Sweepstakes casinos represent a rapidly expanding sector of the gaming industry, growing at a 75% compound annual growth rate from 2019 through 2023, reaching a $4 billion market value according to Macquarie analyst Aaron Lee.

Unlike traditional iGaming, which is legal in only seven states, sweepstakes casinos operate in a gray area between social casinos and real-money gambling. These platforms offer free-to-play games with potential prizes, though they often encourage in-app purchases for advancement.

Key characteristics of sweepstakes casinos:

• Players can participate without making purchases
• Uses dual currency system (virtual and sweepstakes coins)
• Sweepstakes coins can be redeemed for cash prizes
• Currently prohibited in four states, with restrictions in seven others

The American Gaming Association (AGA) has raised concerns about the dual currency system, suggesting it may violate federal and state laws. However, enforcement remains challenging as most operators are based outside the U.S.

Market outlook:

• 2023: $4.2 billion in gross revenue ($1.3 billion net)
• 2024 projected: $5.6 billion gross ($1.7 billion net)
• 2025 projected: $6.9 billion gross ($2.1 billion net)

While the sector continues to grow, increased regulatory scrutiny is expected. Interestingly, this growth might actually encourage iGaming legislation by highlighting untapped tax revenue potential, rather than cannibalizing existing gaming markets.

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