- Sweepstakes casinos Golden Hearts Games (GHG) and Virtual Gaming Worlds (VGW) are leaving or planning to exit Michigan.
- GHG was ordered to cease operations, possibly due to charitable gaming.
- VGW decided to leave out of caution and concerns about regulatory scrutiny.
- Legal experts weigh in on the reasons behind their departures.
- The interpretation of gaming laws and regulatory pressures vary by state.
I think it’s increased scrutiny by the regulator that’s leading companies to decide to leave.
Sweepstakes casinos — specifically, Golden Hearts Games (GHG) and a trio of sites operated by Virtual Gaming Worlds (VGW) — have either left Michigan or are planning to do so in the next few months.
While GHG was ordered to cease operations by AG Dana Nessel in mid-September, VGW said last month that it would voluntarily pull down its sweepstakes online poker and casino sites — Global Poker, Chumba Casino, and LuckyLand Slots — by February 1, 2024.
But the departures did not materialize for the same reasons. For GHG, it was likely because the company, which has a charitable gaming component, ran afoul of state law that governs such components. For VGW, it was likely out of an abundance of caution and wanting to avoid problems with the state regulator in the future.
“I think it’s increased scrutiny by the regulator that’s leading companies to decide to leave,” gaming law attorney Michelle Cohen, a member of Ifrah Law PLLC, told Poker Industry PRO in an exclusive interview. “Now that Chumba is leaving, you’ll probably see more [companies leave] because [VGW] is the biggest player in the industry.”
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GHG’s Charitable Component
Regulators tend to pay closer attention when companies say there’s a charitable aspect.
Cohen, who leads the firm’s Data Privacy & Cyber Security group — which advises clients on sweepstakes and contests, among other things — said that when she first learned GHG was ordered out of Michigan, she figured it may have been because it’s a small company without a lot of resources.
“They may have just made a business decision that they did not want to expend the resources to fight it out with the regulator, and it was better to enter into [an] agreement of assurance and leave the state,” Cohen said.
But GHG also had a rare charitable component on its platform.
“I [originally] thought that that may have raised the interest of the regulator there because they had a charitable aspect,” Cohen said. “But that said, I understand now that Chumba [Casino] is also leaving Michigan, and as far as I know, they don’t have a charitable aspect.”
According to Cohen, while it’s not illegal for a real money sweepstakes casino in the US to say that a percentage of its sales go toward a non-profit or a charity, they are still heavily regulated.
“When you incorporate a charitable or giving aspect, that does tend to get attention from regulators because there are some that will say there’s some charitable aspect when the charity is not getting all the funds,” she said. “Regulators tend to pay closer attention when companies say there’s a charitable aspect.”
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Varied Interpretation of Gaming Laws
Laws governing sweepstakes — and, therefore, sweepstakes casinos — have been around for decades. Sweepstakes are not considered gambling if they offer some legitimate purpose and allow some (or all) participants to play for free.
But Michigan also has an igaming law, which means sweeps need to be properly licensed by the state.
“In terms of some companies closing down because of the charitable component, the only one I know of is GHG — so I think that’s a red herring,” Cohen said. “That’s not necessarily the focus [of state law].
“There’s been a number of states where the way that their sweepstakes laws are written or interpreted, the companies may have been advised not to offer service there, even in the past. Whatever a company does, I think, depends on its sense of risk management, what their advice has been from counsel, how much business or interest they have from people in the state, etc.”
Washington is one such state. Idaho is another. And it appears that Michigan will be yet another — especially considering the Michigan Gaming Control Board (MGCB) has also forced out prop-style DFS wagering.
“There are some states where, if you’re awarded additional free play, which happens on most of these sites, that can be considered either a prize or a consideration,” Cohen said. “That can push a company into the definition of gambling.”
Learn more about real money online casinos in Michigan in our complete guide.