The Future US iGaming in 2025: Sweepstakes Casinos and Federal Oversight

The year 2025 promises to shape the future of iGaming for decades ahead. 

The war on sweep casinos at the state level and the looming threat of heavy-handed federal oversight are reshaping the industry. At the same time, efforts to pass online casino legislation in several states and the ramifications of a bombshell Supreme Court decision signal that online casinos are in for a rocky year ahead.

Quick Overview

Last year, sweepstakes casinos dominated the headlines and were the talk of the town at the Las Vegas Gaming Expo in October. In the months since, the American Gaming Association and its proxies have launched an aggressive campaign to bring the burgeoning industry to heel.

However, instead of tightening control, the campaign has only served to highlight deeper cracks within the US gaming sector as a whole. The issues raised about sweepstakes casinos only serve to hold up a mirror to existing problems with legal casinos, both land-based and online.

This escalating tension threatens to draw in the federal government, which has already begun rattling its sabers over perceived industry overreach. 

Discussions around the SAFE BET Act and even the possibility of revisiting the Wire Act suggest that federal oversight could soon become a reality for the iGaming sector.

While states continue to run enormous deficits, online casino operators struggle to pass new legislation due to concerns about cannibalizing brick-and-mortar casinos.

This issue is not helped by the slow growth in brick-and-mortar casino revenue in states like New Jersey and Pennsylvania.

In addition, the Supreme Court's failure to hear the West Flagler case in the summer of 2024 has set off the most seismic recalculation of online casinos and tribal gaming since the introduction of the Indian Gaming Regulatory Act in 1988.

There is a lot to digest, so let's examine each of these issues one by one.

The Sweepstakes Casino Controversy

For those unfamiliar with a sweepstakes casino, the concept is simple: players receive free gold coins to play slot machines or, less frequently, table games. When those gold coins run out, they can either wait for more the next day or purchase additional gold coins. However, players are awarded sweep coins with each gold coin purchase, which serve as entries into sweepstakes contests. These sweeps coins can be used to play the machines, and any winnings can be redeemed for cash or gift cards.

Since legal online gambling is only available in seven states, sweepstakes casinos have carved out a significant share of the slots market in unregulated states. Unlike offshore operators who operate quietly, sweep casinos have leaned heavily into aggressive marketing strategies. Confident in the perceived legality of their model, they've advertised widely on major social media platforms.

VGW, the owner of Chumba Casino, Luckyland Slots, and Global Poker, reported over $6 billion in revenue last year. Most of it was generated by American players. 

To fuel this growth, they've hired Hollywood heavyweights like Ryan Seacrest and DJ Khaled to promote their apps across Instagram, Facebook, and TikTok, spending nearly $300 million on advertising alone. This success has inspired a wave of imitators. 

Drake is now the face of Stake Casino, while Paris Hilton represents WOW Vegas. These high-profile endorsements have drawn fire from the American Gaming Association and various state gaming commissions and legislators.

Critics point out that many of these operators lack proper licensing and regulation. They often fail to perform even routine age identification checks, have little or no responsible gaming protections, and outright ignore Know Your Customer (KYC) protocols that brick-and-mortar casinos must follow.

Yet the traditional gaming community has struggled to seize the moral high ground, partly due to a series of high-profile scandals in the latter half of 2024.

Mired in Controversy: The Challenges Facing Traditional Gaming

While sweepstakes casinos face intense scrutiny, traditional gaming operators have not escaped their own share of scandals. Sports betting was the primary culprit, with Jontay Porter getting a lifetime ban for betting on NBA games and Shohei Ohtani for embezzling $17 million. But the biggest black eye was the blowback from the oversaturation of sportsbook advertising.

In the past three years, almost $5 billion has been spent on gambling advertising in the US. Much of it was spent on advertising that was inadvertently seen by children, such as on television or in-venue advertising. The discontent from sports viewers and even players has manifested in some senators and congressmen starting to make noise about federal gambling regulations. 

Wynn Las Vegas, the crown jewel of the legendary strip, paid a $130 million forfeiture for conspiring with unlicensed money-transmitting businesses. The press release lists a half dozen instances of ex-Wynn employees flat out breaking the law regarding AML and KYC statutes, though often with humorous names for crimes like Human Hat or Flying Monkey. 

MGM paid $7.45 million for turning its back on filing Suspicious Activity Reports on gamblers it knew to be illegal bookies. Scott Sibella, former president at Resorts World, was forced to resign and surrender his gaming license after Resort World's license was almost pulled over a similar incident in which illegal bookies were wined and dined at Resorts while betting millions with knowledge of casino executives. Resorts World will almost certainly face an eight or nine-figure fine as well. 

These scandals tarnish the gaming industry's reputation and fuel arguments for federal oversight, including measures like the SAFE BET Act. As public trust wanes and lawmakers demand stricter compliance, traditional operators must confront these challenges or risk losing their grip on the moral high ground.

Regulatory Battles and Industry Hypocrisy

These scandals took a bit of wind out of the American Gaming Association's sails as they moved from statehouse to statehouse in the fall of 2024, making their case against sweeps casinos and the issue of "consideration." Lawyers argue that gambling must include three components for it to be legally defined: chance, prize, and consideration.

What should have been a straightforward explanation, that sweepstakes casinos are exploiting the "consideration" requirement by using gold coins and sweeps coins as a legal loophole, quickly got lost in the noise. 

Instead of selling a Big Mac or a car in a one-off promotional sweepstakes, these casinos run their contests perpetually and with clear monetary incentives, which courts have already addressed in cases against internet café casinos a decade ago. It should have been an easy sell.

Unfortunately, these arguments were overshadowed by the steady drumbeat of federal investigations into anti-money laundering (AML) and Know Your Customer (KYC) failures in the gaming industry. Even well-known operators like DraftKings were fined in some states for advertising to underage gamblers, with penalties reaching five figures.

Hypocrisy is never a good look, and the iGaming industry's own scandals made it harder for politicians to rally against sweeps casinos with the same enthusiasm. 

Groups like the National Council on Problem Gambling and the National Council of Legislators from Gaming States pushed for bans or stricter regulations on sweeps casinos, but the momentum seemed to stall.

Still, states like Michigan, New Jersey, New York, and a dozen others are considering either outright bans or heavy-handed legislation to address the issue. 

New Jersey's approach, on the surface, calls for legalizing sweeps casinos. Still, upon closer inspection, it looks more like a carefully designed trap. A sign that more aggressive legislative action is likely on the horizon.

Balancing States' Rights and Federal Regulation

Of course, using state legislators to squash pseudo-competitors is one thing, but it's a different story when the federal government starts taking notice. 

Senator Blumenthal and Rep. Tonko even put together a precociously named bill called the Supporting Affordability and Fairness with Every Bet Act, or the SAFE Bet Act, which would limit customer deposits, massively restrict advertising, and establish federal oversight. 

Naturally, this has raised skepticism from states that rely heavily on online gambling tax revenues. 

Many ask, "What makes the federal government think it knows better than we do about what our residents want?" And they have a point. The priorities of New Jersey and Nevada, for example, are bound to differ greatly from those of Utah or Hawaii. 

Reactions have been mixed. Some predict that federal action is imminent, while others remain doubtful, especially given the presidential election's outcome. Trump and his family already have ties to various prediction market makers like Kalshi. 

Kalshi is already taking action on the Super Bowl in 2025 and acting in almost all ways as a sportsbook. 

It's hard to imagine an administration focused on reducing federal oversight deciding to introduce sweeping new federal laws for gaming and sports betting. 

Still, saying that this administration is unpredictable may be the understatement of the decade, or perhaps any decade. And let's not forget that some of the president's key allies, like Miriam Adelson, may support expanding land-based casino gambling but remain staunch opponents of online betting. Her late husband, Sheldon, fought a long battle for federal bans on online casinos. 

The odds of sweeping federal oversight in the next four years seem long. Still, suppose the gambling industry, particularly sports betting, fails to address its advertising practices and compliance with federal laws. In that case, it's only a matter of time before lawmakers lose patience and take action. 

The Stalemate of Online Casino Expansion

Online casinos first launched in New Jersey in 2013, and in the dozen or years since, we've seen them expand to seven states, almost all in the Northeast. By comparison, sports betting became legal again in 2018 and it’s currently legal in 38 states and DC. So what's gone wrong?

One word stands out, and that is cannibalization. Many land-based operators, as well as legislators, fear that online casinos will cause casino resorts to lose jobs. Casino resorts, which contribute millions in taxes, tens of thousands of jobs, and most importantly, a lot of lobbying money in states where iGaming bills have been brought to the house floor. 

Many believed that 2024 would see a new raft of online casino legislation, and it did. Online casino legislation was floated in at least nine states and passed in none. 

Not even one month into 2025, and eight states have iGaming on their legislative calendars. Maryland came closest last year, passing the bill out of the House but failing in the Senate. 

Maryland exacerbated the problem when a state-commissioned study by The Innovation Group (TIG) found that as much as 10% of Maryland's land-based casino revenue would disappear. When their methodology was questioned, they attempted to walk those numbers back, but it was too late, and unions from around the state coalesced against iGaming as they now saw it as a job killer. 

Despite other firms with more gaming experience, like Eilers and Krejcik, releasing their own studies showing most states introducing iGaming see modest growth for their brick-and-mortar casinos after passage, the specter of cannibalization was already set in the minds of casino workers, their labor unions, and eventually legislators.

And whether you look at the new bills in New York, Illinois, or Virginia, it is hard to see how these state assemblies can maneuver around entrenched opposition from big labor. 

Illinois is facing its own 3-billion-dollar deficit, and the governor has expressed support for iGaming. However, besides being a very pro-union state, they face strong opposition from the owners of the more than 47,000 slot-like Video Lottery Terminals peppered across the state. 

While it's possible that a smaller state like Wyoming might pass an online gaming bill this year, even that seems unlikely given entrenched gaming interests’ opposition here as well. It may take a worsening of the national economy and real deficit pain at these state houses before we see more movement on the iGaming front in the US.

Impact of West Flagler Case

One possible way through the current political morass was laid out by the Supreme Court last summer.

By denying hearing the West Flagler case and letting the DC Circuit Court's opinion stand, SCOTUS effectively agreed that bets placed on internet servers on reservations are, in fact, the same as those placed on tribal land. The Department of the Interior (DOI) then codified the hub and spoke model the Seminoles proposed in Florida. 

The DOI not only agreed that players didn't need to be on tribal land to place remote bets through servers located there, but they also made the process through the Indian Gaming Regulatory Act (IGRA) of reaching a compact between tribes and states much more precise and less prone to abuse by the states trying to negotiate matters unrelated to gambling.

While this has national implications as tribes in many states begin negotiating compacts over sports betting and possibly iGaming, its most significant impact is in the Sunshine State, with 22 million residents and the third most populous state in the country. If the Seminoles and the state of Florida were to begin negotiations, it would be a seismic shock for the online casino world. 

However, the longer-term implications were not lost on other tribal casinos. If, in accordance with the IGRA, they can reach a compact with the state giving them the legal right to offer online casinos, then the law of the land says those bets happen on the reservations regardless of where in the state those bets were made.

For instance, if the Seminole renegotiated their compact with the state of Florida, they could immediately offer online casinos to anyone anywhere in the state, just as they have done with sports betting.

Of course, the ruling doesn't apply to just Florida, as the DOI has made clear in codifying new rules that make it easier for tribes to negotiate compacts and when the agency needs to step in to review them. That means tribal nations from Alabama to Arizona, Oklahoma to California are all wondering what this might mean for them. 

In some states, governors and their departments of interior could reach a compact without legislative approval. 

For instance, Arizona, Colorado, Louisiana, Nebraska, Wisconsin, and Minnesota require zero input from legislators in tribal gaming compacts. In others, the role of negotiating the compact is given to other state agencies or commissions. Only three states currently require legislative approval of these compacts.  

This presents an alternative scenario where iGaming could potentially gain traction in a state with a robust history of tribal gaming and a governor who is prepared to take decisive action to address budget deficits without resorting to navigating the legislative process. This is probably currently a much more likely scenario than any other for a state to approve new online casinos.

In truth, just as iGaming swept through the Northeast or riverboat gaming swept through the South and Midwest in the 1990s, one state's approval could kick off a land rush.

For instance, the Seminoles renegotiating their compact could see the Porch Creek tribe in Alabama get iGaming, or Colorado signing a compact might force the hands of the governors in Arizona and New Mexico.

Conclusion

This year is shaping up to be a pivotal one for iGaming. On one hand, stalled state legislation and the looming threat of federal oversight pose serious concerns. On the other hand, sweepstakes casinos and the potential for tribal-led iGaming expansion promise to shake up the industry.

Sweepstakes casinos have pushed the boundaries of legality and advertising as far as state legislatures allow, while traditional gaming operators continue to grapple with scandals that erode public trust. Both find themselves vulnerable, with sweepstakes casinos facing aggressive state regulations and traditional operators facing the possibility of federal intervention through measures like the SAFE BET Act.

Fears of cannibalization and opposition from unions and brick-and-mortar operators create steep hurdles for online casino expansion. Yet, the Supreme Court's ruling in West Flagler and the DOI's streamlined Compact process offer some states and tribes the ability to take a back-door approach to expanding iGaming.

As states wrestle with budget deficits and gaming operators seek to restore public trust, the future of iGaming hangs in the balance. Whether through legislation, tribal compacts, or unforeseen breakthroughs, 2025 will define the industry's trajectory for decades to come.