Illegal Internet Sweepstakes Threaten US Online Gambling

The Baltimore Sun report revealed that Maryland gambling law enforcing agencies executed search warrants on 10 online sweepstakes businesses.

Maryland police decided to end the boom of the so-called internet sweepstakes business. The recent raid was a result of a year-long investigation together with the Immigration and Customs Enforcement office, the Homeland Security Investigation, and the US Attorney’s Office.

According to the police, the investigation revealed that the internet businesses were using electronic gaming devices illegally. No arrests have been made yet, but there will be charges filed against the offenders.

Online sweepstakes mimic casino operation

Internet sweepstakes businesses are carefully designed to abuse sweepstakes laws in US states to circumvent anti gambling laws and gambling licensing restrictions. Typically, a normal store is set up, offering internet services or long-distance telephone calls.

Each purchase automatically enters the so-called sweepstakes. The customers, or better called the players, can ask the employees to see if they won. They can also use the internet connected gambling computers to check the results.

In some cases, players can use a program that clearly mimics a legal US online casino. The sweepstake outcome in this case is decided by a pseudo-interactive online gambling application such as a slot machine or video poker. The sweepstake result is already decided at the time of the purchase, the animation is just for player confusion.

Internet sweepstakes harm legal online gambling

A 2011 report in the Business Week magazine revealed that up to 5,000 internet sweepstakes cafes were operating in the USA. A Google Maps search showed 2,823 results across the country.

According to analysts, dodgy internet sweepstakes mean a 1 billion dollar business every year. Their operation is unregulated, and no taxes are paid after the games. If that money would be spent on state lotteries or in legal internet casinos or online sportsbooks in the USA, the resulting taxes would add hundreds of millions of dollars to the state budget, enabling better services for their citizens.

Internet sweepstakes operators and users argue that the games played on the premises have to be considered promotional sweepstakes, and thus are legal in most US states.