considered gambling across the country. Several states have now put bans in place on Sweepstakes Casinos operating within their borders, including cease-and-desist orders against these platforms, as they request that the legal system determine which regulations and laws they should operate under. One of these states is Maryland, which has introduced two bills to ban Sweepstakes Casinos from being offered to residents.
Why States Are Targeting Sweepstakes Casinos
While the growth of legalized gambling has exploded in the country, there are several types of online companies offering what many states consider to be illegal forms of gambling. What separates the two is that every state with legalized gambling has a regulatory framework that offers rules and provisions not only for the operators of these services but also for their customers. States want to not only protect their legal gambling platforms as they provide millions of dollars in generated revenue for them, but also the licensed operators are pushing back against these illegal platforms that are taking away from the regulated businesses that they are running. Following the legalization of sports gambling in many states in 2018, more states have been pushing back against unregulated gambling platforms like Sweepstakes Casinos. Due to this, lawmakers have slowly begun trying to ban these platforms from operating, not only because they believe they violate many existing gambling laws, but also because they can fall short in protecting consumers who use them.
Economic Impact of Tax Revenue
Licensed casinos and gambling institutions are also putting pressure on regulatory bodies to ban these platforms that don’t offer the same consumer protections they are required to provide. Not only are regulatory issues a concern, but the financial impacts these companies have on the state through lost revenue are a key reason states have introduced legislation to ban them. Since they don’t operate under state-to-state legalized gambling regulations, they don’t contribute financially to states’ tax revenues as regulated gambling institutions do.
Maryland Pushes Back Against Sweepstakes Casinos
With the introduction of House Bill 295 (HB 295) and House Bill 1226 (HB 1226) in February, Maryland is looking to both ban Sweepstakes Casinos and enforce legal restrictions on their operators. HB 295 passed the Maryland House of Delegates in late March, while HB 1226 passed the House three days later. Through these two Bills, the state is seeking to join a growing list of states that have restricted or taken action against these platforms through cease-and-desist orders or legislation, including California, Connecticut, Indiana, Montana, and New Jersey. When the Indiana Senate approved its anti-sweeps Bill, it became the first state to allow peer-to-peer poker, putting its own stamp on what it defined as legal. On top of Indiana and these other states with bans, Louisiana has proposed harsher penalties for Sweepstakes Casinos.
Maryland Introduces a Pair of Bills
HB 295 focuses on banning Sweepstakes Casinos in Maryland. The Bill targets platforms that offer dual-currency systems, aiming to prohibit this casino model in the state. The Bill would also prohibit any operator of interactive games from promoting or conducting this type of gambling. If passed, the proposed Bill would charge violators with a misdemeanor, with prison sentences of up to 3 years and fines ranging from $10,000 to $100,000.
What Is HB 1226?
In addition to HB 295, Maryland also introduced HB 1226. The difference between the two Bills is that while HB 295 seeks to ban Sweepstakes Casinos and certain offerings of other online gambling platforms, HB 1226 allows the state to enforce measures against those who operate them and others involved in their production. The state is calling HB 1226 the Maryland Illegal Online Gambling Enforcement Act, and it gives the state the power to enforce its authority against them and other forms of illegal online gambling.
Under this Bill, the state would have the right to enforce measures not only against the operators of Sweepstakes Casinos but also against companies that advertise on them and process payments for these platforms. It also gives the state greater power to issue cease-and-desist orders and to impose criminal and civil penalties on violators of these terms.
Why Both Bills Stalled
With Maryland’s legislative session ending on April 13, neither of these proposed bills made it through the Senate. That means Sweepstakes Casinos will still operate in their current capacity in the state for the remainder of the year. If Maryland eventually bans these platforms, it won’t happen until 2027 at the earliest.
Impacts and Consequences
The fallout over both HB 295 and HB 1226 will be impactful across Maryland regardless of their outcomes. If they pass, the state will have greater regulatory control over these platforms, can ban them, restrict access, and impose penalties on violators. Currently, though, without any laws in place, users of this form of gambling are risking not only their money but also their consumer protections. Through these Bills, lawmakers are trying to close any loopholes and gray areas that Sweepstakes Casinos use to get around current state laws governing state-regulated gambling. Banning this type of gambling could also generate more revenue for the state by driving consumers away from online gambling sites and towards regulated casinos within the state.
Protecting the Consumer
One of the main reasons Maryland and other states are looking to ban Sweepstakes Casinos is their lack of consumer protections. Since these platforms operate in the legal gray area, they are not subject to the same level of regulation as licensed gambling operators. Age verification and safety nets to address potential gambling risks arising from using these platforms are, for the most part, not provided. If and when disputes arise between providers and customers, there are no clear rules in place to protect consumers. With the introduction of HB 295 and HB 1226, Maryland would reduce the risks many users currently face, as there is no governing body for users of Sweepstakes Casinos to bring their concerns to.
What the Future Holds for Sweepstakes Casinos in Maryland
Maryland has joined the list of many states looking to ban Sweepstakes Casinos from operating in its state. The introduction of both HB 295 and HB 1226 is a major step in their efforts to protect consumers and enforce strict laws against platforms that don’t adhere to the state’s regulated gambling laws. While these two bills are currently going through the legal system, both the passing of HB 295 and HB 1226 through the Maryland House of Delegates in March suggests that the state will become next in line to add its name to the growing list of those in the country that are looking to increase their regulatory enforcement when it comes to the illegal and unregulated forms of gambling that these platforms offer. However, the earliest that will happen is in 2027. It should be noted that even if these bills are passed and become law, Sweepstakes Casinos could still move their operations to offshore sites, where they would remain in a legal gray area. However, as more and more states begin to try to govern these gambling markets, the pressure will continue to build on them to stop operating under their current methods.
