New York Legislature Unanimously Bans Online Sweepstakes Casinos

Join Our Telegram channel to stay up to date on breaking news coverage

In a decisive legislative action that sent shockwaves through the online gaming industry, the New York State Assembly voted unanimously (141-0) on June 17, 2025, to ban online sweepstakes casinos, completing a lightning-fast journey for Senate Bill 5935 that began with a 57-2 Senate approval just days earlier. The bill, which now awaits Governor Kathy Hochul’s signature, represents one of the nation’s most comprehensive prohibitions on sweepstakes gaming and follows aggressive enforcement actions by state authorities against platforms operating in what regulators describe as a legal gray area.

This dramatic legislative action reflects growing nationwide concern about the sweepstakes casino model, which has emerged as a significant regulatory challenge as platforms generate billions in revenue while operating outside traditional gambling oversight. The unanimous votes in both chambers signal unprecedented political consensus against these platforms, potentially marking a turning point in how states approach unregulated gaming activities.

Key Takeaways

Unanimous Legislative Action: New York’s Assembly voted 141-0 to ban online sweepstakes casinos, following a 57-2 Senate approval, demonstrating rare bipartisan consensus.
Comprehensive Prohibition: Senate Bill 5935 targets platforms using dual-currency systems that allow cash exchanges for virtual currency winnings.
Steep Penalties: Violations carry fines from $10,000 to $100,000 per incident, potentially losing existing gaming licenses.
Preemptive Enforcement: Attorney General Letitia James issued cease-and-desist letters to 26 platforms before legislative action, with all platforms complying.
Industry Opposition: The Social and Promotional Games Association (SPGA) urges Governor Hochul to veto the bill, arguing it stifles innovation.
National Trend: New York would become the third state to ban sweepstakes casinos, following Connecticut and Montana explicitly.
Path to Regulation: Some observers suggest the ban could facilitate future legalization of regulated online casinos in New York.

The Legislation: Comprehensive Ban with Steep Penalties

Senate Bill 5935, introduced by Senator Joseph Addabbo Jr. in March 2025, represents one of the most detailed and comprehensive approaches to addressing sweepstakes gaming that any state has adopted. The legislation specifically targets online platforms that “utilize a dual-currency system of payment allowing the player to exchange the currency for any cash prize, cash award or cash equivalents, and simulates casino-style gaming.”

Key Provisions and Enforcement Mechanisms

The legislation establishes a multifaceted prohibition framework:

Operational Prohibitions: Explicitly bans operating, conducting, or promoting online sweepstakes games within New York State
Financial Penalties: Imposes substantial fines ranging from $10,000 to $100,000 per violation, creating meaningful deterrence for operators
Licensing Consequences: Threatens violators with loss of existing gaming licenses, affecting operators with multiple business lines
Multi-Agency Enforcement: Grants enforcement authority to the New York State Gaming Commission, State Police, and Attorney General’s office
Revenue Allocation: Directs collected fines to the Commercial Gaming Revenue Fund specifically for problem gambling education and prevention programs

The bill’s definition of prohibited activities is notably comprehensive, covering “slot machines, video poker, table games, lottery games, bingo, or sports wagering” that use virtual currencies exchangeable for cash or prizes. This broad language appears designed to prevent operators from circumventing the ban through technical platform modifications.

Regulatory Discretion and Enforcement Tools

Perhaps most significantly, the legislation grants the Gaming Commission substantial discretionary authority to determine what constitutes a “dual-currency system,” effectively closing potential loopholes that operators might attempt to exploit through creative interpretations of the law. This administrative flexibility reflects lawmakers’ recognition that the sweepstakes industry has historically proven adept at adapting to regulatory challenges through model modifications.

The multi-agency enforcement approach ensures that violations can be addressed through criminal prosecution (State Police), civil enforcement (Attorney General), and regulatory action (Gaming Commission), creating multiple pathways for accountability and deterrence.

Attorney General’s Strategic Enforcement Campaign

The legislative push was preceded by a coordinated enforcement action that demonstrated the state’s commitment to addressing sweepstakes casinos even before new legislation took effect. On June 6, 2025, Attorney General Letitia James issued cease-and-desist letters to 26 online sweepstakes casinos operating in the state, working in coordination with the New York State Gaming Commission.

Targeted Platform Enforcement

The enforcement action targeted platforms offering games using virtual coins that could be exchanged for cash and prizes, including several of the industry’s most prominent operators:

Chumba Casino: One of the largest sweepstakes platforms with millions of users nationwide
Fliff: A sports-focused sweepstakes platform that has grown rapidly
High 5 Casino: An established operator with significant New York presence
Chanced: A newer entrant targeting younger demographics
Luckyland Slots: A popular slots-focused sweepstakes platform

The universal compliance with the cease-and-desist letters (with all 26 platforms agreeing to end the sale of sweepstakes coins in New York) suggests that operators recognized the serious legal risk they faced and the likelihood of additional legislative action.

Coordinated Regulatory Strategy

“Online sweepstakes casinos are illegal, dangerous, and can seriously ruin people’s finances,” James stated in announcing the enforcement action. This language reflects the state’s position that sweepstakes casinos constitute a form of unregulated gambling that poses consumer protection risks comparable to unlicensed traditional gambling operations.

The coordination between the Attorney General’s office and the Gaming Commission demonstrates a unified state approach to addressing what officials view as illegal gambling operations disguised as promotional gaming activities.

Industry Response: Fighting for Model Survival

The Social and Promotional Games Association (SPGA), representing major sweepstakes operators, has mounted an intensive campaign to convince Governor Hochul to veto the legislation. The organization’s arguments reflect broader industry concerns about regulatory overreach and the economic implications of prohibition.

Core Industry Arguments

The SPGA’s opposition centers on several key themes:

Innovation and Investment Climate: The organization argues that the bill “sends a chilling message” to potential investors in gaming innovation, potentially deterring venture capital and private equity investment in New York-based gaming technology companies.

Economic Development: Industry advocates point to the success of companies like FanDuel, which began operations in New York before becoming a major nationwide platform, arguing that overly restrictive legislation could prevent the next generation of successful gaming companies from emerging in the state.

Regulatory Overreach: The SPGA contends that the legislation inappropriately delegates authority to define prohibited games to an unelected Gaming Commission, raising concerns about due process and regulatory clarity.

Technological Leadership: Advocates argue that banning innovative gaming models could undermine New York’s position as a leader in technology and digital entertainment, potentially causing companies to relocate to more gaming-friendly jurisdictions.

Strategic Response Campaign

“This legislation doesn’t merely target sweepstakes; it conveys a discouraging message to potential investors in the future of gaming innovation,” an SPGA spokesperson stated. The organization has pointed to Louisiana Governor Jeff Landry’s recent veto of similar legislation as a model for Hochul to follow, suggesting that other state executives have recognized the economic risks of broad gaming prohibitions.

The industry’s response reflects the high stakes involved, as New York represents one of the largest potential markets for sweepstakes operators. The loss of New York could significantly impact revenue projections and business models for companies that have built substantial user bases in the state.

National Regulatory Trend: Growing State Opposition

New York’s legislative action occurs within a broader national context of increasing state scrutiny of sweepstakes gaming models. The rapid pace of regulatory responses across multiple states suggests coordinated concern about the growth of unregulated gaming activities.

Recent State Actions

Connecticut: Enacted a comprehensive ban that takes effect October 1, 2025, following unanimous legislative approval. The Connecticut legislation prohibits any simulated gambling device or online sweepstakes operating without proper state licensing.
Montana: Implemented perhaps the most severe response, making violations a felony punishable by up to 10 years in prison, reflecting the state’s determination to treat sweepstakes operations as serious criminal violations of gambling laws.
Pending Legislation: Lawmakers in Ohio, New Jersey, and several other states are exploring similar restrictions, suggesting that the regulatory trend may accelerate as states observe the enforcement actions and legislative approaches adopted by early movers.

Failed Legislative Efforts

Not all state efforts have succeeded, with proposed restrictions failing to gain full legislative approval in Arkansas, Florida, Maryland, and Mississippi. These failures often reflect lobbying pressure from the sweepstakes industry, concerns about economic impact, or disagreements about the appropriate regulatory approach.

The mixed success rate across states suggests that the regulatory environment remains fluid, with outcomes often dependent on local political dynamics and the effectiveness of industry advocacy efforts.

Understanding the Sweepstakes Casino Model

The controversy surrounding sweepstakes casinos stems from their business model, which uses technical distinctions to operate casino-style games while attempting to avoid traditional gambling regulations. Understanding this model is essential for evaluating the regulatory responses.

Dual-Currency Framework

Sweepstakes casinos typically operate using a dual-currency system:

Paid Currency: Players purchase virtual coins or tokens that can be used to play games but cannot directly be redeemed for cash or prizes.
Free Currency: Players also receive “sweepstakes entries” or promotional currency, often obtained through mail-in requests or as bonuses, which can be exchanged for cash prizes when players win.
Technical Separation: Operators maintain that players are technically using only the free currency for prize-eligible play, while the purchased currency is solely for entertainment.

Regulatory Gray Area

This model attempts to exploit legal distinctions in gambling law:

No Purchase Necessary: Because players can obtain prize-eligible currency through free methods, operators argue they’re offering sweepstakes rather than gambling
Entertainment Value: The purchased currency provides entertainment value independent of any prize potential
Promotional Framework: The entire system is structured as promotional marketing rather than commercial gambling

Consumer Experience Reality

Despite the technical distinctions, the consumer experience closely resembles traditional online gambling:

Players use credit cards to purchase virtual currency
Games include slots, poker, blackjack, and other casino staples
Winnings can be redeemed for cash through various payment methods
Marketing emphasizes winning potential rather than entertainment value

Regulators argue that this consumer experience demonstrates that sweepstakes casinos function as gambling operations regardless of their technical legal structure.

Potential Path to Regulated Online Casino Legalization

Some industry observers and political analysts suggest that the sweepstakes ban could actually facilitate future legalization of regulated online casinos in New York. This perspective reflects the complex relationship between prohibition and regulation in gambling policy.

Senator Addabbo’s Broader Strategy

Senator Addabbo, the bill’s sponsor, has been a vocal proponent of legalizing online casinos in New York and introduced comprehensive legislation earlier this year that would create a licensed, regulated market. His comments suggest the sweepstakes ban is part of a broader regulatory strategy.

“Until we legalize online gaming in New York, we do not want the illegal market to expand, to grow, to target minors or those that have problems,” Addabbo stated regarding the sweepstakes ban. This language suggests he views prohibition of unregulated activities as a precursor to proper regulation rather than permanent opposition to online gambling.

Regulatory Sequence Logic

The logic behind this approach includes several elements:

Market Clearing: Eliminating unregulated competitors could make licensed operators more willing to enter a regulated market, knowing they won’t face unfair competition from unregulated platforms.
Consumer Protection: Prohibiting unregulated platforms could demonstrate a commitment to addressing gambling-related harm and build political support for properly regulated alternatives.
Revenue Generation: Licensed, regulated platforms would generate tax revenue for the state, while unregulated sweepstakes platforms provide no direct fiscal benefit.
Political Optics: Banning unregulated gambling while permitting regulated alternatives allows lawmakers to appear both tough on illegal gambling and supportive of responsible economic development.

Economic and Political Implications

The New York legislative action carries significant implications beyond the immediate impact on sweepstakes operators, potentially influencing both the broader gambling industry and interstate regulatory coordination.

Market Size and Economic Impact

New York represents one of the largest potential markets for online gambling in the United States:

Population: Nearly 20 million residents with high disposable income levels
Existing Gaming: Robust commercial and tribal casino operations demonstrate substantial gambling demand
Technology Infrastructure: Advanced telecommunications and payment systems support sophisticated online gambling operations
Regulatory Experience: Established sports betting market provides framework for additional online gambling regulation

The loss of New York access could significantly impact sweepstakes operators’ business models, as the state likely represents a substantial portion of their revenue base.

Interstate Regulatory Competition

New York’s approach may influence other large states considering similar legislation:

California: With its massive population and technology industry presence, California’s regulatory approach could be influenced by New York’s decisive action.
Texas: As another large state with conservative gambling policies, Texas lawmakers may view New York’s ban as validation for their own restrictive approaches.
Florida: The state’s complex gambling regulatory environment could be simplified by following New York’s prohibition model.

The interstate regulatory competition reflects the reality that gambling operators often base decisions about business models and compliance strategies on the approaches taken by the largest and most influential states.

Governor’s Decision: Critical Crossroads

With the bill now passed by both chambers of the legislature, Governor Hochul faces a decision that could significantly influence both New York’s gambling landscape and national regulatory trends. Her options include signing the bill into law, vetoing it, or taking no action (which would result in the bill becoming law after 10 days).

Political Considerations

Several factors may influence the Governor’s decision:

Consumer Protection: Hochul has previously signed legislation aimed at addressing gambling addiction, including a 2024 law requiring advertisements to include warnings about the potential harmful effects of gambling, suggesting sympathy for protective approaches.
Economic Development: The state’s commitment to fostering technology innovation and entrepreneurship could argue for a veto, particularly given industry arguments about chilling effects on investment.
Legislative Consensus: The unanimous or near-unanimous votes in both chambers create significant political pressure to sign the legislation, as vetoing would contradict overwhelming legislative consensus.
Federal Coordination: The Biden administration’s cautious approach to gambling expansion could influence state-level decisions, particularly for governors with federal political ambitions.

Industry Advocacy Campaign

The SPGA and allied organizations are focusing intensive lobbying efforts on the Governor’s office, emphasizing:

Economic impact studies showing potential job losses and reduced investment
Comparisons to other states that have rejected similar legislation
Constitutional and legal concerns about the legislation’s scope and implementation
Alternative regulatory approaches that could address concerns without complete prohibition

The success of this advocacy campaign may depend on the industry’s ability to demonstrate concrete economic benefits from sweepstakes operations and present credible alternatives to outright prohibition.

Conclusion: Defining Moment for Unregulated Gaming

New York’s legislative action against sweepstakes casinos represents a defining moment in the ongoing tension between gambling innovation and regulatory oversight. The unanimous legislative support for prohibition demonstrates unprecedented political consensus against unregulated gaming models, potentially signaling a broader shift in how states approach gambling policy.

For the sweepstakes industry, the loss of New York would represent more than just a significant market: it could signal the beginning of widespread regulatory rejection of their business model. The industry’s survival may depend on its ability to either successfully challenge these prohibitions or adapt its models to satisfy regulatory concerns while maintaining commercial viability.

The broader implications extend beyond sweepstakes casinos to the entire online gambling ecosystem. States are increasingly asserting their authority to define and prohibit gambling activities that operate in regulatory gray areas, potentially affecting other innovative gaming models that rely on technical legal distinctions.

As Governor Hochul weighs her decision, the $8 billion sweepstakes gaming industry faces an uncertain future. Her choice will not only determine the fate of these platforms in New York but could influence regulatory approaches nationwide, potentially accelerating either the prohibition trend or industry adaptation efforts.

The outcome may ultimately determine whether the future of online gambling in America follows a path of strict regulatory control and licensed operations or continued innovation through alternative models that challenge traditional gambling definitions, like crypto casinos. For an industry built on calculated risks, the New York decision represents perhaps the highest-stakes wager yet.