Legal License Compliance Requirements for Sweepstakes Casinos
Running an online sweepstakes gaming software business is a complex affair. Like online casinos, sweepstakes casinos are also subject to various legal complexities that can vary significantly from one geographic area to another. Hence, in order to run a successful sweepstakes business, it is highly important to be aware of the necessary legal compliances regarding sweepstakes laws in different countries or territories.
Here in this article, we’ll discuss this topic in detail. Keep reading!
Here in this article, we’ll discuss this topic in detail. Keep reading!
What Is a Sweepstakes Casino?
Online sweepstakes casinos are similar to traditional casinos that offer various kinds of gambling games to play online. However, unlike real casinos, sweepstakes casinos follow a ‘free-to-play’ structure that makes spending money on the sweepstakes platform optional or not required at all.
Sweepstakes casinos run on a dual virtual currency system, i.e, Gold Coins and Sweep Coins.
Gold Coins (GC):
GC is the primary currency, offered to players for free when they sign up. Players can also earn GC by winning games or by purchasing them in exchange for real money. Players use these as the wagering currency required to play various sweepstakes games in the sweepstakes software.
Sweep Coins (SC):
SC has a different role to play. Players need to collect them by playing and winning games. When enough is collected, they can redeem or exchange them for real-life prizes that have real value. SC cannot be directly purchased and must be won or received as bonuses for playing at the sweepstakes platforms.
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Difference Between Traditional Online Casinos & Online Sweepstakes Casinos
If you want to participate in traditional online casino gaming, then making a monetary deposit is a must. In contrast, as mentioned above, social casino sweepstakes operate on virtual currencies of GC and SC. While players can purchase additional GC, payment is optional, and winnings are awarded through coupon credits or merchandise, rather than direct cash deposits. This distinction allows sweepstakes casinos to comply with sweepstakes legality in the USA and around the world
Primary Rules for Operating Legal Sweepstakes Casinos
In order to host an event to be legally called a Sweepstakes, there are some basic rules and regulations that must be followed. Here’s a checklist of sweepstakes casino legal requirements.
A ‘No Purchase Necessary’ Disclaimer
Online sweepstakes platforms must have a ‘free’ entry option. Spending money on the platform or making any purchase from the business partners or sponsors must not be mandatory in order for it to be considered a legal ‘sweepstakes’.
Alternative Method Of Entry
Even if the sweepstakes casino has a way of entry that involves spending money or making a purchase, it must also include an AMOE or Alternative Method Of Entry that’s free of cost.
Eligibility Requirements
The sweepstakes casino platform must list out the eligibility requirements for players to participate, including the legal age, nationality, and any other criteria.
Void Jurisdictions
The sweepstakes casino should also clearly declare its area of operations, and list out the areas where the jurisdiction is void, and hence, the sweepstakes is not operable.
Odds Of Winning
Another important thing that a sweepstakes casino business must declare is the odds of winning for each sweepstakes casino game. The odds should strictly follow statistical facts and must not be misleading.
Prize Value & Description
The sweepstakes casino must also declare in advance about the prizes, their descriptions, and monetary values.
Tax Obligations
If the sweepstakes involves a high amount of prize value, then it must also include details about the tax obligations for winners.
Ethical Marketing
Avoid misleading claims, hidden conditions, or bait-and-switch promos. Advertising must be honest and transparent, and sweepstakes casinos should establish clear terms to build trust among players.
Compliance with Federal & State Laws
Sweepstakes regulations in the USA vary in different States. Therefore, operators functioning in the USA must comply with both federal laws and the state rules that govern sweepstakes. Operators must work with local compliance experts and keep all statutory obligations up to date.
Online Sweepstakes Casinos: Legal Compliance in Different Countries
Below you’ll find specific legal requirements for a number of countries worldwide where sweepstakes casinos are popular.
United Kingdom:
Gambling activities are controlled by the Gambling Act 2005 in the UK. However, sweepstakes casinos don’t fall under gambling in this country, and they are generally exempt from gambling rules and regulations. For sweepstakes casinos, it is mandatory to offer a ‘free of cost’ entry option and follow ethical code for marketing and promotions, without misleading the target audience.
Germany:
Germany has a strict policy regarding gambling and online casinos require extensive legal compliance. Sweepstakes casinos fall into a legal gray area in Germany since it doesn’t involve direct betting of money. Despite that, even sweepstakes casinos are highly regulated.
Spain:
Gambling is legal in Spain and is regulated by the Spanish Gambling Act 2011. Sweepstakes casinos are legal, but online platforms must obtain necessary licenses from the DGOJ (Directorate General for the Regulation of Gambling) of Spain in order to operate legally.
Singapore:
Singapore has strict regulations regarding gambling and online casinos are mostly restricted. Even sweepstakes casinos are heavily regulated, and unauthorized online sweepstakes platforms are strictly penalized.
Philippines:
Gambling is generally legal in the Philippines and is controlled by the Philippine Amusement and Gaming Corporation (PAGCOR). Online casinos are highly popular in the Philippines, and so are sweepstakes casinos. Although online sweepstakes casinos don’t require as complex legal compliance as traditional online casinos, it is still advised to contact the local authorities and employ a legal team before setting up a sweepstakes business here.
Legal Compliance for Sweepstakes Casinos in The United States
Online sweepstakes casinos are regulated by the Federal Trade Commission (FTC). Unlike the traditional online casino, which is considered gambling and is legal in only 7 states, sweepstakes casinos fall under a more lenient legal structure and are considered legal in 48 states. However, Sweepstakes casinos are completely banned in Washington and Michigan.
Sweepstakes casinos have their own legal requirements that are not as strict as those of online casinos or gambling. Sweepstakes casinos don’t involve mandatory money spending and follow a free-to-play model. Hence, they are not categorized as gambling per se.
In order to be considered as a ‘sweepstakes casino’, an AMOE or Alternative Method Of Entry that doesn’t involve any purchase or spending real money, is one of the basic legal requirements for sweepstakes.
In a few states, registration and bonds are required for sweepstakes casinos in order to operate legally.
Sweepstakes casinos have their own legal requirements that are not as strict as those of online casinos or gambling. Sweepstakes casinos don’t involve mandatory money spending and follow a free-to-play model. Hence, they are not categorized as gambling per se.
In order to be considered as a ‘sweepstakes casino’, an AMOE or Alternative Method Of Entry that doesn’t involve any purchase or spending real money, is one of the basic legal requirements for sweepstakes.
In a few states, registration and bonds are required for sweepstakes casinos in order to operate legally.
Responsible Gaming & Player Protection in Sweepstakes Casinos
The consistent and fast rise of sweepstakes gaming software and its skyrocketing popularity among players globally can sometimes pose threats to the industry. Like all industries, unregulated growth and business can become detrimental to the sustainability of sweepstakes businesses.
This is why responsible gambling practices and player protection systems are highly coveted these days. Renowned and popular online sweepstakes operators offer tools and resources such as:
This is why responsible gambling practices and player protection systems are highly coveted these days. Renowned and popular online sweepstakes operators offer tools and resources such as:
- Purchase limits to restrict spending
- Self-exclusion for a period
- Alerts players of the session duration
- Limits on total losses in a given period
- Temporary account suspension
- Educational resources for problem gambling support
Why is It Important to Be Completely Legally Compliant with Your Sweepstakes Casino?
If you’re planning to operate a sweepstakes business online, then you must be completely legally compliant under the jurisdiction of your operation and run a legal sweepstakes gaming software online.
Avoid Penalties
Unauthorized and illegal online sweepstakes businesses can attract hefty penalties, and lawsuits can be filed against you that might result in severe consequences.
Protect Your Reputation
Being branded for illegal activities can cause irreparable damage to your reputation. In order to establish yourself as a dependable and reputable organization, staying on the right side of the law is necessary.
Assure Your Customers
In order to attract more customers and develop your own loyal pool of followers, players, or customers, legal assurance is necessary.
Hence, inquiring about all the legal formalities and fulfilling all of them is non-negotiable for a successful online sweepstakes casino business.
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How Can GammaStack Help to Build a Sweepstakes Casino?
Wondering how to get started? GammaStack is here to help!! We have over 14+ years of market experience, and an impressive portfolio of clients belonging to 45+ countries worldwide. GammaStack not only offers the most impressive online sweepstakes software development and sweepstakes game development services, but also provides complete assistance to gain all necessary licenses and legal permissions from the jurisdictions under which your sweepstakes business will be operable. Whether you need platform development, secure game integrations, or help with compliance and launch operations, GammaStack is your one-stop solution for all issues related to sweepstakes casinos. Contact us now!
Frequently Asked Questions on Sweepstakes Casinos
A sweepstakes casino is an online gaming platform where players use virtual currencies of Gold Coins and Sweep Coins to play casino-style games and win prizes through sweepstakes mechanics rather than by wagering real money. Coins are typically given free at signup, earned through play or bonuses, and optionally purchasable. To comply with sweepstakes regulations, operators must offer a free Alternative Method of Entry (AMOE).
Yes. Sweepstakes casinos are generally legal in countries around the world. However, legalities can vary based on the jurisdiction.
For online sweepstakes casinos, businesses don’t need gambling licenses to operate in the US, as it is not categorized as gambling, owing to its ‘no purchase necessary’ feature. It can operate legally in 48 states of the US, except in Michigan and Washington. However, if it involves high-value prizes, registrations and bonds might be required in some states, particularly in New York, Florida, and Rhode Island.
Yes. GammaStack can help you acquire all the necessary permissions, bonds, and licenses necessary for operation.
GammaStack offers end-to-end sweepstakes solutions, including platform development, custom game integrations, compliance support, payment gateway integration, CRM/CMS tools, and ongoing technical and operational assistance.
Yes. GammaStack provides online casino software development services, online casino game development services, post-launch maintenance services, and more.
