The Crackdown on Sweeps and Sports Books: What the General Public Should Know

The evolution of sweepstakes operators

Sweepstakes gambling has long existed in a legal gray area. Unlike traditional gambling, which involves placing a direct wager for a potential reward, sweeps models typically operate on a system where users earn virtual currency – very often through free methods - to participate in games. And this is where it gets even trickier: by adhering to sweepstakes laws rather than traditional gambling regulations, these sweepstakes operators have avoided much of the scrutiny faced by casinos and sportsbooks.

In recent times, some of these operators have taken a step further – they have actually leveraged their platforms so they can begin offering sports betting. By incorporating predictive games and other features that mimic traditional sports wagers, sweeps operators appeal to the increasing market of sports enthusiasts who are becoming more and more comfortable with online betting.

So why are sweeps operators entering sports betting?

This begs the most singular question of them all: why are more sweeps operators getting into sports betting in the first place? Needless to say, the move into sports betting by sweeps operators is driven by several key factors:

• Legal ambiguity: Sweepstakes laws, as most of us know, provide a framework that allows these operators to function without the heavy regulatory burdens placed on traditional sportsbooks. By positioning themselves within these sweepstakes laws, sweeps operators can offer services that closely resemble betting - without being labeled as such.
• Market growth: The US sports betting market has exploded since the Supreme Court’s 2018 decision to overturn PASPA. By the end of 2024, the market is projected to exceed $20 billion in annual revenue, making it a lucrative target for operators across the spectrum.
• Low barriers to entry: Compared to launching a licensed sportsbook like BetMGM, DraftKings, or FanDuel, which have spent millions and millions of dollars, starting a sweepstakes-based sports betting platform requires fewer regulatory approvals and lower upfront costs. This makes it an attractive avenue for companies looking to capitalize on the growing demand for sports betting.
• Consumer familiarity: As sports betting gains mainstream acceptance (even more than casino gaming, in fact), consumers are more willing to try new platforms. Sweeps operators use aggressive marketing and gamified experiences to attract users who may not yet have loyalty to traditional sportsbooks.

Loopholes in the regulatory system

Even more alarming is the proliferation of sweeps operators in sports betting. These sweeps operators trying to ‘sneak in’ as sports betting operators are good at finding significant loopholes in the regulatory framework. Here are just a few examples of the above-mentioned loopholes:

• Patchwork state laws: Unlike traditional sportsbooks, which are regulated on a state-by-state basis, sweepstakes operators can often operate nationally under sweepstakes laws. This allows them to bypass stringent state-level gambling regulations.
• Ambiguity in definition: Sweepstakes gambling relies on the premise that participants can enter without purchase, typically by mailing in entries or using free credits. This model blurs the line between gambling and promotional contests, creating a regulatory blind spot.
• Lack of oversight: Traditional sportsbooks must adhere to strict licensing requirements - including background checks, financial disclosures, and consumer protection measures. Sweeps operators, on the other hand, are often exempt from these requirements, raising concerns about the fairness and transparency of their offerings.
• Advertising loopholes: Many sweeps platforms exploit vague advertising standards to promote their services as "free" or "risk-free," potentially misleading consumers about the true nature of their games.
• Limited federal involvement: While the federal government has taken steps to regulate online gambling in specific contexts, such as the Unlawful Internet Gambling Enforcement Act (UIGEA), at the moment, there is still no comprehensive framework addressing the rise of sweeps operators in sports betting.

The risks for consumers

As always, it’s the general public who suffers. For the public, the rise of sweeps operators in sports betting presents several risks:

• Lack of transparency: Without robust regulatory oversight, there is little guarantee that games are fair or that operators act in the best interests of consumers.
• Data privacy concerns: Many sweeps platforms collect extensive user data without the stringent privacy protections required of licensed sportsbooks.
• Potential for addiction: The gamified nature of sweeps platforms can encourage excessive spending and gambling behaviors, especially among younger or inexperienced users.
• Dispute resolution challenges: Consumers who encounter issues with sweeps platforms may find it difficult to seek recourse or recompense, as these operators often lack the accountability mechanisms mandated for licensed sportsbooks.

The ongoing crackdown

Fortunately, in response to these concerns, regulators and lawmakers are beginning to scrutinize the activities of sweeps operators:

• State-level investigations: Several states have launched investigations into the legality of sweeps-based sports betting, with some issuing cease-and-desist orders against platforms that operate without proper licensing. Such is the case with Bovada, the offshore gaming operator, which, at last count, had cease-and-desist orders from more than a dozen states and counting.
• Litigation: Class-action lawsuits have been filed against certain sweeps operators, alleging deceptive practices and violations of consumer protection laws.
• Calls for federal action: Advocacy groups and industry stakeholders are urging Congress to create a unified regulatory framework that addresses the unique challenges posed by sweeps operators in the sports betting market.

Consumer education campaigns: Organizations such as the National Council on Problem Gambling (NCPG) are working to raise awareness about the risks associated with unregulated betting platforms.

What the general public should know

But the biggest question of them all is what should the general public know? In other words, what can we do to protect ourselves? As the regulatory landscape evolves, here are some key takeaways for consumers:

• Understand the platform: Before engaging with any betting platform, research its licensing status and regulatory compliance. Remember that licensed sportsbooks are subject to rigorous oversight, while sweeps operators may operate in a legal gray area.
• Read the fine print: Pay close attention to the terms and conditions of sweeps platforms, including their entry methods, withdrawal policies, and privacy practices.
• Set limits: Oftentimes, the only limit is our own self-control. To avoid overspending, establish clear budgets and time limits for your sports betting or gambling activities. Many licensed sportsbooks offer tools to help users manage their behavior, but sweeps platforms may lack these features.
• Report concerns: If you encounter deceptive practices or other issues with a sweeps operator, report them to your state’s gaming commission or consumer protection agency.

There is a thin line separating sweeps gambling and sports betting, and it is a rapidly evolving space, presenting opportunities and challenges for everyone involved. As regulators, operators, and, more importantly, consumers navigate this uncharted territory, transparency and accountability will always be key to ensuring a fair as well as sustainable market. For the general public, keep in mind that staying informed is the best defense against potential pitfalls. By completely understanding the nuances of sweeps operators and advocating for stronger consumer protections, we can help shape a safer - and more unbiased - future for online sports betting.