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A pending bill to regulate online sweepstakes casinos would give New Jersey gaming regulators the clear legal authority over sweepstakes businesses that they do not currently have, according to a senior gaming official.

“We only have statutory authority over entities that do business with casinos,” said Lou Rogacki, deputy director and assistant attorney general with the New Jersey Division of Gaming Enforcement (DGE). “None of these entities are doing business with the casinos.” 

Rogacki confirmed the DGE has issued cease-and-desist letters to several sweepstakes companies.

“That’s like playing whack-a-mole, not that we can stop doing it," Rogacki said during a panel discussion on Monday (March 3) at the Gaming Law, Compliance and Integrity Bootcamp hosted by Seton Hall Law School in Newark, New Jersey.

“We’ve been very lucky, because companies have gotten [the letters] and they’ve assisted,” Rogacki. “What do we do when somebody doesn’t? What’s my authority? You need other agencies, whether in New Jersey, it’s community affairs that regulates traditional sweepstakes and raffles or the Division of Criminal Justice.”

Rogacki explained that illegal online sweepstakes is “defined as a fourth degree [violation] in New Jersey”, and subject to a fine of between $50,000 and $200,000. 

“So, the Division of Criminal Justice is saying, ‘Okay, will you want us to look at human trafficking, or do you want us to look at a fourth degree promoting gaming,’” he said. “So, it’s an allocation of resources. What’s important to the Division of Gaming Enforcement may not necessarily be that important or lower on the priority list than some of those other agencies that we need their assistance.”

Under pending Assembly Bill , operators of online sweepstakes platforms would be required to obtain the same supplier licenses as New Jersey online casinos and partner with an Atlantic City casino to operate in the state. The current tax rates of 13 percent on online sports betting and 15 percent on online casinos would also be applied to sweepstakes companies.

The bill would also allow the New Jersey Division of Gaming Enforcement to work with law enforcement agencies to crack down on unauthorized sweepstakes casinos.

If passed, the legislation, introduced by Democratic Assemblyman Clinton Calabrese, would make New Jersey one of the first states to implement a regulatory framework for online sweepstakes companies.

“As always, as a regulator, you’re happy when whatever it is gets the legislature’s attention,” Rogacki said. “They jumped on it, and they proposed a bill unbeknownst to us that basically put all the sweepstakes companies operating in New Jersey, having to come to the [DGE] and get licensed, which is great ... but there are a couple of things.”

Rogacki noted that in New Jersey online casinos or sportsbooks must operate through a partnership, or as a skin, between land-based casinos and online operators. Each licensed casino can have three skins for sports betting, and five skins for iGaming.

“They all have to be tethered to a casino,” Rogacki said. “Are sweepstakes going to be untethered to the casinos? So, there are a lot of issues that still need to be worked out, the initial bill doesn’t look anything like the final bill. We’ve worked on potential additions or amendments to the bill.”

Rogacki said the DGE is looking at tightening up the bill to give gaming regulators more authority over these companies, whether they license them or give the agency more of an ability to go after the companies that are operating illegally.

Calabrese’s measure has been referred to the Assembly Tourism, Gaming and the Arts Committee but is still waiting to be heard by the committee. There is also , a companion bill that has been filed in the Senate.

Rogacki was joined on the panel by David Murley, deputy director of the Michigan Gaming Control Board (MGCB), Stephanie Maxwell, deputy director and general counsel with the Tennessee Sports Wagering Council, Steve Cook, chief counsel for the Pennsylvania Gaming Control Board (PGCB), and moderator Frank DiGiacomo, an attorney and partner with Duane Morris.

Regulators estimate there are more than 200 unregulated sweepstakes casino and sports-betting websites that are not required to offer controls such as know your customer (KYC) and age verification checks, or responsible gambling tools.

Sweepstakes platforms have been subject to enforcement actions by gaming commissions in Michigan, Connecticut and Maryland, although the chief gaming regulator of the latter state recently testified to Maryland lawmakers that cease-and-desist letters sent to six sweepstakes platforms had yet to prompt any of them to exit the state.

Legislation to expressly prohibit sweepstakes sites offering casino-style games or sports betting has been introduced in Maryland, Connecticut and Florida.

In Mississippi, the state's Senate last month voted 44-1 to pass Senate Bill 2510 that similarly would ban sweepstakes sites in the state, while New York Senator Joseph Addabbo Jr, chair of the Senate Racing, Gaming, and Wagering Committee, has proposed closing an existing loophole for online sweepstakes casino operators.