Is Social Gambling Legal? Learn State Laws on Social Casinos in the US and Find Out What States Don't Allow Casinos

Casino gaming has always been controversial. Although it has been a popular form of entertainment for centuries, the law in many places prohibits people from gambling for real money due to the perceived dangers of casinos.

But social casinos work a bit differently than the regular ones. They are a type of gaming that offers casino-style games without the burden of real money stakes. As a result, social casino software operates under a completely unique legal framework.

So what does the law say about this form of gambling? In this post, we will explore the legal and regulatory environment of social gambling as well as the differences in regulation across different states. 

• Social gaming sites are free-to-play platforms where players use virtual currencies instead of real money. 
• Since they do not involve real money gambling, social casinos are legal in most US states, except for Washington, Idaho, and Nevada.
• Social casinos are expected to comply with legal requirements, including age restrictions, transparency in payout rules, and free access to social games.
• Although they do not face as much scrutiny as conventional casino sites, social casinos are expected to promote responsible gaming through features like self-exclusion, reminders, and data security protocols. 

Definition and Function of Social Casinos

Social casinos are gaming platforms that allow players to play games for free. They offer the same kinds of games as regular casinos and players can place bets or wagers like they would normally do. However, in social gaming sites, bets are placed in virtual currency on-site in the form of coins, tokens, or chips. 

Social casinos give these virtual currencies to players after they sign up and at regular intervals through all kinds of promotions and bonuses. Players can continue to access and bet on games with free virtual coins, which means the casino is free at all times. Players have the option of purchasing virtual coins, but it isn’t compulsory. 

Since they do not offer real money play, most social casino sites don’t give cash rewards as well. This means you cannot win real money prizes from playing on these sites. However, sweepstakes casinos (which is a type of social casino) offer prizes with real-world values which players can get by redeeming virtual coins won from playing games. 

As their name suggests, online social casinos have a social aspect to them as well. Players get to interact and compete against other players through direct matches, tournaments, leaderboards, and so on.

To learn more about social casinos and how they work read our article titled “What Is a Social Casino?“

Are Social Casinos Legal in the US?

Yes. Social casinos are perfectly legal in the United States. These sites operate on a system that allows gamers to play casino games for free. Because they do not involve wagering with real money and there are no prizes awarded, social casino is not considered gambling in most US states.

It is possible to play on social gaming sites legally in the United States even in places where real money casinos are prohibited by law. In a way, social casino sites are similar to practice or demo games offered by real money casinos. Since players don’t need to pay to access these free games and they cannot win money as well, it is not considered gambling. The only states where social casinos are outrightly prohibited are Washington State, Idaho, and Nevada.

Online Gambling Laws and Regulations

Traditional online casinos allow players to win cash prizes by placing bets on the outcome of both skill and luck-based games. This is frowned upon by the law in most places. In the United States, it’s up to each state to make laws to allow or prohibit gambling and only a handful of states have fully legalized real-money casino gambling. They include Connecticut, Delaware, New Jersey, Michigan, Pennsylvania, Rhode Island and West Virginia. In other states, online casino games are either prohibited or heavily prohibited. 

Conventional online gambling laws don’t apply to social casinos. While most US states still have some rules guiding the operation of real money casinos, social casinos are generally permitted in most states. The only exceptions to this are Washington, Idaho, and Nevada where social gambling remains prohibited by law. 

However, even in states where social casinos are legally permitted to operate, these types of online casinos are still required to follow certain laws and regulations. For instance, age restrictions still apply to players who can register on social casino sites. The minimum age is 18, meaning it is lower than the minimum age requirement for real money gambling which equals 21 (although it may differ from state to state).

The main restriction for these sites is that the games they offer have to be free. This is what distinguishes them from real money online casinos. This means players must be allowed access to free games without wagering with real money. Other legal restrictions that guide the operation of social casinos include: 

• Operators must provide a free alternative means of entry. This is usually in the form of mail-in requests. 
• The site or app must clearly outline the eligibility requirements.
• The game’s payout percentage which indicates a player’s chances of winning must be disclosed. 
• If prices can be won (in the case of sweepstakes games), the rules for winning the prices or exchanging coins for prices must be clearly stated. 

These are general conditions that guide the operation of sweepstakes casinos in most US states. However, different states may also outline other terms for the legal operation of social casinos in their jurisdictions. Failure to comply with these laws means you’re running an illegal gambling operation.

We have a comprehensive article that highlights the differences between social casinos and real money casinos. You can read it to learn more about why they are classified differently under the law in our social casino vs real money casino comparison. Sweepstakes casinos are also slightly different from social casinos. You can read more about these differences in our “Sweepstakes Casinos vs Social Casinos” article.

State Laws on Social Casino Games – Where Are Social Casinos Legal?

Skill and Chance in Social Gaming

One of the major factors that influence the legal classification of social casino apps especially in the context of sweepstakes gaming is the fact that they’re luck-based rather than skill-based. Gambling laws in many jurisdictions are designed to regulate activities that involve a significant element of chance and risk. 

Virtually all casino games depend on chance as well. While some games such as poker, blackjack, and other table games require players to incorporate some strategic thinking into their gameplay, they still depend on luck to determine the cards players get in the first place. Games like this rely on both luck and skill using something known as random number generators (RNGs). These are computer algorithms programmed to generate random outcomes in reel spins, card drawings, and other aspects of casino gaming. 

Since social casinos operate based on these conditions as well, many argue that they should be treated the same way as regular casino games. Sweepstakes and social casinos offer slot machines and table games that include elements of both luck and skill. The major distinction with social casinos is that there really isn’t any risk involved in playing them. Most social casinos only offer a fun experience with no chance of real money winnings. Due to this free-play nature, it doesn’t really matter whether they’re skill or chance-based.

Also, for sweepstakes sites that allow players to play with purchased coins and potentially win real prizes, the players aren’t exactly gambling for these prices. Unlike traditional online casinos, where a player’s winnings depend on how much they staked, sweepstakes allow players to exchange premium coins for wins based on a fixed exchange rate. This means a player’s winning chances aren’t influenced by how much they have paid into the casino. This excuses their classification as non-gambling contests, which makes them legal by law. 

Player Protection in Social Casinos

Playing in social casinos carries less risk compared to conventional casino gaming. This is because players aren’t betting actual money on social gaming sites. With real money gambling out of the question, gamers aren’t under pressure to win a fortune, nor are they worried about losing money. 

However, that’s not to say that social casinos don’t care about responsible gambling. Casino gaming can be addictive even without the promise of life-changing wins. The entertainment and social interaction promised by social casinos can keep players glued for hours daily, which is just as unhealthy. 

To protect players, social casinos implement features such as self-exclusion, reminders, and limits. These features help promote responsible gaming habits by keeping players in check and preventing problematic behavior. Some sites may also implement advanced machine learning algorithms to track user behavior and mitigate risk patterns.  

User privacy and data security are other aspects of player protection that social casinos must prioritize. The information collected from players during registration or from their usage of the gambling platform must be used in compliance with data protection standards such as the GDPR and other policies that apply to the specific jurisdiction where the casino is operating. Social casinos also need transparent data policies and user consent protocols that ensure players are well-informed about how the data they submit will be used by the casino. 

Social casinos need to implement security measures on their site or application as well. This includes data encryption and other advanced security protocols that will protect sensitive user data from hacks or attacks by malicious actors. These protocols ensure that users can use social casinos safely without worrying about falling victim to attacks.

The Future of Social Casino Regulations

The social casino market is a 6.2 billion US dollar industry with significant potential for growth in coming years. While this growth is currently fueled by favorable legislation across most US states, the landscape is plagued by uncertainties.

In recent years, there have been a number of attempts by states to clarify the position of federal laws about social casinos. Recently, a court in Washington ruled against a company that allegedly offers social casino games. The lawsuit would have likely had a different outcome if it had been filed in any of the other states where social casinos are considered legal. 

Inconsistencies like this are the main reason why states are seeking federal clarification on the legality of social casinos and sweepstakes gaming platforms. Operators in the casino industry need to anticipate regulatory shifts in the future and make plans for them. The lax regulations and permissive environment that social casinos currently enjoy may not last forever. Just in 2023, social casinos pulled out of Michigan due to intricate regulations that do not ban social gaming entirely but are way more difficult to navigate.

Of course, the anticipated change in sweepstakes laws doesn’t have to be negative. As operators continue to lobby for reconsideration, the handful of states where social casino gaming isn’t legal may change their stance, allowing social casinos to operate without hindrance in the future. 

Conclusion

For anyone looking to embark on a social casino project, legal consideration is one of the most important steps in executing it. A good knowledge of the legal and regulatory landscape will ensure that you are not contravening any laws when operating your social casino site. 

One of the ways to ensure you’re staying compliant with regulations is by working with a software development company with solid knowledge of the industry. With a company like CrustLab as your partner, you will navigate the social gambling landscape without stress. Thanks to years of experience and industry expertise, we know what it takes to create an immersive social casino experience that operates in full compliance with the law.