VGW and other sweepstakes operators face tough week across the US as legislators, regulators crack down
It’s only halfway through, but this week has been decidedly unfavourable for sweepstakes operators.
On Tuesday, regulators in Louisiana and Mississippi, both big retail casino states, issued a spate of cease-and-desist orders to various sites deemed to be operating illegally. These include offshore sportsbooks and iGaming sites as well as sweepstakes. In Louisiana’s case, it was 40 orders issued, with Mississippi issuing 10.
Both states took aim either directly or indirectly at VGW Holdings, the secretive Australian-based sweepstakes giant. VGW operates several well-known brands such as Chumba Casino, LuckyLand Slots and Global Poker. Louisiana sent a cease-and-desist order directly to VGW whereas Mississippi issued one to Chumba, regulators announced.
Outside of legislative and regulatory scrutiny, the company has come under fire from investors for its diminishing financial reporting. Founder Laurence Escalante earlier this month defiantly declared that anyone unconvinced of his leadership should sell off.
Please exit the bayou
The Louisiana Gaming Control Board order comes shortly after a bill banning sweepstakes altogether was passed through the state legislature. However, Governor Jeff Landry vetoed the bill on 13 June, saying that regulators were capable of policing their own industry.
This initially drew praise from the Social and Promotional Games Association, a vocal trade group representing some sweeps operators but not VGW.
“Governor Landry’s veto is a powerful affirmation that not all online games are gambling and that innovation should not be met with prohibition,” the SPGA said at the time. “This legislation blurred critical legal distinctions and risked punishing legitimate businesses that comply with well-established sweepstakes laws and offer free-to-play experiences.”
A separate sweeps group that does include VGW – the Social Gaming Leadership Alliance – said the veto “gives all stakeholders an opportunity to pursue a sensible solution to allow Louisiana residents to continue playing online social games” and create a licensing framework.
But that goodwill faded quickly, as the board saw it differently. In a release, the LGCB called its crackdown a “show of enforcement strength”. Chairman Chris Herbert said it sent a “clear message” that “Louisiana will not tolerate illegal operators who put our citizens at risk and undermine the fairness and integrity of our gaming industry.”
Mississippi: No online gaming here
While the Mississippi Gaming Commission was not solely targeting sweepstakes in its orders, it nonetheless affirmed via release that there is no legal online gambling at all in the state, sweeps included.
“While some games might be advertised as free to play, if there is an opportunity for the player to provide consideration and win something of value, and an element of chance exists in the game outcome, it is gaming under Mississippi law,” the commission said.
A sweepstakes ban was also introduced in the Magnolia State, Senate Bill 2510, which passed the state senate in February. However, when the house added language regarding mobile sports betting, the senate then rejected the bill. Currently, only retail casinos and sports betting are legal in the state.
“The MGC will aggressively pursue both domestic and offshore illegal operators and the MGC is currently providing criminal case files to our state and federal law enforcement partners and requesting prosecution,” MGC Executive Director Jay McDaniel said in a statement.
“Companies like those put on notice today mislead our residents by claiming to be legal outlets, when in fact they operate illegally and without providing any tax revenue or other tangible benefit to Mississippi.”
New York state of mind?
In addition to those developments, the New York Legislature also on Tuesday passed its own sweepstakes ban. The legislation, Senate Bill S5935A, passed both chambers in less than a week, including a 141-0 vote in the state assembly.
If the bill is signed by Governor Kathy Hochul, the Empire State would join Montana, Connecticut and Nevada in enacting sweepstakes bans this year.
In early March, New York also issued its own flurry of 26 cease-and-desist orders to sweeps sites, in this case from Attorney General Letitia James. All three of VGW’s primary brands – Chumba, LuckyLand and Global Poker – were included in the actions. In late May, the company announced it was ceasing its sweepstakes operations in the state.
“These so-called ‘sweepstakes’ games are unscrupulous, unsecure and unlawful,” New York State Gaming Commission Chairman Brian O’Dwyer said via statement. “I have been very vocal about the need to crack down on these operations and I am thrilled that Attorney General James has taken this significant step to eradicate the illegal gambling market. We encourage those of age who wish to gamble to do so with legal operators.”