Recent U.S. Sweepstakes Gaming News: Regulatory Crackdowns & Legal Updates

In the past few months, sweepstakes-based gaming platforms have faced a flurry of legal and regulatory actions across the United States. Numerous states are moving to ban or restrict these so-called "sweepstakes casinos," while regulators and courts crack down on operators skirting gaming laws. These developments have created significant challenges for gaming payment processors and compliance teams, as they navigate an increasingly complex regulatory landscape. Below we break down the latest state legislation, enforcement actions, and court cases (as of mid-2025), and what they mean for consumers and the gaming industry.

State Legislatures Move to Ban Sweepstakes Casinos

State lawmakers nationwide have taken swift action against sweepstakes gaming platforms. Since May 2025, at least five states have passed bills outlawing online sweepstakes casinos, citing consumer protection and the integrity of regulated gaming. Many of these measures enjoyed overwhelming bipartisan support and set significant penalties for violators. The legislative crackdown has also prompted payment processors to reassess their risk tolerance, with several major providers beginning to restrict services to sweepstakes operators. The following states have recently enacted (or advanced) sweepstakes casino bans:

• Montana: SB 555 bans unlicensed online casino-style games, effective Oct 1, 2025.
• Connecticut: SB 1235 makes sweepstakes casinos a Class D felony with up to 5 years in prison.
• Nevada: SB 256 broadens the definition of illegal gaming and targets sweepstakes operators.
• New York: S5935 bans sweepstakes games and imposes fines up to $100,000 per violation.
• New Jersey: A5447 outlaws sweepstakes wagering and enables enforcement by gaming regulators.
• Louisiana: SB 181 passed but was vetoed by the governor; enforcement continues via other channels.

Regulatory Crackdowns Across Multiple States

Even as legislatures debate new laws, state regulators and attorneys general have been aggressively using existing laws to shut down sweepstakes casinos. In early June, New York Attorney General Letitia James issued cease-and-desist orders to 26 online sweepstakes casino platforms. The crackdown targeted sites like Chumba, Global Poker, and LuckyLand, which were deemed illegal gaming operations under New York law.

Louisiana and Mississippi also issued cease-and-desist letters in June. Mississippi's Gaming Commission reminded operators that accepting payments in exchange for a chance to win constitutes gaming, regardless of whether games advertise "free play." These enforcement actions have created immediate compliance challenges for gaming payment providers, who must quickly implement geoblocking and transaction monitoring to avoid regulatory violations.

Other states like Michigan and Arizona are quietly sending warnings or initiating investigations. In many jurisdictions, operators have pulled out voluntarily to avoid enforcement.

Legal Challenges and Court Cases

Alabama has seen a surge of lawsuits—13 active cases—against sweepstakes casino operators. Plaintiffs are invoking state laws allowing recovery of gaming losses. These cases argue that platforms like Chumba Casino involve all three gaming elements: prize, chance, and consideration.

However, most platforms enforce arbitration clauses, which have blocked several lawsuits from moving forward. A federal judge in California recently compelled arbitration in a case against Stake.us. Similar cases are pending against Pulsz and in Illinois courts. Many of these lawsuits also challenge payment processing practices, arguing that accepting deposits for virtual currency constitutes illegal consideration, putting additional pressure on gaming payment providers to enhance their compliance frameworks.

Implications for Consumers and Operators

Consumers: With operators exiting states or being shut down, players lose access to some platforms. Regulators stress that unregulated sites may rig games or withhold payouts, unlike licensed casinos which are audited and held accountable.

Operators: Companies must now geofence banned states, revisit terms of service, and explore licensing or regulatory alternatives. This includes overhauling their gaming payment infrastructure to ensure compliance across multiple jurisdictions, implementing enhanced player verification systems, and working with specialized payment providers who understand the evolving regulatory landscape. Trade groups like the SPGA and SGLA are lobbying to protect promotional sweepstakes models, but many states are no longer receptive.

The legal climate in the U.S. is shifting rapidly. As the second half of 2025 unfolds, sweepstakes casinos may either vanish from several jurisdictions or be forced into regulation. Payment processors and gaming operators alike must adapt quickly to these changes, implementing robust compliance systems and geographic restrictions to navigate the increasingly complex regulatory environment. Either way, the gray zone is closing.