New York's Sweepstakes Ban Legislation: Potential Impacts on Small Business Community and Gaming Industry

The introduction of Senate Bill S5935 in New York has ignited significant debate between industry representatives and lawmakers over the future of online sweepstakes gaming in the Empire State. The legislation, which aims to comprehensively prohibit various forms of sweepstakes gaming, has drawn particular criticism from industry groups concerned about its potential effects on small businesses and the broader economic landscape.

The Comprehensive Nature of the Proposed Legislation

Senator Joseph Addabbo, long recognized as an advocate for regulated gambling expansion in New York, has taken a firm stance against social casinos by sponsoring Senate Bill S5935. The proposed legislation provides an extensive definition of online sweepstakes games, describing them as “any game, contest or promotion that is available on the internet and/or accessible on a mobile phone, computer terminal or similar access device, that utilizes a dual-currency system of payment allowing the player to exchange the currency for any prize, award, cash or cash equivalents”. The bill specifically targets games simulating casino-style entertainment, including poker, slot machines, and sports wagering.

What distinguishes this legislative attempt from previous regulatory efforts is its remarkably broad scope. The bill extends beyond mere operators to target a wide ecosystem of associated businesses, including financial institutions, payment processors, geolocation service providers, and media affiliates. Any entity found supporting or facilitating online sweepstakes games could face substantial financial penalties ranging from $10,000 to $100,000 per incident, with potential additional consequences including the loss of gaming licenses. The proposed enforcement mechanism would involve multiple state agencies, including the New York State Gaming Commission, state police, and the Attorney General’s office, all of which would possess extensive investigative authority.

At the heart of the debate lies a fundamental disagreement about the nature of sweepstakes gaming. While operators maintain that their activities do not constitute gambling because players aren’t technically required to spend money—instead using virtual currencies that can be either purchased or earned through various means—critics argue that the structural similarities to traditional gambling are too significant to ignore.

The New York Small Business Landscape

Small businesses constitute the backbone of New York’s economic infrastructure. Of the more than 200,000 businesses located in New York City alone, 98 percent qualify as small (fewer than 100 employees) and 89 percent are categorized as very small (fewer than 20 employees). Collectively, these small enterprises employ more than half of New York City’s private sector workforce and frequently provide pathways to economic self-determination and middle-class stability for their owners.

The regulatory environment for small businesses in New York has historically presented challenges. While efforts have been made over time to improve conditions, the sheer complexity and volume of requirements can disproportionately burden small businesses, which typically have fewer resources to navigate governmental requirements. This existing regulatory landscape makes any new legislation with potential small business impacts particularly sensitive.

SPGA’s Opposition and Economic Concerns

The Social and Promotional Games Association (SPGA), the primary advocacy organization for the sweepstakes industry, has voiced strong opposition to the proposed ban. In a statement responding to the legislation, the SPGA offered what might be characterized as backhanded appreciation for “New York lawmakers’ formal recognition that social sweepstakes are a legal form of gambling.” The organization argued somewhat ironically that the very existence of a ban proposal implies the current legality of sweepstakes, stating “you don’t need to outlaw something if it is already illegal”.

The SPGA’s critique extends beyond legal semantics to broader concerns about governmental overreach and economic impacts. The association contends that the bill represents unwarranted interference with consumer entertainment choices and personal freedoms, while constituting what they term a “colossal waste of government resources”. Of particular concern to the SPGA is the potential criminalization of promotional sweepstakes utilized by small businesses throughout New York, which they fear could jeopardize “thousands of jobs in an already unstable economic climate”.

Rather than outright prohibition, the SPGA advocates for a regulatory approach focusing on “sensible regulation and taxation” of sweepstakes gaming. The association has expressed willingness to collaborate with New York policymakers on developing “a more sensible, balanced approach that protects the rights of consumers and not the special interests of a small handful of corporate interests”.

Industry Disagreements and Economic Comparisons

The sweepstakes debate in New York represents just one facet of a larger industry conflict. The American Gaming Association (AGA) and the SPGA have publicly diverged on their assessments of sweepstakes gaming’s legality and market impact. During a February 2025 State of the Industry webinar, AGA President and CEO Bill Miller characterized sweepstakes casinos as part of a broader problem of unregulated gambling, aligning them with offshore sportsbooks.

Properly operated sweepstakes are legal in almost all states members operate within well-established legal frameworks that contrast starkly with black-market offshore sportsbooks and casinos.

The AGA presented concerning economic figures, estimating that illegal and unregulated operators accepted $109 billion in wagers during 2024, resulting in approximately $17.3 billion in lost revenue nationwide. Miller expressed concern that “these illegal operations exploit consumer confusion and threaten to undermine the public trust we have built over many years”. The AGA further alleged that certain sweepstakes operators “exploit legal loopholes” to maintain operations in jurisdictions where they might otherwise face restrictions.

The SPGA has firmly rejected these characterizations, insisting on the legal distinction between social sweepstakes gaming and offshore gambling operations. “Properly operated sweepstakes are legal in almost all states,” the organization maintained, adding that its “members operate within well-established legal frameworks that contrast starkly with black-market offshore sportsbooks and casinos”.

Economic Contributions and Regulatory Comparisons

When comparing different gaming sectors, the economic disparities become apparent. Traditional gaming contributes substantially to New York’s economy, generating over $16 billion in economic impact and creating nearly 70,000 jobs statewide. Similarly, sports betting has emerged as a significant revenue source, with September 2024 figures showing the handle exceeded $2.07 billion and generated over $104 million in tax revenue for New York in a single month.

By contrast, sweepstakes casinos do not directly contribute to New York’s tax coffers in the same manner, primarily due to their currency model being legally classified as non-monetary. Despite this revenue disparity, sweepstakes platforms have experienced substantial growth, largely operating outside the regulatory frameworks that govern traditional gaming establishments. This regulatory distinction has allowed sweepstakes operations to “sidestep legislative hurdles” while continuing to expand their market presence.

The National Regulatory Landscape

New York’s proposed sweepstakes ban exists within a broader national context of regulatory approaches toward sweepstakes gaming. While the SPGA has consistently emphasized its members’ commitment to responsible entertainment practices, most American jurisdictions have demonstrated reluctance to seriously consider regulatory frameworks as an alternative to prohibition.

New Jersey stands as the sole exception to this trend, having proposed a regulatory structure for sweepstakes rather than an outright ban, though the ultimate fate of this proposal remains uncertain. Meanwhile, various other states have implemented prohibitions on social casino products similar to the approach now being considered in New York.

Balancing Regulation With Small Business Interests

The controversial nature of Senate Bill S5935 highlights the ongoing challenge of developing effective regulatory frameworks that balance legitimate consumer protection concerns with the interests of small businesses. Proponents of the ban argue that unregulated sweepstakes platforms circumvent important consumer protection measures, responsible gaming protocols, and anti-money laundering regulations essential to the integrity of the gaming sector.

Opponents contend that the bill’s broad definitions could inadvertently criminalize legitimate promotional activities used by small businesses across New York. The SPGA has specifically warned that the bill “could criminalize promotional sweepstakes used by small businesses across the state, hurting local shops and jeopardizing thousands of jobs”.

As New York legislators contemplate the future of Senate Bill S5935, they face the challenge of weighing consumer protection priorities against potential impacts on small businesses that form the foundation of local economies throughout the state. The outcome of this legislative process may establish precedents for how other states approach the regulation of emerging gaming formats in an increasingly digital entertainment landscape.