New York becomes latest state to try to ban online 'casino sweepstakes'

ALBANY — The top state gaming official said it appears to be "unlawful gambling." The attorney general issued "cease and desist" orders to 26 of them.

Now, the State Legislature has taken the next step of enforcement by passing a bill that could outlaw what regulators call a troubling development: The proliferation of online "casino sweepstakes" that purport to not be about wagering money but in fact, according to officials, offer just that.

Here’s how it works, according to officials: A "social gaming" site offers you virtual tokens, coins or the like for free that are said to be worthless and just for fun in a casino sweepstakes game. The catch: A player basically can exchange the freebies for something of value (money) to be wagered.

"It’s just such an obvious skirting of the law, it’s almost comedic," Assemb. Jarett Gandolfo (R-Sayville), who voted for the ban, said when the Assembly brought the ban bill for a vote Wednesday evening.

"They’re basically online casinos," Gandolfo said. "I’m surprised it wasn’t already addressed in law."

He said there are also flimsy protections for keeping minors off such sites: Just click a box attesting you’re an adult.

A coalition of sweepstakes operators complain the legislation will "deprive the state's residents of popular, free-to-play entertainment enjoyed by millions nationwide."

"By blurring the line between lawful sweepstakes promotions and illegal gambling, this legislation threatens a vibrant digital-entertainment sector while offering players no safer alternatives," Jeff Duncan, executive director of the Social Gaming Leadership Alliance, said in a statement.

Duncan said the New York legislation was "drafted based on fundamental misunderstanding of our industry."

Yet the State Legislature seemed to have little doubt about its understanding of the business. The Assembly approved the ban by a vote of 141-0; the Senate, 57-2. No legislator spoke in opposition to the bill.

Further, New York is just one of several states that have moved to ban the games in a very short span. And it is one of several states to begin issuing "cease and desist" orders to operators.

Lawmakers in Montana, Louisiana, Mississippi and Connecticut have passed bills to prohibit casino sweepstakes. Governors in Montana and Connecticut have signed the bans into law.

In Louisiana, the bill was vetoed, though the state’s gambling regulatory board has issued a slew of "cease and desist" orders. Mississippi gambling regulators not only issued similar orders but said they would forward information to state and federal law enforcement for criminal prosecution.

In New York, Attorney General Letitia James on June 6 announced her office issued such orders to 26 "online platforms offering players slots, table games and sports betting using virtual coins that could be exchanged for cash and prizes."

In a statement, James said: "New York law prohibits online platforms from offering gambling that involves risking something of value, including virtual coins that can be redeemed for cash or prizes. Online sweepstakes casinos are not subject to audits and other regulatory oversight by the state to ensure that games are not rigged, putting New Yorkers at risk."

Brian O'Dwyer, the New York State Gaming Commission chairman, was one of the early voices to warn concerns, raising the issue routinely at monthly commission meetings beginning in January.

"These so-called ‘sweepstakes’ games are unscrupulous, unsecure and unlawful," O'Dwyer said earlier this month.

Gov. Kathy Hochul must sign or veto the bill before the end of the year. Perhaps aiming for a veto, SGLA’s Duncan said operators want to work with "New York policymakers to develop sensible regulatory frameworks that protect consumers while preserving innovation and the freedom for residents to enjoy the same entertainment options available to Americans in other states."

By Yancey Roy

yancey.roy@newsday.com@yanceyroy