Sweepstakes Casino Regulations in the US

Sweepstakes have a long and colorful history in the US. They were popular throughout the 20th century, with magazines like Reader’s Digest and popular soda brands regularly handing out prizes for sweepstakes participants.

When the Unlawful Internet Gambling Enforcement Act (UIGEA) was introduced in 2006, online casinos were prohibited in the United States. For a long time, there was no alternative in the United States.

In recent years, however, sweepstakes casinos have started to appear. These casinos utilize a legal sweepstakes model that allows players to play for free and potentially trade their virtual winnings for real-world prizes. Many of these sweepstakes also provide an alternative method of entry, which allows players to purchase packages to play.

Sweepstakes are currently legal in 48 states, with Washington being the only state to outright ban them through the Washington State Gambling Commission. The laws around sweepstakes casinos are in a constant state of flux, and in this guide to sweepstakes regulations, we explore taxes, rules and regulations, the future, and more.

Key Regulations and Authorities

The United States serves up a mix of different gambling and sweepstakes laws. Sweepstakes Casinos are able to operate separately from online gambling sites, as players are not required to use any money to play at them. Instead, players use virtual currencies, typically a free, readily available one, and a more premium version that can be traded in for prizes.

The decentralized approach to the American legal system means that states operate on an individual basis when it comes to the regulation and control of sweepstakes casinos. For example, in Michigan, the Michigan Gaming Control Board determined that sweepstakes casinos were effectively operating as gambling sites and issued cease and desist letters due to them not being regulated as such.

To operate within the United States legal framework of what constitutes a sweepstake, casinos must meet certain criteria. A sweepstake is defined as a game of chance where players can win without making any purchases. In most states, an alternative, paid method of entry is allowed, providing that the same chance of winning is presented through this alternative method of entry.

Most of this is governed by the states themselves, but the rules are broadly the same in practice, with only a few states having their own unique variants. For example, in Florida, players can not win more than $5,000 at sweepstakes casinos due to state law on sweepstake prizes and how they must be registered. While federal laws like the UIGEA and FTC regulations impact operations, the primary regulatory framework is at the state level.

Licensing Requirements

To operate in the USA, it is important that a sweepstakes casino has a valid license. All of the casinos we recommend at sweepstakescasino.net are fully licensed and regulated for use by American citizens.

The legal landscape for gambling in America is, as it is with many things, complex. Each state will have different laws about the way it regulates gambling and, in turn, the way it regulates and defines sweepstakes casinos. In some states, for example, players may not be able to claim cash prizes, while in others, like Washington, it is totally prohibited.

Some states will have their own dedicated governing bodies, and operators will be required to obtain a license from them to operate. Some of the biggest state-level regulators in the US include the Pennsylvania Gaming Control Board, the New Jersey Division of Gaming Enforcement, The Michigan Gaming Control Board, and the Nevada Gaming Control Board.

Depending on how the state defines gambling, sweepstakes casinos do not have to hold a specific license from them. However, the sweepstakes casinos we all recommend all hold a valid license from a regulatory body.

In some instances, these may be from well-respected licensing bodies within the industry. For example, Stake.us holds a valid license from the Malta Gaming Authority (MGA), one of the most respected and stringent regulators around.

We take licensing and regulation extremely seriously at sweepstakescasino.net. If you have concerns about the licensing status of an operator, we recommend reaching out to them for clarity. If you can not get any clarity, leave the site and go to one of the many other licensed and secure operators we recommend.

Taxation and Fees

If you are lucky enough to have won some prizes at a sweepstakes casino, you might wonder whether you need to pay taxes on them. Unfortunately, there is no simple answer to this question.

Gambling or sweepstakes income is taxable on a federal level. For sweepstakes, the threshold is $5,000, and players are then taxed at the rate of 24%. On a state level, things get more complicated, with different states operating different laws and rates. In some instances, sweepstakes may not be considered gambling income, though this is rare. Some states, such as New York and Florida, have lower thresholds than the federal government.

Income from gambling is not taxed at a progressive rate, which means that, at least for federal taxes, you will always be taxed at 24% for any income related to gambling or sweepstakes.

From the operator’s perspective, they are required to issue a form W-2G for winnings that are $600 or higher from sweepstakes.

For more detailed information about how state taxes sweepstake winnings, we recommend you reach out to your local governing bodies or professional accountants for more information.

Player Protection Measures

If you are playing at a sweepstakes casino, you want to be sure that you are safe. At sweepstakescasino.net, we prioritize the safety of our readers. As such, all of the casinos that we recommend have substantial player protection measures in place. The following are the most common player protection measures you will find at top sweepstakes casinos:

Responsible Gaming information: All of the casinos we recommend will have dedicated responsible gaming pages. On these pages, you will typically find links to resources and responsible gaming charities, as well as information if your friends or family members are experiencing problems.

Self-exclusion and limits: If you are concerned about your gaming and spending habits, self-exclusion schemes are available. These will allow you to exclude yourself from playing. The casinos we recommend also provide the option to set limits on both your spending and the time spent playing.

Age and identity verification: The sweepstakes casinos we recommend all have detailed know-your-customer (KYC) policies that ensure players are who they say they are and that they are of legal age to play. This is to protect underage people from playing and to ensure that your account and personal information are kept safe.

Encryption technology: Security is one of players’ most common concerns when gaming online. The sweepstakes casinos we recommend all use the latest encryption technology to ensure that all of your private information is kept safe from third parties.

Recent Changes and Updates

Predicting the future of online gaming laws in the US is an extremely difficult task. New legislation and bills are being drafted regularly as more and more states explore legalizing online gambling.

Changes in online gambling laws could have a direct impact on sweepstakes casinos. Not only will this provide more competition, but it means that states could alter their definition of gambling to include sweepstakes casinos, which could mean they are subject to more regulation.

Sweepstake casinos have also come under fire in several lawsuits that could affect how they are viewed in several states. For example, in June 2024, Destiny Kennedy looked to recoup losses against several VGW-owned brands, claiming that their goal was to clearly take money from their customers. These lawsuits could have regulatory implications for the industry later down the line. Similar lawsuits have also been filed in California and Kentucky in recent years, putting the status of sweepstakes casinos in the spotlight.

It can be extremely difficult to keep up with all of the regulatory changes in America. If you want to stay in the loop, check in with Sweepstakescasino.net News regularly to ensure you are getting the latest news and information.

References

• FDIC
• Intuit Turbotax
• American Bar Association
• IRS Instructions for Forms W-2G
• IRS Topic No. 419
• UIGEA Full Text
• Washington State Gambling Commission
• Michigan Gaming Control Board
• Pennsylvania Gaming Control Board
• New Jersey Division of Gaming Enforcement
• Florida Sweepstakes Regulations
• FTC Sweepstakes and Lottery Scams
• Nevada Gaming Control Board
• Investopedia