Could Texas AG Be Next to Crack Down on Sweepstakes Casinos?

Sweepstakes casinos have grown in popularity in recent years, leading many lawmakers, gaming regulators, and attorneys general to target the platforms as illegal gambling.

The unregulated industry recently took its biggest hit when California banned dual-currency platforms. Now, some observers point to Texas, the nation’s second most populous state, as a potential new battleground.

The state’s Legislature is not scheduled to reconvene until 2027, meaning there will be no legislative ban. However, the Texas Attorney General, Ken Paxton, could take enforcement action before then. If he doesn’t act, the winner of the four Republican AG candidates, who have recently unanimously pledged to uphold Texas gambling bans, will likely move on it later.

A Legal Gray Zone

Sweepstakes casinos such as Stake.us and Chumba operate in an ambiguous legal space. They mimic casino gaming but use virtual tokens. Through that, they claim compliance because users can access gameplay through a “free” method of entry.

That model aims to avoid “consideration.” That’s one of three elements defining gambling under Texas Penal Code Chapter 47: prize, chance, and consideration.

However, many users purchase tokens (one AGA survey suggests most do) to extend play or redeem prizes. That critics argue effectively reintroduces consideration — and thus gambling — under Texas law.

The Texas Constitution (Article III, Section 47) permits only a limited number of exceptions for lotteries and charitable gaming. So, any business violating that could face legal scrutiny.

Existing Statutory Tools: Chapter 622 of Texas Business & Commerce Code

Texas’s principal sweepstakes law, Chapter 622, was written for the direct-mail sweepstakes era. However, it still offers a potential enforcement foundation.

The statute prohibits linking sweepstakes entries to purchases (§ 622.101) and using misleading statements (§ 622.104). It also prohibits implying chance or luck through game pieces (§ 622.105) or falsely indicating that someone has won (§ 622.107).

Section 622.105 states:

“A person conducting a sweepstakes may not convey information about the sweepstakes or an offer to enter the sweepstakes by using a scratch-off device or any other game piece that suggests an element of chance or luck.”

The law authorizes the Attorney General to investigate violations and seek injunctions or civil penalties under §§ 622.201–203.

The chapter technically applies to mail-based promotions with prizes exceeding $50,000. Still, a court might find them functionally equivalent and extend the application to digital sweepstakes and casino platforms.

Beyond Chapter 622: Other Enforcement Paths

The Texas Deceptive Trade Practices–Consumer Protection Act (DTPA) provides the AG with another avenue. It enables actions against companies that mislead consumers about odds, winnings, or purchase requirements.

If investigators conclude a sweepstakes casino constitutes actual wagering, Penal Code Chapter 47 could come into play. That would expose operators to criminal penalties.

Past enforcement actions against unlicensed game rooms show that Texas prosecutors often combine gambling and consumer-fraud statutes when targeting gray-market operations.

How the Louisiana Opinion Points Back to Texas

According to gaming law attorney Daniel Wallach, the Louisiana Attorney General’s 2025 opinion (which has led to lawsuits) declaring sweepstakes casinos illegal “relied in part on Texas law” in reaching its conclusion.

In a Forbes article, Wallach wrote that Texas is “another strong candidate” for a similar review. That’s because its Legislature will not reconvene until early 2027. Also, because of the state’s “deep-rooted history of being an anti-gambling state and extensive body of case law addressing casino-themed sweepstakes games.” That leaves enforcement to the Attorney General.

He emphasized that Texas’s “primary-subject” test is central to determining whether a sweepstakes crosses into gambling. Under that analysis, courts decide whether the product tied to the sweepstakes — such as Internet time or virtual coins — is the proper object of the purchase or “mere subterfuge to promote sweepstakes play.”

In the Texas court case Texas v. Ysleta del Sur Pueblo, which the Louisiana AG relied on, the court explains, “if entries to a sweepstakes are granted in connection with the purchase of a product, the product must be the ‘primary subject of the transaction,’ otherwise the payment is made to purchase an entry to win a prize, and the so-called sweepstakes is, in actuality, an illegal lottery.”

Legal Precedent & Academic View

That reasoning, developed in Texas, has influenced courts nationwide, including in North Carolina, Alabama, and Pennsylvania. There, judges evaluating casino-style sweepstakes likewise found that the “casino-like” setup showed the businesses’ true purpose was gambling rather than product sales.

Other gaming-law commentators echo this interpretation. Regulators and scholars have widely cited cases such as Jester, Davis, and Telesweeps of Butler Valley as establishing that the sale of supplemental products cannot disguise a gambling enterprise.

Gaming-law scholar Anthony Cabot, writing in the UNLV Gaming Law Journal, makes a similar point. He argues that a free-entry option does not necessarily eliminate the element of consideration if purchasing remains the dominant means of participation.

His analysis reinforces the broader regulatory consensus that courts must look to the economic reality of sweepstakes promotions rather than their formal structure.

Free-Entry Options Don’t Eliminate Gambling

Cabot’s analysis underlines Texas’s approach to so-called “free-entry” defenses. Even when operators advertise a no-purchase option, courts and regulators have consistently looked beyond that to determine whether paying customers receive preferential treatment. That’s a question that goes to the heart of the “consideration” analysis.

In the same Forbes analysis, Wallach notes that offering a “free” or “alternative” method of entry does not exempt sweepstakes casinos from gambling prohibition. That argument has been established in previous cases in the state.

In Jester vs. Texas, the court found that “the mere pretense of free prizes, designed to evade the law, will not negate the element of consideration.” Additionally, the court determined that consideration existed, even though players could request free entries by mail. It concluded that the business’s “main purpose and function… was to induce people to play the game… and not to promote telephone cards.”

Wallach added that Texas law is “even clearer” on this point: if the primary subject of the transaction is sweepstakes play rather than the sale of a good or service, “the existence of alternative methods of free entry will not negate the element of consideration.”

He added that Texas requires free entries to be “readily and conveniently available,” in non-nominal numbers, and treated equally to paid entries.

When paying customers receive immediate credit and non-paying entrants must wait weeks for minimal rewards, Wallach argued, “any character of favoritism” toward purchasers would render the scheme a prohibited lottery.

Potential Enforcement Scenarios

The Attorney General’s office has a firm legal foundation. That includes Texas’s historically anti-gambling posture, combined with prior Attorney General opinions and the state’s extensive case law on sweepstakes promotions. The Louisiana opinion may provide both the legal and political cover for similar action in Austin.

Legal analysts outline several approaches the AG could take:

• Allege deceptive marketing under § 622.104 or the DTPA, citing claims of “guaranteed wins” or inflated odds.
• Argue that purchase-based gameplay equals consideration, collapsing the sweepstakes defense.
• Seek statewide injunctions restricting access to platforms deemed in violation of Texas law.

Such actions would mirror prior state efforts to rein in unregulated “skill-game” parlors and social-casino apps.

Outlook: Waiting for a Signal

With the Legislature dormant until 2027, the next major development in Texas gambling law may come through the Attorney General.

Whether Chapter 622’s 1990s-era sweepstakes language can stretch to modern digital casinos could determine the future of one of Texas’s fastest-growing gray-market industries. It would also signal whether the state is willing to defend its anti-gambling tradition in the online era.