VGW Sweepstakes Operator Exits the Empire State

Online sweepstakes behemoth VGW is the latest to announce plans to exit New York state this summer. The parent company of Chumba Casino, Luckyland Slots, and Global Poker VGW is Australian-based but is one of this country’s largest sweepstakes casino operators. 

They join a long list of other sweepstakes casinos that have left New York since March, when the first anti-sweepstakes bills were filed in Albany. This includes High Fives Casino, McLuck, Pulsz, and Hello Millions, all large nationwide operators that have excited the Empire State in the span of about three months.

What’s most interesting about this is that, first, New York has a population of more than 20 million and is the fourth most populous state in the nation. While they have been toying with the idea of legalizing iGaming for quite some time, it has not yet come to pass.

While it does have land-based gaming, most of it is not yet in the large population centers in the South, especially New York City and all its suburbs. This means it has to be a huge share of revenue for any sweeps casino willing to spend some advertising money and ignore the occasional cease-and-desist letter. 

Up until very recently, this was basically all of the Sweeps operators, so this en masse exodus is all the more intriguing in that it’s a foregone conclusion that the New York legislature won’t be passing any anti-sweeps legislation before the end of the legislative session on June 12th.

Without any impending legislation, why would so many sweep operators pull up their tent stakes so quickly on what one would assume is a giant pot of money?

Bill S5935 would make sweeps illegal immediately upon passage and impose fines of up to $100,000. While it will have a committee debate this week, it hasn’t moved in over a month, and its odds of passage this year have to be seen as vanishingly small.

Its companion legislation over in the State Assembly hasn’t seen much movement either, and despite Senator Joe Addabbo, the powerful Chairman of the Senate Racing, Gaming, and Wagering Committee, having sponsored the bill, it’s unlikely to be resuscitated in the next two weeks.

VGW and others have alluded to ongoing constructive talks with state officials, and we suspect that in this case, that simply means that the state has made it clear that it is prepared to file cease-and-desist letters like Connecticut did earlier in the spring, stating that these companies are operating an illegal and unlicensed casino enterprise, demanding records, and threatening fines and the inability to be licensed in the future. 

Or perhaps they are prepared to follow the example of Connecticut, which threatened High Five with over 1,100 counts of gambling violations and suspended the company's license to provide legal games to the state’s online operators back in March. Each count would carry up to a year in jail and more than a $2,000 fine, and perhaps even more painful, the company was seeking the disgorgement of all illegally obtained proceeds from wagering by residents of the state.

High Five lost its ability to host its proprietary slot games through DraftKings and FanDuel in Connecticut, and it's likely that its and other sweepstakes operators' flight from the  Knickerbocker State was tied to threats, either indirect or direct, that not only was the state’s attorney general prepared to do the same, but that once having followed through, the companies would not be eligible to supply licensed and legal online operators in the state if and when the state passes online gaming legislation.

VGW is a privately held Australian company, but estimates put worldwide revenue at over $4 billion. Perhaps seeing the writing on the wall for the sweeps industry as a whole and its companies in particular, it's quite possible that they have also decided the potential to sell or lease its hundreds of proprietary slot games to operators in New York or other states post-legalization far outweighed the legal quagmire awaiting them if they stayed. 

A combination of factors may be finally pushing sweepstakes operators out of New York. First, there’s the growing realization that political and consumer sentiment have shifted. States desperate for tax revenue are increasingly unwilling to tolerate unlicensed, casino-style games operating outside the regulatory framework.

Second, operators know that overstaying their welcome could jeopardize future licensing opportunities. Continuing to operate in defiance of lawmakers might permanently prevent a return if a regulated market emerges later.

And finally, the prospect of mounting legal fees and severe reputational damage likely made the risk untenable. For many companies, the smart move was to leave quietly, keep their options open, and they may return later.

Perhaps this tactical retreat from states that clearly aren’t welcoming them may show other state legislatures that they are not, in fact, ruthless gambling dens, but online companies simply looking for guidance in a grey market area.  Maybe the message of “we follow the rules, just tell us what they are” may resonate in some state capitols.

In any case, by keeping their powder dry and leaving in good order, they buy themselves time while the state legislators debate. And they now have the potential to return one day in one form or another, instead of fighting a costly and likely ill-fated court battle.