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The National Council of Legislators from Gaming States (NCLGS) has released its draft of the Model Internet Gaming Act (MIGA) and recommends that state legislatures ban online sweepstakes games in any legislation.

The proposal calls for the prohibition of sweepstakes sites, with penalties for violations ranging from fines of $10,000 to $100,000 per offence and the potential loss of a gaming license. Repeat offenders shall be subject to increased fines and potential imprisonment of up to two years.

“I think it is something that needed to be done,” Democratic state Representative Shawn Fluharty of West Virginia and president of the NCLGS, said about adding the prohibition of sweepstakes to the draft legislation.

Fluharty told 91����ԭ�� GamblingCompliance that he expects the prohibition of sweepstakes to be part of internet gaming legislation discussed by various state legislatures next year. The MIGA is a regulatory framework designed to provide states with legislative guidelines for legalizing iGaming.

New York, Illinois and Ohio are among the states that gaming lobbyists and analysts believe will debate iGaming legislation in 2025.

“It’s up to each individual state but we put forward what we feel are best practices,” Fluharty said. “We know every state is different, however, if [the prohibition] serves as a catalyst for when they consider legislation then this will be a step forward.”

Sweepstakes have raised concerns in Georgia, Kentucky, Michigan, Connecticut and several other states, as online games often cross the line between social gaming and illegal gambling.

Fluharty, who is also head of U.S. government affairs at online casino game supplier Play'n Go, told 91����ԭ�� on Wednesday (November 27) that the goal in introducing the prohibition on sweepstakes games was to “shrink the black market”.

He admitted that as a legislator it is typically difficult to pass any gaming legislation, but lawmakers need to consider what should be permitted within their states.

“Sweepstakes is not part of that legislative framework,” Fluharty added.

The draft legislation defines an online sweepstakes game as “any game, contest, or promotion, in which a prize is awarded based on chance, that is available on the internet and accessible on a mobile phone, computer terminal, or similar access device, that utilizes a dual-currency system of payment allowing the player to exchange the currency for any prize or award or cash or cash equivalents, and simulates casino-style gaming, including but not limited to, slot machines, video poker, and table games, lottery games, and sports wagering.”

In terms of enforcement, the NCLGS believes state gaming regulators should conduct investigations, hold hearings, and issue subpoenas to ensure compliance.

The NCLGS also recommended that states impose a tax rate of between 15 percent and 25 percent of licensees’ adjusted gross revenue.

The 26-page draft legislation released late Tuesday says it is important to establish a tax rate “that will maximize revenues and allow for competitiveness with other gaming jurisdictions”. 

“A competitive tax rate also allows competitive technological growth without creating a barrier of entry for future market participation. The model legislation affords states the latitude to impose a tax rate within certain specified boundaries and to designate the allocation of tax revenues for specific community purposes.”

The NCLGS notes that the average iGaming tax rate in the U.S. is 19 percent, excluding Pennsylvania’s 54 percent on online slot machines. For instance, in Michigan, online operators pay a graduated tax rate based on adjusted gross receipts.

Currently, New Jersey, Delaware, West Virginia, Pennsylvania, Michigan, Connecticut and Rhode Island are the states with legal iGaming. Nevada has authorized online poker only.

The draft proposal includes certain advertising guidelines. Promotions must target audiences aged at least 21, include responsible gambles messages, as well as avoid college campuses.

Fluharty discussed plans to develop a draft iGaming legislation that could be used as a framework to help overcome legislative obstacles for state lawmakers during the NCLGS’ summer meeting in Pittsburgh.

“We looked at what we could do with iGaming legislation,” Fluharty said during his presentation in July. “Let's try to make it easier to build a foundation for what can happen in states looking to have iGaming. That’s the goal here.”

Legislators and state gaming regulators will discuss the model legislation on December 14 at the NCLGS winter meeting in New Orleans but will not vote on the proposal until next year, following a public comment period ending December 31.