Tribes, commercial operators aligned against sweepstakes
In a moment that seemed impossible in 2022, on Wednesday (23 October), Indian Country and the Sports Betting Alliance (SBA) in the US had a meaningful conversation about how to fight — together — against sweepstakes.
Victor Rocha invited lobbyist Jeremy Kudon, who represents the SBA (comprised of BetMGM, DraftKings, Fanatics and FanDuel) to share his thoughts on the rise of sweepstakes. That is the latest âunregulated, unlicenced and untaxedâ gambling to emerge in the last year.
Sweepstakes offer gaming without initially using real money. In legal sports betting and igaming, consumers stake accounts with cash or cash equivalents. In sweepstakes, the games start off free to play, but then consumers can purchase âcoinsâ or âvirtual cashâ with which to wager.
Recently, the legal industry has not only taken notice of the rise of sweepstakes, but is starting to educate itself on what they say is already a multi-billion-dollar industry. The goal is to stop it from continuing to proliferate.
Because sweepstakes are unregulated and untaxed, the billions of dollars sweepstakes companies earn, the panelists said, are coming out of the pockets of commercial operators and tribes alike.
âWith all the focus on Underdog, PrizePicks, and (others), maybe we were missing the bigger pictureâ of sweepstakes, Kudon said.
Kudon works for the legal firm Orrick, and though it does not appear that he represents any sweepstakes operators, his company does, according to its website. Among them, VGW, which operates as âChumba.â
Strange bedfellows
Kudon joined Pechanga.net founder and Indian Gaming Association conference chair Rocha and Jason Giles, executive director of the National Indian Gaming Commission on the âNew Normalâ webinar. The episode was titled âCommon Ground: Will California Tribes and Sports Betting Alliance Join Forces Against Sweepstakes Threats?â
The combination would have been unthinkable two years ago, as Californiaâs Indian Country and the SBA spent close to $500m (ÂŁ386.7m/âŹ463.6m) on campaigns for and against legal sports betting initiatives. During the campaigns, the advertisements were often ugly, with both sides pointing fingers and calling names. In the end, the tribes prevailed. The commercial initiative, Proposition 27, suffered one of the worst failures in political history.
Since then, some commercial operators have begun to offer amends to Californiaâs Indian Country. In particular, FanDuel president Christian Genetski went on an apology tour. And US CEO Amy Howe has publicly said California sports betting will be done âwith and throughâ the tribes. FanDuel now has a whole department dedicated to âstrategic partnerships.â The heavy focus is on listening to and working with Indian Country.
Per their compacts and federal law, Californiaâs tribes have exclusivity for gaming. And they are clear that any gambling will go through them.
Hereâs what sweepstakes sites look like
Kudon spent significant time educating viewers on how sweepstakes-model platforms work and what they look like. Visually, they look nearly identical to digital casinos and sportsbooks, complete with odds.
âWeâre on the road constantly trying to pass legislation,â Kudon said. âItâs hard ⊠but it should be hard. There should be no shortcuts here. And I hope that (attorneys general) see this. I hope they see why in regulated states, why would you allow Fliff not to pay the $25m licence fee or the 51% tax that my clients pay (in New York) on every bet?â
As chance would have it, the Attorney General Alliance is meeting 23-25 October in Deadwood, SD, and according to sources, multiple gambling issues are on the agenda.
âThere should be, I hope, someone focusing on this all the time,â Kudon said. âThese are not offshore operators. Fliff is based in Delaware.â
Going forward, it seems clear that former foes will unite. As the old saying goes, âthe enemy of my enemy is my friend.â
âWeâre going to turn Fliff into a verbâ
Rocha said he was blindsided by the rise of sweepstakes while at Gaming Global Expo earlier this month. He seems to have his sights set on blowing up the sweepstakes industry. Fliff and VGW are his main targets.
âWeâre going to turn Fliff into a verb,â Rocha said. âWhere youâll say, âI went into California and got Fliff-ed.â Iâve talked to tribal leaders and they are shocked at the money and the arrogance. I think the big thing here is that we are not alone in this. When I reached out to you (Kudon), you were instantly welcoming and we had a commonality.â
Referring back to 2022 and Propositions 26 (tribal retail sports betting) and 27 (statewide digital betting), Kudon said there was âa lot of pain, but thatâs part of the process and now weâre going to work together to do this the right way.
âThis is the moment for all of the commercial operators and sovereign nations to band together and root this out.â
Pickâem fantasy also in the crosshairs
Besides announcing their intent to combat sweepstakes, Rocha also asked Kudon about where the SBA stands on âDFS 2.0.â The reference is specifically to pickâem-style fantasy games. Rocha and California Indian Country are waiting on an attorney general opinion about the legality of pickâem games.
Kudon, who said he has many friends who work for fantasy sports companies like PrizePicks and Underdog, lobbied for DraftKings and FanDuel before sports betting was legalised in many states. He said there is a clear distinction between traditional fantasy sports, in which players compete against each other, and pickâem. He said that is essentially a âprop parlay,â in which consumers can pick a yes-or-no answer and wager real money against the house.
âThey use the words âfantasy sports,â but itâs really a player prop,â Kudon said. âWill Bronny James play more than one minute? Score more than two points? Yes or no? Thatâs the same as sports betting. Those are sportsbooks, and they should not be operating in California.
âThey say that if you squint your eyes and look at the letter of the law, they say, âOh! We fit into those words.â But courts will always take substance over form. Thatâs going to be true of fantasy and thatâs going to be true of sweepstakes.â
Kudon went on to call the pickâem contests a âshortcutâ and suggested that companies were âhiding behindâ the word âinnovation.â
âWeâre at a crossroadsâ
Among Rochaâs goals with his series of planned webinars about sweepstakes â three more are coming, with Bill Miller of the American Gaming Association on the agenda next week â is educating California tribes. Kudon pointed out that the education should extend beyond the Golden State as sweepstakes and pickâem contests are active across the US, including in tribal gaming states like Florida, Minnesota and Oklahoma.
âThis is a moment in time where the industry has woken up and sees that weâre at a crossroads,â Rocha said. âAnd we need to do something about it. As a Native American in the Pechanga Tribe, as a Californian, I recognise the threat and I canât wait for someone else to do something.
âWe welcome you. We welcome the AGA. Here in California, the tribes have to do something. You canât come into California and think that the tribes werenât going to react.â