Sweepstakes casinos represent a rapidly growing segment of the gaming industry, achieving 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 prize winnings, though they often encourage in-app purchases for advancement.

Key characteristics of sweepstakes casinos:

• Remove the "consideration" element of gambling
• Utilize dual currency systems
• Must provide free entry methods (like mail-in forms)
• Currently prohibited in four states, with restrictions in seven others

The industry has experienced significant growth:

• 2019: $460 million (gross revenue)
• 2023: $4.2 billion (gross revenue)
• 2024 Forecast: $5.6 billion (30% year-over-year growth)
• 2025 Forecast: $6.9 billion (24% year-over-year growth)

Regulatory concerns are increasing, particularly regarding:

• The dual currency system potentially circumventing gambling laws
• Lack of regulatory oversight
• Difficulty in legal enforcement due to offshore operations
• Potential impact on traditional gaming markets

The American Gaming Association (AGA) has called for increased scrutiny of these operations, though enforcement remains challenging as most operators are based outside the US. Despite concerns, the sector's growth could potentially drive more states to consider formal iGaming legislation due to untapped tax revenue potential.

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