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Waterhouse VC Sweepstakes mania

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Tom Waterhouse, of Waterhouse VC, explores sweepstakes in their industry and the role that they play.

Casinos that offer sweepstakes do not accept real money bets. They use a freemium approach instead. This model involves virtual tokens that can be obtained for free or indirectly, and then used as play money to access in-game functions. After playing, virtual currency can be converted to cash or other prizes. Since over 10 years, the largest sweepstakes casinos have operated.

Sweepstakes are a great alternative to igaming in jurisdictions that do not regulate or prohibit real-money online gaming. Sweepstakes casino games are popular among real money players. They include titles from Pragmatic Play and Playtech, as well as NetEnt.

According to Eilers & Krejcik Gaming, the global sweepstakes industry saw revenues grow by 89% annually between 2019 and 2020, with a total of $3.1bn expected in 2022. It is less than half the US market for sports betting, where $7.5bn in gross gaming revenues were recorded by 2022. Flutter, DraftKings and other sites were the leaders.

In spite of igaming being banned in many US states, the US is the driving force behind the worldwide sweepstakes industry. Online sports betting has been legalised in more than 30 states. However, igaming is still a long way from being fully legalised. Only seven states allow igaming: Connecticut, Delaware Michigan New Jersey Pennsylvania Rhode Island West Virginia. Sweepstakes can fill the gap in states that do not allow igaming by providing a product similar to igaming.

Perth’s real gold rush

Virtual Gaming Worlds is the leading sweepstakes operator. According to Eilers and Krejcik gaming, it has a market share of more than 90% mainly through the Chumba Casino brand.

VGW customers can purchase virtual coins for use in Chumba Casino. The coins have no value outside Chumba Casino. Gold coins are a bonus currency that is also used by players who purchase them. In most parts of North America and Canada, these coins can be converted to cash.

VGW has a selection of games. Source: Channel News

Laurence Escalante founded VGW in 2010. The company now employs more than 1300 people worldwide. Perth is home to around 220 people.

Escalante, 42, is one of Australia’s richest people. He has a fortune worth $3.9bn, according to the Australian Financial Review, and owns a 70% stake in VGW. VGW reported in its H1 results released in March a 29% rise in revenue, to AU$2.8bn. The net profit was also up 23% to AU$207m.

Escalante joins Ed Craven, who is 28 years old. Craven founded Melbourne’s crypto betting operator Stake.com in 2017. Stake generated AU$1.8bn of revenue in 2021 and a profit net of AU$550m, according to the Australian Financial Review. This fueled Craven’s AU$3.1bn fortune.

Escalante earned $5.65 an hour as a teenager at Hungry Jacks. In Sydney he studied Actuarial Studies, Economics and Retail at The Reject Shop. Escalante has a different Instagram profile today, which is similar to the fantasies of most boys.

One of Laurence Escalante’s possessions, a Lamborghini Countach. Source: Instagram

VGW is licensed in Malta to operate gaming operations. VGW, and other sweepstakes casinos could be affected by changes in federal sweepstakes laws or state law variations. As more states begin to legalise online gaming, it is likely that customers will be drawn to these operators instead of sweepstakes casino.

Rapid Growth

In recent years, the rapid expansion of sweepstakes casino has brought several new players into the market. Stake.US is a sweepstakes version of Ed Craven’s popular crypto betting site. Over the next three-year period, it is expected that sweepstakes will grow by 31% annually. This growth will be driven by US states which do not allow igaming.

Aristocrat Leisure also has developed games which offer players a similar experience to igaming. Lightning Link Casino (a slot-machine simulator) has been Australia’s most popular mobile game for the last few years.

Lighting Link is a free slot machine simulation available in Australia. Igaming there is prohibited. Businesses like Lightning Link, unlike sweepstakes-based models, are classified as “social casino”.

Sweepstakes are different from social casino games in that they allow you to win real money prizes. Sweepstakes casinos offer real-money rewards to players, while social casinos are purely for fun.

Aristocrat’s social casino collection has seen players worldwide spend approximately $1bn in game currency. Social casinos will generate close to US$7bn in revenue worldwide by 2020 (Australian Communications and Media Authority).

Global revenue for social casinos. Source: Australian Communications and Media Authority

Waterhouse VC, a wholesale investor fund that specializes in betting and gaming businesses both publicly traded and privately owned around the world.

Waterhouse VC, since its inception on August 2019 has generated a total gross return of 3,067% (11% annualized) as of 31 March 2024. This assumes the reinvestment all distributions.

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