Sweepstakes-based gaming offerings have become a focal point of discussion in the gaming industry, according to analyst reports from G2E.
Sweepstakes-based gaming offerings have become a focal point of discussion in the gaming industry, according to analyst reports from recent meetings at G2E in Las Vegas.
Sweepstakes, which operate in a legal grey area in many states, have drawn increased attention from industry and regulators in 2024.
As a result, sweepstakes were high on the agenda for G2E, with anecdotal evidence from across the industry suggesting it is an area of high interest with industry professionals and investors.
I was talking to friend that is switching careers. In mid-conversation, a guy comes up and starts telling us about his new sweepstakes startup. I turn to my friend and say, “Have you considered sweepstakes?” He said yes.
— Victor Rocha (@VictorRocha1) October 9, 2024
Analysts at Truist Securities said there has been speculation the proliferation of sweepstakes could cause states to take action.
Could sweepstakes boost iGaming legalisation:?
This, they argued, could take the form of movement on regulated iGaming, which has stalled on the legislative front in recent years.
So far, the majority of states that have issued cease-and-desist letters to sweepstakes-based operators are legal iGaming states.
However, despite this potential catalyst, current projections for iGaming expansion remain conservative.
Morgan Stanley estimated that only four additional states will legalise online casino gaming by 2026, bringing the total from seven to eleven states.
They forecasted approximately $11.5bn in gross gaming revenue for this sector by that time.
The American Gaming Association (AGA) has emphasised the risks associated with the expanding sweepstakes market and has called for a crackdown on the offerings.
These concerns include the lack of tax revenue for states, lower consumer protection measures, and potential threats to game integrity.
Meanwhile, Morgan Stanley analysts reported that public operators showed limited interest in entering the sweepstakes market.
However, they noted that many industry participants observed a continued flow of talent and capital towards this space, especially within new sweepstakes casinos that are positioning themselves as alternatives to traditional online operators.
The analysts argued the response to the burgeoning new product categories has varied across the industry.
Morgan Stanley said that while operators are wary, affiliates and suppliers appear more neutral, adopting a wait-and-see attitude with minimal current exposure to the sector.
The future of the sweepstakes industry is uncertain, with some companies facing enforcement from regulators and lawsuits alleging they are offering illegal gambling.
As a result of the increased scrutiny, several sweepstakes operators launched a new trade body, the Social and Promotional Gaming Association, to lobby for their interests last month.