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The Maryland House of Delegates’ Ways and Means Committee recently held a hearing on a bill that aims to ban sweepstakes-based online gambling in the state. Testimony during the hearing represented business interests both in opposition to and of introducing criminal penalties for offering such gaming.
Those conversations concerned potential difficulties in enforcing such bans and possible unintended consequences of laws to restrict social and sweepstakes-based online casinos. Maryland isn’t the only place where legislators are weighing the advantages and disadvantages of limits on that activity.
Maryland committee hearing features stakeholder statements
On March 11, the Ways and Means committee considered HB1140, which is a companion bill to SB0860. SB0860 has already been approved unanimously by Maryland Senators, putting emphasis on the House’s consideration of HB1140.
The hearing included testimony from HB1140’s sponsor, Del. Eric Ebersole and online casino vendor Light & Wonder. Also speaking were representatives from companies operating social and sweepstakes online casinos.
The committee took no action on HB1140 but some decisions could be forthcoming soon. The hearing gave legislators plenty to ponder.
Testimony addresses complications in sweepstakes regulation
A primary concern that was raised during the hearing is the possible expansive application of restrictions for online sweepstakes. A representative from the Social and Promotional Games Association pointed to fast-food promotions and likened them to the games that online sweepstakes casinos offer, suggesting that to ban one would be to ban both.
The argument was that in enacting broad restrictions on Internet sweepstakes, the bill might eliminate most promotional opportunities for many businesses, perhaps unintentionally. The representative from Light & Wonder countered that by arguing that social and sweepstakes-based casinos are unique in that they resemble online casinos so closely.
While Maryland delegates weigh the arguments for and against HB1140, their counterparts in other states are doing the same. However, it’s true that any bill attempting to ban sweepstakes casinos and only sweepstakes casinos will need to be carefully worded. A too-narrow law might be easy to circumvent, while one that’s broadly-worded might carry the sort of unintended consequences the SPGA representative warned of.
Several states considering sweepstakes restrictions
Currently, Maryland is one of six states with active bills that would restrict the operation of online sweepstakes. The other five are:
Among those five, Mississippi’s proposal is closest to becoming law. Both the Mississippi House of Representatives and the Mississippi Senate have ed bills that would ban sweeps. However, the two bills differ in their language, so reconciling the two versions will be necessary before the legislation can proceed to Gov. Tate Reeves to become law.
The other four bills are in early stages. Some of them take approaches similar to Ebersole’s to the issue of restricting online sweepstakes.
Legislative approaches to targeting online sweepstakes casinos
There is some common language in multiple proposals. For example, both the Maryland and New York bills identify the targets of the enforcement actions by calling out the dual-currency system that many social and sweepstakes casinos employ.
In these formats, the casino sites sell digital currencies that can be used to play games but have no value otherwise. They then award players with a different digital currency that can be used to play casino games, winnings from which can be exchanged for cash prizes.
In addition to targeting those frameworks, the Maryland and New York bills also call out online sweepstakes that simulate casino games. Florida’s bill takes a similar but not identical approach.
The Florida bill does not mention sweepstakes but redefines illegal internet gambling as any game awarding anything of value based on chance and simulating “casino-style gaming.” The Connecticut bill contains similar language regarding the simulation of casino gaming, but introduces yet another concept.
The proposal in Connecticut adds that online sweepstakes unconnected to “the bona fide sale of goods, services, or property” are in violation of state law. Mississippi’s bill attempts to reach the same end by different means.
SB 2510 in Mississippi identifies parameters for a lawful sweepstakes, tying such activities to the promotion of a “specific product or service unrelated to digital tokens, coins, or currency associated with a sweepstakes game.” That product or service must also be “offered for sale by the manufacturer, distributor, vendor, or retailer of the product or service.”
The enactment of any of these bills into law would create the need for social and sweepstakes casino operators to evaluate their businesses. Some might attempt to tweak their business model to remain on the right side of the law without ceasing operations. Enactment could also set the stage for legal challenges.
Language will be pivotal to laws’ enforceability
Legal challenges to apply new standards to active social and sweepstakes casino sites are likely outcomes for any of these bills. For example, language about “simulated casino gaming” might result in courts needing to define the parameters for what “simulated” means in this context.
Another possibility, looking at Connecticut’s law, would be a challenge over what qualifies as “the bona fide sale of goods, services, or property,” and whether virtual play money chips count. The age of any of these bills might only be a precursor to the judicial opinions that will truly redefine the status quo for online social and sweepstakes casino operators.
Until then, the conversation over the content of such laws in any state are ongoing in state legislatures. Maryland could be the first place where the debate transitions from the state capitol to the courtrooms.
