Tennessee attorney general shuts down nearly 40 sweepstakes sites

Charlotte Capewell

5 January 2026 at 7:15am UTC-5

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Tennessee Attorney General Jonathan Skrmetti said his office has issued cease-and-desist orders to more than three dozen icasinos operating in the state, citing that they offer “predatory and unregulated gambling operations.”

Sweepstakes casinos typically mimic real-money brands by offering games like slots, table games, instant wins, and bingo. They do not fall under traditional gambling laws as they use two forms of virtual currency. One of those currencies can be exchanged for cash or prizes, a structure officials say disguises real-money gambling.

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According to the Attorney General’s Office, this model amounts to an illegal lottery under the Tennessee Constitution and violates state gambling and consumer protection laws.

Nearly 40 operators have since received cease-and-desist notices from the state. Skrmetti’s office noted that every operator contacted has removed the unlawful elements from their sites or set a timeline to wind down services.

“The only thing you can be sure about with an online sweepstakes casino is that it’s going to take your money,” Skrmetti said. “They work hard to make these sweepstakes casinos look legitimate, but at the end of the day they are not. They avoid any oversight that could ensure honesty or fairness. Our office was glad to chase these shady operations out of Tennessee and will keep working to protect Tennesseans from illegal gambling.”

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The cease-and-desist orders follow similar actions from other states, including Indiana, with lawmakers introducing a bill last month to impose restrictions on sweepstakes casinos.

Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.

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The Backstory

What Tennessee’s move signals

Tennessee’s order to wind down dozens of sweepstakes casinos caps months of mounting pressure on gray-market operators that mimic online casinos with virtual coins redeemable for cash. States and regulators have been moving in parallel, arguing the model skirts licensing and consumer safeguards. The playbook has been consistent: declare the products unlicensed gambling or illegal lotteries, issue cease-and-desist letters, then push platforms to exit or overhaul their offers.

The enforcement wave is not isolated. Attorneys general and regulators in other jurisdictions have rolled out similar actions and policy proposals, setting a backdrop that made Tennessee’s escalation more likely and, for operators, more consequential. The pattern also shows how a legal theory once dismissed as niche — that sweepstakes mechanics equate to wagering — now carries real teeth across multiple markets.

New York’s early warning shot

New York delivered one of the clearest templates for action this year when Attorney General Letitia James halted 26 sweepstakes operations after finding they offered casino-style gambling without authorization. Her office framed virtual coin systems as functionally indistinguishable from wagering, a view echoed by Sen. Joseph P. Addabbo Jr., who said the model exposes consumers to fraud, addiction and underage play.

James’ office underscored the rationale in a public enforcement notice, emphasizing that online platforms cannot offer games where players risk money for the chance to win items of monetary value. Addabbo followed with a bill, S5935A, aimed at explicitly banning sweepstakes casinos statewide. While legislation may take time, the combination of enforcement and a statutory backstop has set expectations: operators running dual-currency models face heightened scrutiny even when they insist their mechanics fall outside gambling statutes.

For Tennessee, New York’s stance matters. Both offices lean on core consumer-protection arguments — lack of licensing, limited recourse for players and opaque game fairness — to justify their interventions. The coordinated message from large states increases the legal risk for companies operating across borders. It also narrows the wiggle room for platforms that try to segment state experiences without substantive changes to game design.

California’s gray zone turns into a line

California, the biggest prize for U.S. gaming, is testing where skill ends and chance begins in adjacent products. A pending legal opinion from Attorney General Rob Bonta — first flagged by KCRA reporting — could deem certain online fantasy sports formats illegal statewide. The ripple effects would extend beyond traditional DFS to newer pick’em-style contests that critics argue are closer to sports prop betting than skill-based fantasy games.

Operators have tried to slow the process. A Sacramento judge last week rejected Underdog Fantasy’s bid to block Bonta’s opinion, noting such opinions do not change law on their own. That procedural ruling, however, still leaves a practical cloud over California operations: an adverse opinion could embolden regulators and local prosecutors or prompt platforms to voluntarily exit to avoid enforcement risks.

The anticipated opinion follows months of pressure from tribal leaders and lawmakers who say the market needs clarity and enforcement. As with sweepstakes casinos, the California debate turns on whether the products are unlicensed games of chance. That alignment in legal theory raises the stakes for sweepstakes models too: a tougher California posture on DFS-like products may signal less tolerance for any unlicensed gambling-adjacent offerings, including social casino variants that redeem for prizes.

Consumer risks drive the policy push

Officials have framed the crackdown less as morality policing and more as a consumer-protection imperative, especially during major betting cycles. In Illinois, Attorney General Kwame Raoul used March Madness to remind residents to verify licensed operators, warning that unlicensed sites can compromise funds and personal data. His office urged bettors to stick with Illinois Gaming Board licensees and steer clear of offshore or unregulated platforms.

The messaging resonates with the sweepstakes debate. Dual-currency casinos often market free play and sweepstakes entries, but regulators argue the ability to buy virtual coins and convert winnings back to cash creates the same risks as gambling, without the counterweights of age verification, responsible-gaming tools and audited game fairness. That gap leaves players exposed when disputes arise or when operators abruptly shut down. Tennessee’s office emphasized those vulnerabilities in its orders, and New York made similar points as it moved against 26 sites.

For licensed sportsbooks and casinos, the enforcement also levels the playing field. State-sanctioned operators face taxes, technical standards and ongoing audits. Policymakers argue allowing lookalike products to operate unchecked undermines consumer safety and deprives states of revenue meant to fund programs tied to regulated gambling.

A global crackdown adds momentum

The U.S. push unfolds against a broader international sweep against illegal digital gambling. Turkey’s National Lottery Administration blocked more than 233,000 sites in 2024, escalating from 168,000 a year earlier and referring cases for criminal prosecution. Officials there link illegal gaming to tax evasion and financial crimes and have coordinated with cybercrime units to target affiliates and promoters.

That scale highlights how fast unlicensed operators can clone sites, route traffic through new domains and target users across borders. It also underscores why states like Tennessee and New York are leaning on quick administrative tools — cease-and-desist orders and payment or access disruption — rather than waiting for lengthy prosecutions. The international trend lends political cover to U.S. enforcers who want to show visible progress against a moving target.

What operators and players should expect

Expect more states to borrow New York’s and Tennessee’s playbooks: define dual-currency casinos as illegal lotteries or unlicensed gambling, issue warnings, then push for swift exits. Legislatures may codify those interpretations, as New York moves with S5935A, to deter reentry and give regulators explicit tools to act.

In California, the Attorney General’s opinion on fantasy formats will be a bellwether for how far states are willing to go in policing adjacent products that present like betting. Even if the opinion lacks force of law, platforms may preemptively narrow offerings or pause operations to manage risk. Any aggressive stance from the nation’s largest state would further chill gray-market experimentation elsewhere.

For players, the takeaway mirrors Illinois’ guidance: verify licenses before depositing funds or sharing data. As Tennessee’s sweepstakes exits unfold, customers may see redemption windows or modified site features as operators wind down. Without licensing, however, recourse is limited if payouts lag or terms change. That asymmetry — and the political appetite to close it — is the throughline connecting recent actions from Nashville to Albany to Sacramento.