U.S. sweepstakes casinos are a divisive topic. Although acting as a viable market entry point in a country where regulatory guidelines and competition can make operations unsustainable, concerns have been raised about the negative impact of sweepstakes on the real-money market as well as their position in unregulated states.
SBC Americas spoke with EvenBet Gaming CEO Dmitry Starostenkov and Infingame Head of Sales Ernest Lewicki to get their thoughts on the constantly evolving state of sweepstakes and what the future holds for social gaming in the U.S.
How important are sweepstakes casinos in acting as an entry point to the US market?
Starostenkov: Seeing the current regulation difficulties and brutal competition for player acquisition and retention, the sweepstakes model looks positive, both for players who wish to enjoy gaming with occasional material gains, and for casinos that would otherwise struggle to obtain revenue in those few highly competitive regulated states.
This is especially the case for online poker. Contrary to casinos, where users play against the house, poker demands high liquidity and a constantly growing community, an objective impossible to attain in the current conditions of the U.S. market, with interstate traffic being largely banned and only six states regulating real-money poker games. It’s no wonder sweepstakes are on the rise. At iGB Live in Amsterdam, roughly a third of our stand visitors were exploring this opportunity. It’s not crucial to enter the market, but it remains a good opportunity to create a brand and a solid user database while the regulation remains uncertain.
Lewicki: Sweepstakes casinos are a crucial entry point into the U.S. market, offering a strategic way for operators to introduce their brand and products. They provide an accessible platform to engage with a broad audience across various states, bypassing some of the initial regulatory hurdles associated with real-money gaming. This approach allows companies to build their reputation and understand player preferences, allowing for more informed and successful market entries when transitioning to real-money offerings.
How can a game’s performance on a sweepstakes casino carve out the direction of future US real-money releases?
Starostenkov: As expected, the classic real-money industry is joining ranks against sweepstakes-based operators. At the end of August, the American Gaming Association (AGA) released a sharp, accusatory anti-sweepstakes policy, encouraging regulators to ban or restrict such casinos. A direct sweepstakes ban would mean not just the end of numerous casino operators, but also social media and online giveaways, and even some non-gambling games with in-app purchases.
There is no simple solution to halting the growth of sweepstakes, so at some point, either the regulation will need to change, or the traditional industry will have to adapt. This shift is already happening. In online poker, purchasing options such as chip packages for entry into money games with prizes are becoming increasingly demanded as an additional source of revenue to classic poker rooms.
Lewicki: A game’s success on a sweepstakes casino can provide crucial insights into player behaviour and engagement patterns, guiding future real-money releases. The data helps operators refine game mechanics, themes, and features to better align with elements that resonate with American players. This ensures that games on real-money platforms are finely tuned for success, leading to more nuanced market entries.
What are the benefits of launching with sweepstakes as opposed to real-money casinos?
Starostenkov: In addition to fewer regulatory headaches and substantially less investment into a licence and the corresponding paperwork, sweepstakes are currently easier to market, so they may profit from better advertising and promotional reach, as well as lower user acquisition costs. The better question is, if regulation changes, would a sweepstakes-based project be doomed? Given there would be an existing player base who are accustomed to the brand, and importantly, are ready to pay, there’s always the possibility of adapting such an operation to the real-money market. In this case, it is crucial that the provider is flexible and retains momentum.
Lewicki: Launching with sweepstakes casinos is a savvy move. Firstly, it’s about accessibility. Sweepstakes casinos can operate in states where real-money gambling is still in regulatory limbo, meaning a broader market reach right from the off. Secondly, they are a lower financial commitment, allowing for product iterations and market feedback without the high stakes of a real-money launch. Finally, there are the ample marketing opportunities that sweepstakes casinos provide. They can attract a demographic that might be hesitant to gamble with cash. Building that customer base and having them trust your brand means that they can be smoothly transitioned to real-money gaming once regulations allow.
What does the future of sweepstakes casinos look like? Could they provide a financially viable alternative to entering real-money markets in the U.S.?
Starostenkov: In the current situation, they absolutely could. From different data sources across states, the current cost of user acquisition for real-money online gambling varies from $200 to over $500, and the average revenue per user in 2023 for online casinos was reported as low as $175. That’s not to mention the enormous costs of the gambling licence. If a brand is not ready to invest millions into getting enough players to hit the profit threshold, sweepstakes look like an extremely viable option, especially if able to adapt to ever-changing market conditions.
Lewicki: The future of sweepstakes casinos looks bright, with their potential to serve as a viable alternative to real-money markets in the U.S. As the regulatory landscape continues to develop, these platforms could maintain strong player engagement and offer significant opportunities for growth. By continuously innovating and enhancing the gaming experience, sweepstakes casinos are well-positioned to remain a key component of the broader gaming ecosystem in the U.S.
