Delaware Cracks Down on Sweepstakes Casinos

Residents of Delaware who enjoy sweepstakes-based online casinos like Chumba Casino, Global Poker, and Luckyland Casino may soon find themselves unable to access these platforms. The Delaware Lottery, in coordination with the Delaware Division of Gaming Enforcement (DDGE), has reportedly ordered Virtual Gaming Worlds (VGW), the Australian company behind these sites, to cease all operations in the state. This development was first reported by Primrose Riordan of the Australian Financial Review.

The DDGE confirmed that it issued a cease-and-desist order to VGW, citing that the company's slot operations and games in Delaware violate state law. The order emphasized that allowing Delaware residents to participate in these games contravenes Delaware's gambling statutes.

This move by Delaware comes at a time when the state's regulated online casino market is thriving. Since Rush Street Interactive (RSI) took over as the online casino vendor for the Delaware Lottery in August 2023, the state's online casino revenues have surged, setting new records. For instance, in June, Delaware's online casino win surpassed $5 million for the first time.

VGW operates its U.S. products, including Chumba Casino, Global Poker, and Luckyland Casino, under a sweepstakes model. This model differentiates itself from traditional online casinos by offering two types of virtual currency: one that can be purchased but not redeemed for prizes and another that can be redeemed for prizes but not purchased. Players can win cash prizes through games, but the cash is technically won through sweepstakes rather than direct gambling. Despite this legal framework, VGW's offerings closely resemble those of licensed online casinos, raising concerns about unlicensed competition and potential revenue loss for states like Delaware.

Delaware's actions are not unprecedented. Earlier this year, Michigan's Attorney General Dana Nessel took similar action against a different sweepstakes casino operator, leading VGW to preemptively withdraw from the Michigan market in May. As with Michigan, Delaware's regulated online casino market could be a motivating factor in this crackdown, as the state seeks to protect its licensed operators and the associated tax revenues.

The legal situation surrounding sweepstakes casinos remains murky. While the DDGE has the authority to enforce gaming laws within Delaware, its jurisdiction does not extend to unlicensed operators like VGW. However, the state’s Attorney General, Kathy Jennings, could potentially escalate the situation by pursuing criminal charges, as seen in Michigan. Such a move could set a significant precedent, although it would involve complex legal challenges.

For VGW, the decision to cease operations in Delaware could be financially prudent, given the state's relatively small population and the legal risks involved. Defending its business model in court would likely be costly, and the outcome uncertain.

 

 

Conclusion

Adding to the pressure on VGW and similar companies, the American Gaming Association (AGA) has recently called for increased scrutiny of sweepstakes-based gaming sites across the U.S. The AGA has urged regulators and state legislatures to review and, if necessary, tighten their laws to prevent potential exploitation of legal loopholes by such companies.

As regulatory scrutiny intensifies, the future of sweepstakes casinos in the U.S. looks increasingly uncertain. Delaware's actions may signal a broader trend that could significantly shrink the operating landscape for VGW and similar companies in the country.