‘Little evidence’ of sweepstakes casino cannibalisation, claims analyst

An analyst at Macquarie Equity Research said there is “little evidence” sweepstakes casino operators are cannibalising iGaming revenue.

In an investor note, Macquarie analyst Aaron Lee said there are clear similarities between sweepstakes casinos and real-money iGaming, including content, the chance to win cash, as well as advertising channels like affiliates.

“However, we believe there is little evidence to suggest that sweepstakes casinos are taking growth away from real-money iGaming as iGaming content is, in our view, a superior gaming experience and growth rates in iGaming states remain strong,” said Lee.

As evidence of this, he highlighted the example of New Jersey, which posted 27% year-on-year revenue growth in September 2024.

Instead, the analyst argued sweepstakes casinos act principally as a replacement product for people without access to legal RMG iGaming.

Sweepstakes exit failed to boost Michigan iGaming

This view chimes with the one presented by gaming consultants Eilers & Krejcik Gaming, which recently produced a report on the impact of sweepstake casino exits on iGaming revenue.

In 2024, Michigan authorities issued cease-and-desist letters to several sweepstakes casino operators, leading to multiple leading businesses leaving the state.

EKG highlighted that Michigan saw the second worse iGaming growth Jan-Aug 24 vs. Jan-Aug 23 at 24.8% despite the exit of the sweepstakes.

This is compared to the 54.5% revenue growth recorded by West Virginia during the same period.

A spokesperson from the sweepstakes’ Social and Promotional Gaming Association (SPGA) trade body told NEXT.io: “We’ve seen critics make unsubstantiated claims about social sweeps sites presenting some kind of competitive threat to real-money online gambling sites.

“The facts don’t support this fear. The customer base of a typical SPGA member is dominated by free-to-play players.

“The majority of social sweeps customers will never make a purchase. The minority of customers who make purchases do so in amounts far smaller than the typical deposit or bet size at a real-money online gambling site.”

Macquarie: sweepstakes could speed iGaming regulation

The Macquarie analyst argued that sweepstakes casinos instead could ultimately compliment iGaming if they can play a role in highlighting untapped revenue for state legislators.

In support of this, Lee highlighted the model of how the rise of Daily Fantasy Sports eventually helped paved the way for sports betting.

However, the analyst argued Macquarie believed it to be unlikely regulated iGaming operators will choose to expand into the sweepstakes casino space.

Despite the potential factors that would make the proposition attractive, such as the profitable product and potential to build databases, Lee said it would present an unacceptable amount of regulatory risk.

He said: “Operating in a legal gray space could seriously jeopardise operators’ gaming licenses not only in existing states but also in any future states that legalise iGaming as US gaming regulators have historically been highly critical of any operations in jurisdictions that are not explicitly regulated.”

Share