What Is Sweepstakes Betting?

The next big thing in sports betting is about to hit us. If you haven’t heard of sweepstakes betting yet, you soon will. It’s poised to massively expand the number of people in the U.S. who can access sports betting. Is it legal? Is it safe? Should you should try it? 

One of the key moments in my gambling career came on May 14, 2018 when the Supreme Court ruled that states were free to decide if they wanted to regulate sports betting for themselves. Over the next six years, we’ve seen sports betting boom and now 35 states offer some form of regulated sports betting.

I had hoped that regulation would bring a thriving sports betting industry full of innovation to most of the United States. And It did – for some states. Unfortunately, where you live dictates how good sports betting can be for you. Some states restrict competition, only giving you one regulated betting option. In other states the barriers to entry prohibit a lot of smaller businesses from even competing. There are also major states that are still potentially years away from regulating sports betting.

The alternative to regulated sports betting has always been the offshore industry as well as local bookies. For a lot of Americans, they’re not comfortable transacting their money out of the country via cryptocurrency and many of them believe that placing a bet offshore is illegal. The offshore betting industry has always had a consumer confidence problem.

Meanwhile, local bookies still thrive in most of the U.S., but they too face a reputational hurdle. People don’t feel comfortable betting with a shady local bookie that settles up weekly. 

Recently, a solution has emerged from an unlikely ally. 

How Does Sweepstakes Betting Work?

It’s called sweepstakes betting. It allows sports betting to exist in an environment that falls within the spectrum of a sweepstake. Here’s how it works:

You sign up for a site and quickly notice there are two different sections. The betting lines are the same on both sections. Both sections also use a virtual currency for the betting. On one side you wager virtual coins and on the other side you wager virtual cash. The difference is on the virtual coin side of the house, your virtual coins are always going to be worth nothing. You can bet 1000 virtual coins to win 10,000 virtual coins, but if you win, your virtual coins are still worth $0.

However, on the virtual cash side of the house, your virtual cash can be converted into real money when you withdraw. So a wager of virtual cash is like wagering real money. You’ll find these sites allow you to purchase a boatload of virtual coins and then give you a 1-to-1 equivalent of virtual cash as a bonus in that same transaction.

Spend $100 and you get 1,000,000 virtual coins and 100 virtual cash.

What Makes a Sweepstake

You’re probably thinking, how could this be legal? You’re just wagering real U.S. dollars by not calling them U.S. dollars? Well, the legality comes in the form of sweepstakes law. The main thing that makes a sweepstake a sweepstake is AMOE – alternative method of entry.

You see, a sweepstake must have a no-purchase -necessary component. So you need to be able to bet on both the virtual coin and virtual cash side of the sportsbook without depositing real money if you so desire.

All of these sweepstakes betting sites give you the opportunity to mail in your username and receive free virtual coins AND virtual cash which after the wagering requirements are met, can be exchanged for real money. 

There are people who just exploit this opportunity alone, making hundreds of dollars per site per month by following the alternative method of entry instructions. I’ll warn you now, they don’t make this process easy and if this would be your method to gaining an edge, you should probably subscribe to this channel and find better ways to make money in sports betting.

There are other components which allow this all to be considered a sweepstake. For instance, a sweepstake must have a start and end date. In this case, that could be the event you’re betting on. A sweepstake must have an odds of winning. Fortunately, odds are a big part of sports betting.

There’s Precedent on Sweepstakes’ Side

Just like regulated gambling, sweepstakes laws come at the state level. Using sweepstakes laws for sports betting purposes is fairly novel though. So far, there hasn’t been a push to modify laws to prohibit this usage and close the loophole. There are a few states that aren’t conducive to sweepstakes betting and generally most sweepstakes based sportsbooks avoid these states. 

However, in the 40 or so other states, it’s game on. Notice that includes some of those big states that haven’t had a taste of good sports betting yet. The ability to take bets from states like California, Texas, Florida, and New York is a huge incentive for companies looking to get into this space.

It’s also more accepted than you might think. For instance, payment processors such as Paypal, Venmo, and Trustly are on-board with sweepstakes based gaming. You don’t have to use some convoluted method to get your money into these sites. Some major regulated operators are already looking into how they can be a part of sweepstakes betting while still maintaining a presence in the regulated betting space. In fact, two regulated operators recently surrendered their licenses in favor of going nationwide via the sweepstakes model.

Currently, sweepstakes betting is dominated by Fliff, which entered the space a couple years ago. But competition is definitely on the way. . 

An Unregulated Space

So what’s the catch? Well, this isn’t regulated by any state gaming commission or office. I recently had a video on what to do when you have a dispute with an operator. Unfortunately, you wouldn’t have much recourse in this environment.

For some, that will give the same uneasy feeling that prevents them from betting with a local bookie or an offshore sportsbook. Without a regulator, the consumer needs to do their due diligence to make sure they can trust the betting site they are depositing money into. Also, the lack of regulation can give rise to shady operators who see this as a way to perpetrate a scam.

Another downside to sweepstakes betting is that the current operators tend not to offer a product that is highly competitive. Lines are typically worse, and limits are lower. If you’re someone who has trouble getting down enough money on bets via your current portfolio of sportsbooks, the sweepstakes books might not seem like they add much value to you. But competition is coming and that’s always to the benefit of the consumer.

More States, More Reach

This is one of the reasons I’m really bullish on the future of sweepstakes betting in the U.S. One of the operators which surrendered their license in New Jersey was the sports betting exchange, Prophet. They will be re-emerging in this new realm as ProphetX. 

Previously, their efforts to offer an equitable betting exchange were hampered by only being able to take bets in New Jersey. In the sweepstakes model, they are able to offer an exchange that reaches over 40 states. There’s less fear of shady dealings when you’re betting into an exchange. The exchange itself is not incentivized to rule in favor of the house because there is no house. An exchange makes money based on peer to peer betting volume passing through their exchange.

The other formerly regulated sportsbook operator is No Vig. Which has always been committed to offering a low-margin betting solution with very tight lines. These sites will put pressure on existing operators to come up with better lines or a better product.

They also won’t be the last sportsbooks to enter this space. Each new product will need to differentiate itself from the others to draw in new customers. It’s an exciting prospect and one that could be a huge step forward for sports betting in the United States.

The Inertia of Legality

But Jack, won’t states take action to shut down these sites? 

That’s always a possibility, but the truth of the matter is that there are bigger fish to go after than this. For instance, the sweepstakes based online casino industry is already massive. There’s always more money flowing from online casinos than sports betting. They would be the bigger target. Plus, this legal loophole that sweepstakes betting exists in is pretty strong.

It’s much easier to draw the ire of a state attorney general when something is illegal, not when something is just a novel interpretation of the law. So far there have been some legal challenges to sweepstakes betting and the concept has fared better than you might expect. There is a good chance that the proliferation of sites like these will push the conversation forward the same way that the early DFS sites like Draftkings and Fanduel pushed that conversation forward on the legality of DFS betting.

If you are a bettor who is running short of operators who are willing to take your bet, or you’re stuck living in a state with very few options to get a bet down, sweepstakes betting might be an exciting option for you. 

Remember, do your due diligence. Be cognizant of how much money you keep in an unregulated space. And if you’re looking to learn how you can get the edge at these new sportsbook options, check out this video which explores how to beat player prop bets. I think this could be an exciting development for you.