A New Jersey Assembly committee on Thursday advanced legislation that would ban sweepstakes casinos in the state, citing concerns over unregulated gambling and consumer protection.

The bill defines sweepstakes casinos as “a contest in which something of value, such as a prize or prize equivalent, is awarded, either directly or indirectly through means such as a dual-currency system of payment that allows a participant to exchange the currency for a prize or prize equivalent.”

New Jersey now joins a growing list of states looking to clamp down on these operations. Just days earlier, Connecticut advanced a similar measure, while states like New York, Maryland, Mississippi, Louisiana, Montana, and Michigan have considered or voted on related bills. A comparable proposal was rejected this week in Florida.

State Officials Warn of Constitutional Violations and Consumer Risk

Stephan Finkel, director of legislative affairs for the New Jersey Attorney General’s Office, argued that sweepstakes casinos violate the state constitution, which requires voter approval for any gambling expansion.

“Unregulated gaming, not only is it unconstitutional, it puts people at risk,” Finkel testified Thursday. He noted that much of New Jersey’s gambling legislation dates back to the 1960s and 70s and was designed to combat older forms of illegal gambling such as bookmaking and numbers rackets. “As we know, the evolution of technology has taken us to a very different place,” he said.

Industry Critics Point to Loopholes, Lack of Oversight, and Youth Exposure

Eric Shuffler, a representative of the Sports Betting Alliance—which includes major online gambling platforms like Fanatics, DraftKings, and BetMGM—said sweepstakes casinos exploit “legal loopholes and ambiguities” to operate a $4 billion untaxed industry without player protections.

According to Shuffler, these platforms sell users in-game currency for entertainment play, often bundling it with bonus or sweepstakes coins that can be used in casino-style games and redeemed for prizes. “It’s essentially a legal maneuver that allows them to replicate the experience of online casinos while avoiding the licensing-regulation-taxation structure,” he said.

Shuffler added that sweepstakes casinos present additional concerns: they encourage cryptocurrency use, deploy marketing strategies that regulated operators cannot, and may contribute to problem gambling. He also raised alarms about how easily minors can access these platforms.

The Social and Promotional Games Association, a trade group representing the sweepstakes casino industry, did not respond to a request for comment. However, its website claims the group is “committed to protecting players, promoting responsible innovation, and advocating for clear regulations that allow the industry to flourish.”

The bill includes limited exemptions, allowing sweepstakes where there is a free method of entry or when participation is tied to the purchase of food or non-alcoholic beverages totaling $20 or less.