Unregulated gaming operators, including sweepstakes, face a fresh battle: IGA announces crackdown
Lashing Out Against Sketchy Gambling Operations Threatening Tribal Gaming
Recent events at the Indian Gaming Association's conference in San Diego made it crystal clear - the battle against unregulated gambling, including sweepstakes and off-the-books betting, is far from over. These shady operators are encroaching on tribal sovereignty, twisting state laws to their advantage.
Sneaky operators, online gambling empires, and cryptocurrency-based under-the-table markets are doing everything they can to exploit loopholes in gambling laws, endangering the reliability of the regulated gaming industry. conference was a meeting of minds, where tribes shared legal strategies, enforcement efforts, and policy solutions to safeguard the future of tribal gaming.
"Illegal online gaming is the biggest danger to tribal sovereignty in this modern era," said Howard Glaser, Light & Wonder's head of government relations. No beating around the bush there!
When you Google "California online casinos," you get a whole slew of operators popping up, even though online gambling is strictly prohibited in the state. Glaser estimates $20 billion in online gaming revenue in California, with unregulated operators already controlling the market.
"The decision the tribes have in front of them, whether to enter the online gaming and online sports betting market, has already been made for them," Glaser said. "Without strong action against these illegal operators, it doesn't matter what the tribes decide - the illegal operators will dominate the market."
Glaser isn't blaming the players - they're unwitting targets, lured in by marketing strategies and unaware that they're breaking the law. In 2024, one company spent a whopping $400 million on advertising in the U.S., while many employ famous celebrities as paid promoters.
James Siva, chair of the California Nations Indian Gaming Association, highlighted the issue as a threat that surfaced two years ago. With swift growth, it soon became a top priority.
"The main thing we protect is our gaming exclusivity in California," Siva said. "If gaming expands without tribal participation, it's illegal. Dealing with the growing illegal industry is a major challenge. We're using multiple strategies including advocating for regulatory fixes, working with the state's gaming commission, and targeting the financial backend of these operations."
Allowing these shady sweepstakes operators to continue their activities opens the door to a wave of new, unscrupulous players, particularly when it comes to sports wagering. These operators claim they don't need to partner with the tribes, choosing instead to stake their claim on the market and gain access through underhanded means.
"Everybody knows California's market is the golden goose," Siva said. "If it's not approved by the tribes, we're coming for you one way or another."
Dustin Gouker, a consultant and analyst with Closing Line Consulting, predicts all forms of gaming will try to find loopholes, forcing tribes to play a constant game of 'Whack-a-mole' in order to combat the problem.
"People are always looking for new ways to push the envelope," Gouker said. "Tribes will continue to face this battle."
While only seven states in the U.S. have legalized internet gambling, in 40-plus states, unregulated online casinos are operating under the guise of sweepstakes. Sweepstakes-based sportsbooks and games are booming, with online casinos bringing in the most revenue.
"Everyone who supports internet gambling is frustrated by the slow pace of legalization, but in most states, illegal online casinos are operating under the disguise of sweepstakes," said Tres York, vice president of government relations with the American Gaming Association.
The good news is that there's momentum building with state regulators and attorneys general sending out subpoenas and legislators taking notice of the issue.
"They aren't being fooled," York said. "The regulators have determined it's illegal gambling. The more states that look into it, the more this issue makes headlines."
Lawyer Scott Crowell called it a "serious threat" and echos the sentiments of those in the industry. In the last two years, the amount of money invested in these illegal platforms and the growth of the industry is "unbelievable." Not only is it a threat to tribal sovereignty, but it siphons away valuable gaming dollars.
"Sweepstakes' argument that they operate legally doesn't even pass the sniff test," Crowell said. "If you think playing with gold coins is free, then you're mistaken! When you lose the gold coins, if you put $100 in sweepstakes coins, you're gambling dollar-for-dollar with real money."
Crowell says state agencies have issued cease-and-desist orders over the past few months, and these operators have been forced to pack up and leave the state. However, not enough state attorneys general are stepping up to take enforcement action.
"We don't see that happening now," Crowell said. "It's astonishing that California's Attorney General hasn't acted. This state could put a stop to a lot of it around the country, and no one has more to lose than the tribes in California. In Connecticut, the attorney general, in conjunction with their state regulator, issued 1,065 criminal counts against one of the illegal casinos."
Glaser calls it a similar situation to what DraftKings and FanDuel did with fantasy sports. "Casinos were looking the other way, thinking they owned the market, and DraftKings and FanDuel spent a lot of time building the customer bases."
Glaser estimates that $20 billion in online gaming revenue in California is worth around $2 billion to tribes, approximately 25% of current tribal gaming revenue.
"They're stealing money from tribal members, residents, the state, and the country at cyberspeed," Glaser said. "All you have to do is set up a website, claim it's not gambling, and evade the law as long as you can. Billions of dollars are passing beyond the tribes, the state, and the country at cyberspeed."
The reality is that tribes will have to take enforcement into their own hands if they want to protect their rights. As for the future, they're ready for that fight.
- The illegal, untraceable online gaming operations continue to pose a significant threat to tribal sovereignty, particularly in California, where unregulated operators are controlling the market.
- In response to this threat, the California Nations Indian Gaming Association is advocating for regulatory fixes, working with the state's gaming commission, and targeting the financial backend of these operations to safeguard their gaming exclusivity.
- legislators are starting to take notice of the issue, with state regulators and attorneys general sending out subpoenas, aiming to combat these shady operators and enforce policy-and-legislation related to gambling.
- However, the battle against these unregulated gambling activities, including sweepstakes and off-the-books betting, is far from over, and tribes will have to continue to be vigilant and proactive in their efforts to protect their rights in the face of these tribal, political, and general-news related challenges.
