New Jersey Assemblyman Clinton Calabrese introduced a new bill that proposes regulating sweepstakes casinos using the same laws and regulations that apply to real-money online casinos and sportsbooks.
Bill A5196’s text is unavailable online, but Bonus has obtained a draft copy of the legislation. In a nutshell, the bill intends to treat sweepstakes casinos not as unregulated social casinos, but as licensed internet gaming operators.
Per the draft, Bill A5196:
Designates sweepstakes casinos as internet gaming; requires licensure and internet gaming permit for operation of sweepstakes casino; directs Division of Gaming Enforcement to investigate and restrict operation of unauthorized sweepstakes casinos.
Calabrese told Gaming Today the legislation addresses sweepstakes’ current lack of oversight.
Sweepstakes casinos have operated in a regulatory gray area, which has led to significant challenges, including consumer protection concerns, underage gambling, and economic losses for the state. Recognizing these issues, I have introduced this legislation to address the lack of oversight for these platforms.
Per the Social & Promotional Games Association (SPGA), sweepstakes casino customers have spent more than $40 billion on the platforms over the past ten years.
Bill would treat sweepstakes and online casinos alike
According to Calabrese’s bill, an “online sweepstakes casino” is defined by two aspects.
First, any game conducted online or via an app allows players to play casino-style games online without monetary cost. Second, an online sweepstakes casino awards—randomly or through completion of a task—prizes that are redeemable for cash or other ‘things of value.’
This reward system differs from social casinos, which, at most, reward players with non-cash redeemable prizes.
For sweepstakes offerings that fit the definition, Bill A5196 requires the providers to become licensed as a “casino service industry enterprise.”
As part of their licensing, sweepstakes operators must prove their integrity through bi-annual independent third-party audits. They will also have to partner with a casino licensee and obtain an internet gaming permit, as do all other New Jersey online operators.
The bill also authorizes New Jersey’s Division of Gaming Enforcement to collaborate with state, federal, and local law enforcement to investigate unlawful sweepstakes operators. This authorization also includes working with telecommunications providers to restrict accessibility to unauthorized offerings.
Otherwise, the state expects sweepstakes operators to comply with the existing gaming laws followed by traditional online casinos. This expectation seems to include licensing fees and applicable tax rates.
The bill’s accompanying statement declares:
Under the bill, online sweepstakes casino operators that become licensed, partner with a casino licensee, and receive an internet gaming permit will be subject to the same legal requirements and standards of all other internet gaming operators. This includes the conduct of background checks for employees, the prohibition on accepting wagers from persons under the age of 21 and the required use of age verification tools, the payment of licensing and permitting fees, and the payment of taxes on all gross internet gaming revenues.
Whether casino operators will back regulation unclear
Should Bill A5196 pass, there are a few potential outcomes.
To continue operating in New Jersey, sweepstakes providers would need to pay privilege taxes and licensing fees, as well as share revenue with a retail partner through a market access agreement. Some sweepstakes providers might be willing to make those financial compromises to stay operational in New Jersey. However, others may choose to exit the state and remain focused on markets that don’t require licensing and aren’t saturated with competitors from the real-money casino space.
It is also unclear whether New Jersey’s existing retail operators are open to partnering with sweepstakes providers. The American Gaming Association has taken a stance against the sweepstakes model, which might strain such business relationships.
The SPGA, however, has come out in support of the bill.
The SPGA welcomes Assemblyman Calabrese’s bill. The SPGA and its members are advocates for clear regulations that enable transparent, innovative, and responsible social and promotional gaming experiences.
For his part, Calabrese told GT his effort is an attempt to level the online playing field.
This bill aims to establish clear regulatory requirements and create a level playing field for all operators, ensuring that sweepstakes casinos meet the same standards as other forms of internet gaming in New Jersey.
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