Sweepstakes Casinos and the Failure of the Dual-Currency Model

By Hank FasthoffJuly 4, 2026

Sweepstakes casinos sell virtual currency packages and award cash-redeemable entries as a promotional bonus, purportedly structured to satisfy sweepstakes law by eliminating consideration through a free alternative method of entry (AMOE). As of mid-2026, the sweepstakes casino model is failing. At least 13 states have banned or effectively shut down sweepstakes casino operations through legislation or attorney general enforcement, dozens of class action lawsuits are pending against sweepstakes operators, and a Washington jury awarded $24.9 million in damages against a single operator in February 2025, the first class action verdict against an online social casino. To my knowledge, as of the date of this article, no court has upheld a sweepstakes casino AMOE on the merits, and no sweepstakes casino model that I've seen complies with the equal dignity rule.

How the Dual-Currency Model Claims to Work

Sweepstakes casinos operate on a dual-currency structure. Players purchase "Gold Coins," which function as an entertainment product with no cash value. When a player purchases Gold Coins, the platform bundles in free "Sweeps Coins" as a promotional bonus. Sweeps Coins can be wagered on casino-style games (slots, table games, video poker) and, following successful play, redeemed for cash.

Operators try to structure this model to satisfy the three-element lottery test. Prize is present because Sweeps Coins can be redeemed for cash. Chance is present because the games are random. But consideration, the operators argue, is absent because players purchase Gold Coins for entertainment, not Sweeps Coins for gambling, and because a free alternate method of entry (typically a daily login bonus or a mailed postcard request) provides Sweeps Coins without any purchase.

The 1:1 Correlation That Undermines the Model

As documented in class action complaints filed across the country, the number of Sweeps Coins a player receives tracks the dollar amount spent on a nearly 1:1 basis. A player who spends $19.99 on Gold Coins might receive 21 Sweeps Coins. A player who spends $49.99 might receive 52 Sweeps Coins. A player who spends $99.99 might receive 105 Sweeps Coins. Sweeps Coins are redeemed for cash at a conversion rate of approximately 1:1 as well, with one Sweeps Coin typically equaling $1.

This is the same pricing structure that Internet sweepstakes cafes used before state courts shut them down. In those operations, for every dollar spent on Internet access time, customers received approximately 100 sweepstakes points, playable on slot-style terminals and redeemable for cash at a corresponding rate. Courts in Alabama, California, and other states held that the Internet time was incidental to the chance to gamble, and that free entries couldn't cure the problem.

Why the AMOE Doesn't Comply with the Equal Dignity Rule

Equal dignity requires that free entrants and paying entrants stand in the same position, with the opportunity to obtain equal entries, equal odds, and an equal opportunity to win a prize. In legitimate brand promotions, a mail-in postcard AMOE satisfies equal dignity because the promotion is marketing a product or service and the sweepstakes is an ancillary incentive. A customer who buys a soft drink and receives a game piece, for example, has the same chance of winning as a customer who mails in a postcard.

For sweepstakes casinos, gambling on casino-style games is the product itself, rather than something a promotional giveaway markets. Gold Coins have no utility beyond enabling gameplay, and the overwhelming majority of Sweeps Coins in circulation are obtained through purchase rather than through the free AMOE. Class action plaintiffs have consistently argued, and enforcement officials have agreed, that the free coin methods are deliberately structured to provide a fraction of the volume available through purchase while appearing, on the surface, to satisfy the "no purchase necessary" requirement.

For example, a player who mails in a postcard requesting free Sweeps Coins may wait days for delivery and receive only a few Sweeps Coins, but a player who purchases a $99.99 Gold Coin package may receive 105 Sweeps Coins instantly. Or, a player who logs in daily may receive one or two free Sweeps Coins per day, but a player who purchases coins receives them in whatever quantity the purchase supports, instantly, with no cap. This disparity in volume, immediacy, and practical accessibility doesn't comply with the equal dignity rule.

Courts examining prior iterations of this model haven't been persuaded that a free entry option cures the fundamental problem. Some courts have found that the availability of free entries is a necessary but not a sufficient condition to remove consideration from the sweepstakes, and that the existence of free entries alone doesn't negate consideration. Commentators tracking this area have identified at least 15 judicial decisions addressing casino-style sweepstakes games that awarded entries in proportion to dollars spent, with each holding the operation to be illegal gambling even though free entries were also available.

Case Law

In Barber v. Jefferson County Racing Ass'n, 960 So. 2d 599 (Ala. 2006), customers bought cards of Internet time loaded with sweepstakes entries playable on slot-style terminals. Alabama's Supreme Court found consideration present, relying on evidence that customers lined up at all hours to use the terminals and bought additional cybertime, with its accompanying entries, even while holding large quantities of unused cybertime. Those facts established that a substantial number of customers, if not a majority, paid to play the terminals rather than to acquire the Internet time. The court also treated the 92 percent payout percentage as revealing the operation's true purpose, since that figure matches the industry standard for casino slot machines while a genuine promotional sweepstakes typically pays out a fraction of one percent.

In People ex rel. Green v. Grewal, 61 Cal. 4th 544 (2015), California's Supreme Court affirmed injunctions against Internet sweepstakes cafes, holding that the devices were unlawful slot machines under California Penal Code § 330b. Customers received 100 sweepstakes points for each dollar spent on Internet time and other products, playable on casino-style terminals and redeemable at a dollar per 100 points. The court held that consideration isn't a required element under the slot machine statute, but added that even if consideration were necessary, it exists wherever a connection exists between purchasing a product and receiving chances to win a prize. That connection was present because points were awarded based on dollars spent. Michigan and Indiana appellate courts have treated discount-card sweepstakes the same way. Across these decisions, courts applied a consistent approach. When participants are paying for the chance to win rather than for a product, a free entry option is a fiction.

In Larsen v. PTT, LLC d/b/a High 5 Games, No. 3:18-cv-05275 (W.D. Wash.), Judge Tiffany M. Cartwright held on summary judgment in June 2024 that High 5 Games' social casino platforms violated Washington's Recovery of Money Lost at Gambling Act and Consumer Protection Act. In February 2025, a jury awarded the plaintiff class approximately $17.7 million in actual damages and $7.2 million in enhanced damages under the Consumer Protection Act, for a class total of roughly $24.9 million. Evidence presented at trial showed that High 5 employees targeted high-spending users they referred to internally as "whales," and that at least one user who told the company she was addicted and needed her account shut off was instead given promotional coins to continue playing. Prior to the verdict, other social casino operators settled class action cases for a collective total exceeding $650 million.

One distinction deserves attention here. Larsen addressed a social casino, where virtual coins can't be redeemed for cash, rather than the dual-currency sweepstakes model at issue in this article. The court held that the coins were things of value because they extended the privilege of playing, and that the availability of future free coins didn't negate that value. If coins that never convert to cash qualify as things of value, coins that redeem at a dollar apiece present the easier case.

State Bans and Enforcement Actions

Between May 2025 and mid-2026, the sweepstakes casino industry went from operating in roughly 45 states to facing active bans, enforcement actions, or pending legislation across a substantial part of the country. Counts vary by source depending on whether pending effective dates and enforcement-only states are included, so treat any specific number as a snapshot.

Ten states enacted statutory bans during 2025 and 2026. Montana passed SB 555 in May 2025, becoming the first state to enact an explicit ban (effective October 1, 2025). Connecticut enacted SB 1235 (Public Act 25-112) in June 2025, classifying sweepstakes casino operation as a Class D felony. Connecticut regulators summarily suspended High 5 Games' gaming service provider license in March 2025 and reinstated it that May as part of a settlement of nearly $1.5 million, after the company shut down its unlicensed casino product in the state. New Jersey enacted A 5447 in August 2025, with fines of $100,000 for a first offense and $250,000 for repeat violations, extending liability to operators, affiliates, and influencers. California enacted AB 831 in October 2025 (effective January 1, 2026), prohibiting dual-currency sweepstakes platforms and extending misdemeanor liability to operators, payment processors, geolocation providers, gaming content suppliers, and media affiliates. California alone accounted for an estimated 17 to 20 percent of U.S. sweepstakes casino revenue. New York enacted its ban in December 2025. Indiana enacted HB 1052 in March 2026 (effective July 1, 2026). Maine enacted LD 2007 in April 2026 (effective approximately July 14, 2026), classifying Sweeps Coins as "indirect consideration." Tennessee enacted SB 2136 in May 2026, prohibiting dual-currency platforms by name. Louisiana enacted HB 883 and HB 53 in May 2026 (effective August 1, 2026), banning the model and adding gambling by electronic sweepstakes device to the state's racketeering statute. Oklahoma enacted SB 1589 in May 2026 over the governor's veto (effective November 1, 2026), with felony penalties reaching payment processors, vendors, affiliates, and promoters.

Two states took a different statutory route. Nevada raised unlicensed gaming to a felony through SB 256, a general statute rather than a sweepstakes-specific ban, though operators treat Nevada as closed. Iowa enacted SF 2289 in 2026, expanding the Iowa Racing and Gaming Commission's authority to pursue unlicensed operators, including those offering illegal sweepstakes, without passing a direct dual-currency ban.

Three states enforce pre-existing gambling laws against sweepstakes operators. Idaho prohibits casino gambling simulations under its constitution. Michigan and Washington enforce existing gambling statutes against sweepstakes casino platforms.

Multiple states have used attorney general enforcement to force operators out before any dedicated legislation passed, and two of them, Louisiana and Tennessee, have since enacted statutory bans of their own. The New York Attorney General announced in June 2025 that 26 sweepstakes casino platforms agreed to stop selling coins in the state. Louisiana's Gaming Control Board issued approximately 40 cease-and-desist letters to operators after the governor vetoed a legislative ban, taking the position that the model was already illegal under existing law. Tennessee Attorney General Jonathan Skrmetti confirmed in December 2025 that cease-and-desist letters were sent to nearly 40 operators, all of which indicated intent to comply and shut down Tennessee operations. In February 2026, the Illinois Gaming Board and Attorney General Kwame Raoul sent 65 cease-and-desist letters to sweepstakes casino operators. Compliance lagged in Illinois, and months later most of the 65 recipients were still serving Illinois players. Minnesota Attorney General Keith Ellison ordered 14 illegal gambling sites, including three sweepstakes casinos, to cease operations in November 2025.

Operators have exited these markets in succession. VGW Holdings, the operator behind Chumba Casino, LuckyLand Slots, and Global Poker, has withdrawn from at least 12 jurisdictions. Most major operators, including Stake.us, Pulsz, McLuck, and High 5 Casino, exited California by December 31, 2025.

Class Action Litigation

A March 2026 analysis found more than 100 active class action lawsuits against sweepstakes operators across the country. VGW Holdings faces dozens of active cases. Other operators facing multiple complaints include Sweepsteaks Limited (Stake.us), A1 Development (Funrize, NoLimit Coins), and B2 Services (McLuck, Jackpota, Hello Millions). Utah saw at least 23 class actions filed in federal court in December 2025 alone.

Plaintiffs in these cases consistently argue that the platforms are designed to encourage purchases, that the free AMOEs are deliberately cumbersome, and that the activity constitutes unlicensed gambling. Some lawsuits name payment processors, and others name celebrity ambassadors. Rapper Drake and streaming influencer Adin Ross were named as defendants in lawsuits against Stake.us. Slot influencer Brian Christopher and media personality Ryan Seacrest were named as defendants in lawsuits against VGW in California.

In March 2026, the city of Baltimore filed suit against six sweepstakes operators (VGW, B2 Services, Pulsz, Stake.us, High 5 Games, and Fortune Coins). Unlike a legislative ban, a lawsuit opens discovery, the process that can compel operators to produce internal contracts, RNG certification records, geolocation agreements, and payment-processing terms that have never been public.

Why Courts and Regulators Haven't Reached the AMOE Question

No court has upheld or rejected a sweepstakes casino AMOE on the merits. Regulators and plaintiffs haven't needed to reach the question, because they've treated the coin model as gambling on independent grounds. Washington classified virtual coins as things of value under Washington gambling law without analyzing the free coin claim. New York's attorney general treated the model as gambling regardless of any free method of obtaining coins. Louisiana's attorney general reached the same conclusion. State legislatures that enacted bans defined the prohibited conduct broadly enough to cover the model without parsing the AMOE.

This approach leaves sweepstakes casino operators without a single favorable precedent on the central question their business model depends on. Operators have argued that the free coin AMOE removes consideration and that the model is a lawful sweepstakes. No court has agreed. Operators that have prevailed, including VGW's recent Georgia cases, have done so on arbitration grounds rather than on the merits of the sweepstakes classification.

What This Means

Sweepstakes law permits a sponsor to offer entry with a purchase as long as a free entry method provides equal dignity. That framework was designed for brand promotions, cook-offs, instant-win games, and product giveaways, formats where the sweepstakes is a marketing tool and the purchase buys a genuine product.

Sweepstakes casinos inverted that framework by making gambling the product and treating the free coin AMOE as a legal formality. Courts, regulators, and plaintiffs have responded by treating the model as what it functionally is, unlicensed gambling, and by declining to let a nominal free entry option override that conclusion. Enforcement is accelerating, and the number of jurisdictions available to operators is shrinking.