Articles

Some GSPs, including Pragmatic Play, decided to leave the vertical in America. Potential legal liabilities and litigation costs were major factors behind this decision.

Sometimes, the cost of some opportunities in terms of risk isn’t worth it. That’s what Pragmatic Play decided when leaving the vertical in America.

Back when the decision happened in 2025, America was seeing major volatility in the regulatory landscape for sweepstakes operations.

Eventually, after the big markets of California and New York shut down, some states remained fair game.

However, large operations need to take extra care. Lawsuits are about money, and state-level prosecutors don’t go after GSPs that don’t have the deep pockets to eventually pay for potential penalties and other forms of financial liabilities derived from courts. 

The Names That Attract Legal Problems

Lawsuits, especially in America, are also influenced by media and politics. It’s not uncommon for prosecutors and judges to eventually run for seats in Congress or state legislatures. 

So not only do they tend to go after big names, but also the companies that can eventually pay for whatever wrongdoing is claimed in a lawsuit. 

Suing Stake, Evolution, or Pragmatic Play companies and their peers in terms of size can be effective, while going to court against smaller operators (especially those incorporated offshore), or small studios from foreign jurisdictions is below the radar, as government authorities might win in court, but never see a penny.

Moreover, if the names aren’t easily recognized by the press, those lawsuits draw less attention.

Scrutiny over GSPs and operators isn’t uniformly spread across the industry, just like it happens in any industry or economic activity. 

So risk management at the shareholder and decision-maker level needs to be mindful of the size of a company, whether it is a listed company, and what the legal risks are according to how their brands are perceived in America and globally.

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.

U.S. Sweepstakes Casinos are gray-market operations that don’t work like fully licensed, real-money iGaming operations. The legal loophole that lets them remain active requires suppressing any mention of U.S. Dollars (USD) or other fiat currencies like Euros, Pounds Sterling, and others. 

Any mentions, including symbols like €, £, and of course, $, can become problematic.

How American Sweepstakes Casinos Operate Legally

Essentially, American sweepstakes casinos operate lawfully by complying with other legislation and regulations, including sweepstakes for retail operations and e-commerce.

The full reasoning behind why they can operate without a real-money gaming license is far more intricate, but this is one of the most surprising things for European real-money iGaming operators when they start familiarizing themselves with the American sweepstakes environment.

Even Euros and Pounds Can Generate Compliance Problems in America 

Sweepstakes operators in America try their luck within a very narrow, well-defined gray area of state-level American law.

That bold interpretation of laws and regulations by operators and their lawyers, often in the form of legal opinions, is frequently frowned upon by state attorneys general and local law enforcement.

Government authorities aren’t always interested in working hard to find ways of interpreting laws in the most favorable terms possible for the private sector, especially when it comes to casino-like products like a sweepstakes casino slot game or roulette live room.

That said, if an American sweepstakes operator has a supplier of games that converts, for example, slots that are native real money gaming titles, and a faulty game displays a balance in fiat currency instead of Sweep Coins or Fun Coins (the usual alternative internal tokens/currencies used by the sweeps industry), the end result is that the operator can be penalized on the grounds of compliance.

Even if an operator tries to argue that the studio is foreign, in case of a proven faulty display of GBP or EUR on an American sweeps casino player screen, depending on the mood of the prosecutor or AG bringing up the subject in court, the possibility of legal and financial liability remains a reality for the casino.

The Alternative Coin System: Fun Coin and Sweep Coin

The solution for sweepstakes casinos is to adopt a system of virtual internal tokens that are not legal tender, like USD, EUR, or GBP.

The reason for having more than one token also relates to the legal opinions that support these operations, but they’re tied to AMOE, another intricate concept behind why sweepstakes casinos can do business in some American states.

Fraudsters target games that seem faulty, and they know what they’re looking for. 

Fraudsters in the online gambling world can be very tech-savvy. So much so that I’ve seen firsthand cases of exploitation of brand-new, proprietary games from platforms that didn’t have any marketing campaigns yet.

The back office is the heart of any casino, and sweepstakes operations are no different.

However, reading data and interpreting it can be complex for an executive with only real-money iGaming experience.

The alternative coin system causes players to bet differently depending on the type of currency involved, redeemable and not redeemable as cash.

Moreover, platforms must work perfectly to filter data correctly.

Game proficiency is also very important: financial fraud detection teams must understand the difference between an obscure, brand-new proprietary slot game and a market leader.

Exploitations of very famous games created by market-leading studios hardly ever cause problems, and when they do, the GSP usually gets in touch before the operator detects the problem.

How to Spot a Fraud and A Faulty Game

Initial signs of problems are easy to spot. If a game suddenly starts being played a lot more than it used to without specific promotion, such as placing it on the home page of the casino, that can be a sign of problems about to happen.

If suddenly, the redemption requests spike abnormally, the financial fraud prevention teams need to open the back office and review game sessions.

If many players start profiting from the same game out of the blue, chances are there’s a faulty game being exploited.

There are communities dedicated to detecting these faults and exploiting them in cooperation, which can cause big liabilities if withdrawals are approved without understanding that something is off and the casino is basically being robbed.

Moreover, understanding whether a player is interacting with several slots is important because that indicates a dilution of risk across different game types and potentially legitimate gameplay.

An example of a Sweepstakes Slot Exploitation Smoking Gun

A typical scenario of news spreading among players that a game is paying abnormally due to natural technical failures in the RNGs or an actual hacking attack will involve factors like:

• A new player registers and deposits large amounts of money;
• The new player obtains the redeemable coin as fast as possible;
• Sequential bets are placed on a single slot;
• The slot is paying a high percentage of winning rounds.

Factors that can contribute to fast risk mitigation include teams that are proficient in the world of gaming.

A great financial fraud prevention manager with strong contacts in the financial industry and deep knowledge of PSPs is not a complete leader if he or she doesn’t know the basics about the operator’s or platform’s game portfolio.

As mentioned, a faulty in-house game is a very different problem than one provided by a market-leading supplier.

If a faulty game is spotted and technical teams lose time trying to understand basic questions such as:

• What is the game’s GSP;
• How to disable a game;
• How to contact the GSP (ticket, Slack, or other form of contact);
• Who’s in charge of emergency situations and choices of game replacement;

Chances are, more time than necessary will pass, and the liabilities derived from the faulty game can grow exponentially.

A good operator must be a well-oiled machine with near-polymath team members who blend technical expertise, financial literacy, and industry game content knowledge. 

Of course, each team member has key responsibilities and knowledge, but learning the basics of the other areas is crucial to prevent disastrous scenarios when your shop is live 24/7, like an online sweepstakes casino. 

Unlike real-money casinos, sweepstakes casinos face different interactions with players. A sweepstakes player tries to exploit AMOE and profit in different ways compared to a player trying to maximize their chances by making the most of traditional bonus offers.

If a particular player feels like a bonus offer is good, for example, at a UK online casino, let’s say the usual package system of tiered bonuses, where sequential deposits release progressive bonus funds, the player’s strategy to use those bonuses will be much different compared to a sweepstakes casino.

Rollover rules at a real-money casino do not apply in the same way. Traditional bonus offers usually come with rollover rules that aim to prevent an easy withdrawal of the bonus funds instead of actual gambling action.

How a Sweepstakes Casino Player Tries to Profit From AMOE by Managing Risk

When a sweepstakes casino player starts a gaming session, they need to play to earn coins that are actually withdrawable. 

To do that, they must bet the internal currency, which can’t be exchanged for money, to eventually earn coins that can be redeemed for cash.

Names vary by operator, but they are usually called Fun Coin (FC) and Sweep Coin (SC).

When trying to bet the coins that are not redeemable, the behavior and choices of games can be different compared to sessions with the coins that are redeemable.

Of course, we are talking about players who strategize their sessions, and that includes players who actively seek free AMOE credits, including physical mail requests.

Players trying to maximize session profits through strategic betting can be as problematic as card counting at a land-based casino table.

The exact patterns a player uses, and how they relate to casino terms and conditions, vary from operator to operator.

The worst problem, however, is when a sweepstakes casino isn’t prepared for interactions with members of communities that strategize AMOE credit requests and how they use the credits received.

Real-money decision-makers must be very attentive to this reality in America.

AMOE isn’t just a great idea to operate in the gray area; it represents an actual potential financial liability and a big potential source of margin corrosion, in a market that faces big risk and potential regulatory changes at any time.

Smart AMOE credit concessions and clear tracking of player sessions are vital to break even and profit sustainably within the U.S. Sweepstakes environment.

The American sweepstakes casino environment has an operational advantage: financial transactions are often processed as e-commerce transactions instead of gambling.

Gambling transactions bring an entirely different set of security risks and filters. A charge, no matter how small, on a credit or debit card to deposit money to bet online, triggers an entirely different “journey” for that transaction.

Some financial institutions ban gambling-related transactions right away. 

Other institutions require pre-approval; that is, the customer contacts the bank’s CS to say that such a transaction might happen.

Also, gambling-related expenses might be subject to affordability checks depending on the regulations of each jurisdiction, whether in America or internationally. Even if clear affordability checks aren’t a reality in a gray area market, that is a good example of why gambling expenses and PSP operations are technically called “high risk markets”.

Also, gambling markets are considered high risk because it is easy to convert a gambling deposit into real cash with low-risk bets, for example, entering and leaving a crash game, for example, or in other low-risk games like low-volatility slots, to meet minimum rollover requirements when necessary.

Sweepstakes are no exception, because some transactions are eventually flagged as gaming. Banks and credit card companies have their own security standards, even though sweepstakes casinos aren’t technically considered casinos that require a license. 

Sweepstakes Casino Credit Card Charges: Potentially as Easy as an e-commerce transaction

Sweepstakes Casinos usually benefit from e-commerce payment pathways when charging credit cards, which might sound completely insane to a real-money iGaming executive in Europe new to the sweepstakes environment.

The fact that some, but not all, transactions are flagged this way explains why financial teams trying to understand why some transactions are denied and some aren’t in America find it so complex. 

I personally helped anti-fraud teams during night shifts operating in America, as part of my multi-role executive work within platforms and operators, and I learned firsthand that every situation is a different case, depending on factors such as the bank issuing the card, the state, and other factors like the digital financial filters of each PSP, the hour of the day, the amount of the transaction, and repeated transactions of the same amount within minutes, for example, among several other potential factors.

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 

Sweepstakes VS Real Money Invoicing: GSP <> Operators 

This article is especially relevant for real-money execs who have never worked in the sweepstakes vertical.

In the sweeps market, invoicing an operator or a platform working on behalf of one comes with an added layer of complexity.

In a normal market operating online, let’s say that any given GSP has an active contract charging 7% GGR as a standard price. Now suppose a GGR of $1MM in a month; that would generate an invoice of $70k.

But customers of sweepstakes casinos can’t see any reference to real money within games.

Hence the SC and FC system. Social Coin and Fun Coin are extremely relevant to preserve compliance and allow the operators to work within what’s stipulated in the legal opinions that back the business.

How Sweep Coins and Fun Coins Affect Invoicing

Essentially, operators and platforms must set an internal value for the coin in financial terms. GSPs will then charge fiat currency based on the commissions generated for the use of proprietary IP.

So a typical GSP invoice will bring a conversion rate of the determined financial value for the use of the IP, pegged to the currencies visible to the users.

This way, everyone remains compliant with the regulations, and B2C-facing products like slots only mention what is legally allowed.

Dollars, Euros and Pounds: B2B Environment Only

References to fiat currency must always be checked. Exposing customers to fiat mentions, if proven by the authorities, can generate substantial fines and legal liabilities.

Operating Under Legal Opinion at Grey Markets VS Licensed White Markets

Teams operating under LO and aiming to serve customers legally within grey markets must work in a vigilant manner at all times.

Team cooperation is essential, and one of the most important things that I learned in my time at sweepstakes platforms is how all team members, regardless of their role, must learn about the internal dictionary of terms allowed and not allowed.

We’ll explore the concept of a Sweepstakes-Compliant Dictionary in an upcoming article.

If a team member spots a $, €, or £ symbol on an operator website, a red alert must sound, and the team must focus on suppressing non-compliant data, whether in the form of communications, products, or other violations, securing the legal safety of the operator client and the platform itself.

First, fix the problem, and investigate the origin of the failure later. Trying to find culprits and pointing fingers before fixing a visible problem is a terrible policy, and leaders in the sweepstakes space must frequently reinforce the protocols if compliance issues are spotted.

Compliance is incredibly important in the sweepstakes market, even if somewhat counterintuitive to some: the fact that there isn’t a traditional gaming license doesn’t mean an absence of rules; on the contrary, the vigilance required to operate safely, relying on the intricacies of legal opinions, is often more complex, and certainly different from operating in fully unregulated markets or within clearly regulated white markets.

In Europe, gambling is normally regulated at the federal level. That includes the EU and non-EU European countries. The U.S., on the other hand, regulates gambling at the state level, so each American state is a unique jurisdiction, just like European nations.

European real money gaming operators that have first contact with the American market often feel extremely surprised by this reality. The problem, however, is not confined to the gambling industry.

America has a legal system derived from many particularities of its history. Many states value the capacity to self-govern when it comes to several different subjects. Having the capacity to do so, respecting local realities, is one of the most defining aspects of American culture.

However, that flexibility comes with setbacks. Lawyers are licensed at the state level, and companies doing business across America suffer from the lack of a fully standardized federal legal system.

The private sector across all industries pushes for a more standardized legal system, and some states have initiatives to adopt uniform standards in terms of specific regulations.

Culture and Law At The State Level in America

American states are extremely different in terms of culture. While in Europe we have situations like London or Paris being different than the countryside, including political opinions and how conservative they are in comparison with each respective country’s capital, America has a far more complex cultural landscape.

California and New York are immensely different from conservative states like Texas. While that may sound obvious to many Europeans used to consuming American culture in the form of media like TV shows or movies, the depth of those differences is better understood when analyzing the immense differences in laws at the state level.

Texas has historically been among the most resistant states when it comes to gambling, as the state is notoriously religious and conservative.

Nevada, for example, is famous for the Las Vegas casinos. However, the state has always been aggressively against lotteries and online gambling, as the land-based casino resorts want customers to visit them in person.

Understanding the nuanced realities of each American state is a very important task before doing business in the American sweepstakes markets as well as other gambling verticals, and even in other industries.

U.S. sweepstakes casinos operate in a gray market because they offer real-money prize redemptions or equivalent (like gift cards) without obtaining state gaming licenses. Instead of following traditional gambling regulations, they rely on standard consumer sweepstakes laws using a dual-currency, ‘no purchase necessary’ model to operate legally in states that have not explicitly banned them.

The gaming industry has always been divided into three very clear markets: 

• regulated (white) markets, that is, jurisdictions like American states or countries that issue gaming licenses, or even cities in cases like Buenos Aires.
• Black market operations: criminal enterprises that operate where local laws explicitly do not allow gaming operations of a specific vertical.
• Gray markets: cloudy points within legislation that allow specific products or services under very specific conditions. In America, operators usually work under the legal opinion concept.

Understanding What Is a Legal Opinion in America

Essentially, a Legal Opinion is a legal interpretation issued by a law firm. This document contains the reasoning explaining why this specific lawyer or law firm believes that the product in question is viable within the law of a specific state.

These documents are credible because a lawyer can be disbarred for blatantly selling a legal document that defends illegal activity.

Therefore, while a legal opinion is understood to be Intelectual Property of the client that acquires it, in the sense that understanding the intricacies of law to the point of commercially profiting from an elegant and unusual understanding of that, Legal Opinions might need to be defended in court. 

If a state or even federal Attorney General, or a competitor, sues a sweepstakes operator, the law firm or lawyer who signs it must explain their reasoning before a judge, risking their professional license if clear wrongdoing is found. 

Legal opinions usually work around the legal concept of “more likely than not”, which in American law refers to a probability of over 50% of the understanding being correct.

Of course, translating semantic concepts into probability surely is subjective in some ways, but the concept of more likely than not differs from others like “beyond reasonable doubt”, which is used in criminal law and refers to an understanding that something is 95% likely to be true. 

Understanding Gray Gaming Markets: Not Just For The Legal Teams

It is understandable that some execs might feel like the intricacies of gaming law affect solely the CLO or the law firms hired by operators, suppliers, and platforms.

But that is absolutely not the reality. The intricacies of legal opinions unfold as many technical tasks within operators and platforms. 

I’ve seen firsthand the impact that constantly reviewing whether an operator remains compliant has on everyone in customer-facing content. 

I recall several situations where problems were flagged on Fridays, which is a disaster for gaming operations.

Usually, an operator, whether sweepstakes or real-money gaming, is prepared for the weekends as there’s a peak in visitors, and that includes commercial agreements with GSPs, new layouts, not to mention festive dates like Halloween, Christmas, New Year’s Eve, Easter, and other holidays.

I recall one specific situation where a European GSP malfunctioned. The game was natively coded to display Euros, and due to a malfunction, an € sign ended up in the front end of a slot, visible to American customers of a sweepstakes casino. 

The game had to be disabled, a ticket had to be opened with the GSP, and the game was unavailable for the coming days. Moreover, because the game was on the casino’s home page, I also had to review all commercial agreements between the GSP and the operator to select the best game for our operator client. 

None of these details appear in a Legal Opinion, but the core issue was simple: no mention of actual fiat currency can ever be visible in an American Sweepstakes casino. All references must be changed to alternate coins like SC and FC. 

Sometimes, teams get agitated when problems like this happen, and team leaders need to stress the legal importance of complying with every small technical detail to avoid legal liabilities in America, which is far more prone to litigation than Europe. 

Not only are the legal requirements of the operations not confined to legal teams, but sometimes we also have to explain what the cultural differences across jurisdictions are; that is, why it is more dangerous to remain 24 hours with non-compliant content online in a place like the U.S. compared to many other countries in the world.