Druff,

I enjoyed the discussion of Global Poker’s “Gambling vs. Sweepstakes” business model as it pertains to PayPal on one of your recent podcasts (sorry, I’m about a month behind). When I think of Gambling vs. Sweepstakes I usually think in terms of taxes. In a casino, when you win money from gambling, you are issued a form W-2G. When those winnings are from sweepstakes, you are issued a form 1099-MISC.

For example, card rooms that offer bad beat or high hand jackpots consider them sweepstakes, and when the amount of the jackpot awarded exceeds the state or federal limits, they will issue you a form 1099-MISC. As you explained in your discussion, players have no consideration and are not putting up any money (or perhaps any additional money) to win these jackpots. Also, if you read the fine print associated with these bad beat jackpots, you can request to participate once a day without playing a “real” hand of poker. The house will take you to an empty table, deal you a hand, a dummy hand, and a board. If you quality, you can win the bad beat without the house even taking their $1 or $2 jackpot drop. Now, this is hardly ever (on possibly never) requested, but it is offered. All this makes jackpot payouts fall into the sweepstakes category and as such, a form 1099-MISC is issued on applicable winnings.

Alternately, if you win a poker tournament, prizes exceeding the state or federal limits will be accompanied by a form W-2G as these are clearly gambling earnings.

Now, in the case of Global Poker, and specifically the player who asked PayPal to refund his money because he did not use the Gold Coins, but used the Sweeps Cash instead, was he gambling or was this a sweepstakes?

Let me muddy the waters and offer up this from my personal history with forms W-2G and 1099-MISC. I played in a small nightly poker tournament at a Harrah’s Hollywood St. Louis property some years ago and finished in 2nd place. The prize was small, as I recall, probably under $400, and I was given a W-2G. Straight forward. No issues.

The muddiness comes from the blackjack tournament I won at Harrah’s Gulf Coast in Biloxi. The details were discussed in my original post called Another CET freeroll bit of shadiness back on March 12th, 2016. The relevant bit here is that I was given the entry as a comp through the usual Caesars' mailings that you’re familiar with. Since my entry was free, I had no consideration, and was given a form 1099-MISC. But what about the other players who were not comped and put up the $30 entry fee? Like a poker tournament, these players would have had consideration in the form of their entry fee. If they had won this same blackjack tournament, would they have been issued a form W-2G? Could the same tournament been seen as gambling for them, but a sweepstakes for me? Or, since at least one player (me) was afforded free entry, does that make the entire tournament a sweepstakes where any winner would receive a form 1099-MISC? If it’s the later, then perhaps Global Poker is using this same argument to categorize all of their games as sweepstakes rather than gambling. As long as there’s the avenue for one player to play for free, then perhaps in the eyes of the law it’s all a sweepstakes. The charge back guy's point was that he didn't touch the Gold Coins which cost money, but instead used the free Sweeps Cash. What are your thoughts?