Sweepstakes operators can face numerous challenges processing financial transactions if they’re incorporated outside the U.S. Although sweepstakes operators work in a gray area of the market, America has a corporate and legal environment focused within its borders.
When an operator is based offshore and claims on its “about us” page to be based in places most Americans can’t even point to on a map, that usually means state Attorneys General and other prosecutors also tend to frown on such an entity processing withdrawals on behalf of sweepstakes casinos.
The Challenges of Operating From Overseas in America:
America is a country that focuses heavily on the economic environment within its borders, especially when compared with Europe.
Tell an average American that Portugal is served by the Spanish Amazon domain, or that New Zealand doesn’t have an Amazon store and that Kiwis shop at the same domain as Australians, and he or she will probably be surprised.
This isn’t criticism; I don’t mean Americans are self-centered. I mean that the vast majority of online transactions processed by Mastercard, Visa and Amex in America are USD transactions within American borders.
Financial Transactions and The American Business Environment
Try shopping online, even using an American PSP, on behalf of a merchant based offshore, and you’ll notice the friction easily.
I’ve seen firsthand a case where a well-built platform had to pay for a much pricier PSP because the top choice didn’t process American transactions efficiently. The percentage of transactions that were charged successfully was way too low, and the platform was incorporated in Nevada.
That gap before the optimal PSP could process charges caused substantial margin deterioration for a platform running on investors’ money and working hard to break even.
Imagine the problems of charging an American client when your company is based in Costa Rica, at 3 a.m. Chances are the transaction can be denied, especially if the client tops up the account more than once.
Incorporation in America and Legal Representation
Another aspect of sweepstakes operations, whether at the supplier end or operator end, regards legal representation.
It’s a lot easier to get in trouble and provoke a ban on your domain if you “look” like an adventurous foreigner operating from overseas.
Establishing a legal presence, even in business-friendly places like Delaware, shows authorities that “you mean business” when it comes to complying with the limitations of operating a sweepstakes casino, regardless of how much of a gray-area operation it is.
Respecting The Gray Market Concept and U.S. Incorporations
As the gray market doesn’t have clear regulation, the U.S. incorporation is not clearly defined, i.e., how, where, and what kind of company, such as an LLC or other forms of American incorporation.
But it certainly conveys more seriousness to have an American company, a local lawyer, and local employees, in contrast to a “phantom-like” presence from overseas.
If you need more information about best practices for sweepstakes casinos, contact sweeptimes.com for our consultancy services.
E-mail our CEO and Editor-In-Chief, Lucas Pasa Mondelo, at lucas@mondelo.net
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