On Friday, the Minnesota Senate Finance Committee passed Senate File 4474 to the floor as a standalone bill.
Minnesota, like many states, allows sweepstakes as a promotional marketing tool. One example that many Minnesotans are familiar with is McDonald’s Monopoly game where when you buy a hamburger there, you get the chance to win a potential prize. However, Sen. Jordan Rasmusson, the bill’s author, said online companies are using a loophole in Minnesota’s sweepstakes framework to offer online gambling.
“They use a so-called dual currency system where you can buy Gold Coins with real money to get Sweeps Coins, which allow you to play for cash and other prizes,” he said. “This effectively allows a form of online gambling where there’s consideration that’s paid to play a game of chance like slots, blackjack, roulette and individuals win prizes on the backend, which is traditionally how we think of the definition of what is gambling.”
Reviewing the SF4474 fiscal note
The bill before the committee would ban these dual-currency online sweepstakes games, joining a number of other states who have recently had to update their laws in this space.
This would not ban social casino games.
“You could still play social casino games for free,” Rasmusson said. “However, we would be taking these casino-style games that have consideration and prizes defining it and banning it with this bill.”
Rasmusson noted groups who are in support of this bill, including those who have been opposed to the expansion of online gambling, including the Minnesota Family Council, Minnesota Catholic Conference, Citizens Against Gambling Expansion in addition to regulated gambling entities in the state including the Indian Gaming Association, Allied Charities, Canterbury Park, the American Legion, and others.
“This bill was given a fiscal note driven by assumptions from the Attorney General’s office that they will see that they would have one contested case per year going forward,” Rasmusson said. “With this bill, my recommendation to the committee today would be to ask the Office of Attorney General to absorb those costs in the fiscal note. … They’re just calculating estimated hours that would go towards these efforts.”
From the perspective of the committee, Sen. Nick Frentz said: “The fiscal implications of our state’s policy on sports gaming, sweepstakes and prediction markets are significant. I hope that we’ll consider this. I’ll be a yes vote on the bill but encourage Finance Committee members to see the larger implications as they did last week in the state of Wisconsin when they legalized online sports gambling.”
Added Sen. Erin Murphy: “It’s important to close the loophole. Long ago, I worked in the Attorney General’s office and had some responsibility there for fiscal notes. This is a really important issue, and I have to believe it is something that the Attorney General’s office is going to want to manage. It’s important for the citizens and for the enforcement of our laws. I’m happy to move this forward.”
So … how about Candy Crush?
“Can you get Sweeps Coins for free?” Senator Eric Pratt asked — opening the door for the argument made by sweeps casinos, that their games don’t constitute gambling because players don’t have to spend any money.
“As a part of most states’ sweepstakes laws for any sweepstakes, there is a no purchase necessary requirement,” Rasmusson answered. “And so even for the McDonald’s sweepstakes, there’s usually a P.O. Box where you could send in a letter and request entries to win their potential prizes.”
Rasmussen went on.
“The business model for these online sweepstakes casinos is that they sell you Gold Coins so that you can access Sweeps Coins so that you can then play their online gambling apps to win oftentimes cash prizes or other prizes,” he explained. “No different than McDonald’s. And that’s typically how people get entered into win their sweepstakes prizes.”
Rasmusson said they asked McDonald’s to review this language, and they sent back a full legal memo reply saying that this bill does not concern them at all.
“We also talked with the association that represents video game companies,” Rasmusson said. “And they also do not have any concerns with this language. The only entities that have come and testified against this language are those that are the online sweepstakes casinos that would be defined and banned in this bill.
“To be specific to the McDonald’s case, their team has reviewed this bill, and they have no concerns that this would put them in violation,” Rasmusson said. “And it’s because they’re not trying to use Minnesota sweepstakes laws to effectively offer online gambling. They are using promotional sweepstakes how they were designed to be — which is as a promotion. If you come in and buy a hamburger, you could enter to win a prize.”
Pratt asked about Candy Crush.
“If it is a social casino product where people are going and playing for fun — they’re playing blackjack slots without a prize, without winning cash on the back end — that is still allowed in this bill,” Rasmusson said. “What would be defined and banned are the dual-currency systems. If this bill became law, you would no longer be able to buy Gold Coins and be getting Sweeps Coins to be able to play for money.”
Not all committee members were thrilled about the legislation.
“I’m willing to let this bill go out of committee without a huge fight but I’ve still got significant concerns with how Senator Rasmussen has presented it and also how broad I think it could be,” Pratt said.
