Tennessee House Bill 1885 had its first hearing with the House Departments and Agencies Subcommittee Committee, which elected to defer action until its meeting on March 10.
Still, Tuesday’s hearing featured key testimony from both sides of the issue.
Rep. Scott Cepicky added an amendment clarifying language on defining what currency is in the language of HB1885, which would ban sweepstakes casinos using “virtual currency” gaming models.
“This bill does not change any law in the state of Tennessee,” Cepicky said. “It just creates a greater enforcement mechanism. If you are following the law in Tennessee in regard to gambling, this bill has no bearing on you whatsoever. If you are potentially operating illegal gambling in the state of Tennessee, you should have concerns because now this expands the scope of enforcement.”
HB1885 outlaws sweepstakes casinos and other forms of what Cepicky deems illegal online gambling “that are often marked as illegal or as legal — free to play, social gaming platforms, utilizing a promotional sweepstakes model and illegal, unregulated and unlicensed gambling machines,” he said.
VGW attorney: We are a freemium operator
Attorney Bill Gantz spoke on behalf of VGW, the sweeps operator that owns Chumba Casino, Global Poker, LuckyLand Slots, LuckyLand Casino, and United Slots. He referred to VGW as a freemium social gaming operator.
“What we’re talking about here are freemium games that have a casino theme,” Gantz said. “These games have been around for over 10 years. No purchase is necessary to play a freemium game or to continue playing a freemium game. These are freemium games which are the target of the proposed legislation — games like Candy Crush, Subway Surfer, and other popular titles. Those will continue to be lawful in Tennessee.”
Gantz said on VGW’s platform, the vast majority of users don’t make a purchase and for those who make a minimum purchase, the median spend is about $25 a week.
“This is not gambling,” he said. “The sweepstakes entries into these games in the form of Sweeps Coins can never be purchased on the platform. They are awarded for free in connection with a purchase just like any other sweepstakes.”
Rep. Larry Miller asked if VGW was licensed and regulated in the state of Tennessee to operate.
“There’s no license or regulation available for companies that operate sweepstakes, but they must comply with the existing sweepstakes statute,” Gantz replied. “They cannot require a purchase in connection with operating sweepstakes, which VGW does not.”
Gantz said VGW would be pleased to have a discussion with representatives about a registration process. He said they think it would be appropriate to have a pause or to table this bill.
Rep. Michele Carringer asked if VGW received a cease-and-desist letter in Tennessee. Gantz said they did, from Assistant Attorney General Jonathan Shirley. VGW pulled its Sweeps Coin gameplay options out of Tennessee in December.
“A couple months ago, there was a discussion back and forth in VGW to voluntarily stop offering the sweepstakes services in Tennessee while reserving its rights if it needs to continue or go to court over these types of things,” Gantz said. “But VGW and other operators in the industry — they’re interested in partnership and discussion, not litigation. And compliance with the law is of utmost concern.”
VGW thinks the committee should pause on this bill and consider ways to get to a point where there’s a registration and the state could capture sales tax on freemium games.
“Not just our product, but all these freemium games,” Gantz said. “People are spending tens of millions of dollars on these games. And this is something that can be subject to sales tax in a number of states too.”
Attorney General’s office: HB1885 makes our job easier and ‘more efficient’
“Our constitution prohibits gambling full stop, except for education lottery,” said Matt Mundy, Legislative Attorney, Office of Legal Services, Tennessee General Assembly. “The legislature made the decision that playing in fantasy sports games and sports gaming was not gambling. It was determined by this General Assembly several years ago that sports gaming was a game of skill.
“If the game is free, then it’s not gambling. If you are entering into something and it doesn’t cost you anything, then it wouldn’t be gambling, even if you may receive some prize or award for that.”
In the context of the definition online sweepstakes game, as Mundy reads it, “online sweepstakes game means gambling in the form of a game, contest or promotion.”
JP Urban, senior deputy of the financial and regulatory section at the Tennessee Attorney General’s office, said his office sent out 38-cease-and-desist letters late last year.
“All 38 of those online casinos ceased their offending operations here in Tennessee,” he said. “We have a running list of hundreds more. I think 384 was the most recent count. There’s really an online epidemic of these companies.
“We will continue to enforce the state’s gambling laws. But this law [HB1885] simply makes that job more efficient and helps us tackle the problem out there.”
