Sweepstakes Casinos aren’t real-money operators, and in some cases they can only reward players with gift cards, or prefer to do so rather than process fiat currency redemptions.
Gift cards are legally more complex as a form of redemption at a sweepstakes casino than, for example, an ACH money withdrawal.
The same applies to other forms of alternative redemption, such as collectibles like TCG cards, which is a growing trend in some jurisdictions such as New York State.
Sweepstakes Casino trade-offs: Is it Better for the Casino to Process Gift Card Redemptions?
The short answer is potentially, yes. Gift cards are usually offered through partnerships with companies that distribute them. Distributing gift cards tied to a specific retailer is a strong marketing tool, and these companies partner with retailers.
Moreover, a retailer expects someone with a gift card to spend more than just the card’s value.
That said, a sweepstakes casino doesn’t necessarily need to purchase gift cards at face value.
Of course, running a well-oiled platform that efficiently redeems the gift cards is another story.
However, processing fiat currency withdrawals comes at a cost (after converting alternative currencies (tokens) like fun coin and sweep coin). Payment Service Providers in the sweepstakes environment can represent a big expense for operators.
I’ve seen firsthand a newborn platform (not an operator, a supplier) have to pay a minimum daily volume to keep a new contract running with a PSP.
To avoid contract termination due to low processed volume, the directors had to use their personal credit cards to pass money through the PSP gateway before the newborn company had its bank accounts sorted and an actual financial flow in place.
And even when everything is up and running with PSPs, it’s crucial to have more than one PSP, and backup options can come at a salty price in terms of commissions and minimum volume.
If a sweepstakes operator isn’t incorporated in America, PSP integration becomes exponentially more complicated.
Gift Cards and Alternative Forms of Redemption: Not a Necessity in Europe and Real-Money Operations
Gift card redemptions generate numerous complications for a casino operation. Instead of just focusing on running a smooth financial operation, including choosing good PSPs, monitoring fraud attempts, and complying with Anti-money laundering regulations, the IT implications of integrating gift card partners add new layers of complexity to the operator’s front end and back-office database, not to mention front-end UX/UI and even back-office UX/UI.
In iGaming real-money operations, that friction and headache simply don’t need to exist. When a casino can stick to the usual business model of receiving deposits and processing withdrawals, operations are far more streamlined compared to the world of sweepstakes casinos.
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