California Senate approves bill to ban sweepstakes casinos, Assembly vote next

California’s Senate voted unanimously on Monday to approve a bill banning dual-currency online sweepstakes casinos. The move could deal a major blow to the sector, as California accounts for 17.3% of the US sweepstakes casino market, according to an Eilers & Krejcik report.

The measure, Assembly Bill 831 (AB 831), passed 36-0 with four abstentions and now returns to the Assembly for concurrence before heading to Governor Gavin Newsom’s desk. Newsom has not yet said whether he will sign the bill.

AB 831 makes it unlawful for any person, company, or partner, such as financial institutions, payment processors, or content suppliers, to “knowingly support directly or indirectly” online sweepstakes casinos in California. Violators could face fines and jail time.

Lawmakers amended the bill last week to clarify that it will not apply to licensed cardrooms, the state lottery, or corporate sweepstakes promotions tied to genuine product sales. Several operators and suppliers have already withdrawn from the California market.

“Many of these ‘sweepstakes’ operators are based offshore and function without proper oversight, avoiding requirements like consumer protections, responsible gaming safeguards, background checks, and tax compliance,” Assemblymember Avelino Valencia, who authored the bill, said in a statement.

The bill has the backing of more than 50 Native American tribes, including the Yuhaaviatam of San Manuel Nation and the California Nations Indian Gaming Association, who see unregulated sweepstakes operators as competitors to their regulated casinos.

“The state’s voters have consistently shown their trust in Native American tribes to operate gaming facilities responsibly and ethically,” the Yuhaaviatam of San Manuel Nation said in a written argument. “Allowing unregulated and predatory sweepstakes operators to bypass these regulations undermines the trust and integrity of California’s gaming policies.”

But a smaller group of tribes, such as the Kletsel Dehe Wintun Nation and Sherwood Valley Rancheria, have opposed the measure, saying it threatens tribal sovereignty and could limit rural tribes’ digital commerce opportunities.

Industry groups have also pushed back. The Social and Promotional Games Association said: “Disrupting an entire legal industry in less than two months without adequate debate, education, public outreach, and evidence supporting the proponent’s arguments seems extremely short-sighted and irresponsible.”

“AB 831 is a flawed and rushed bill that lacks broad tribal consensus,” said Jeff Duncan, Executive Director of the Social Gaming Leadership Alliance and a former congressman. “What California lawmakers should focus on instead is creating proper regulation that supports online social games, creates new revenue sources for the state, and protects economic opportunities for all tribes.”

VGW, a sweepstakes operator, said: “We want to work collaboratively with the California Legislature on sensible legislation that creates a robust regulatory framework prioritizing consumer protection while simultaneously offering a new revenue stream for the state.”

The U.S. sweepstakes casino market generated $3.1 billion in revenue in 2022 and is now projected to exceed $8 billion, a Senate analysis said. If enacted, California would be the sixth state, and by far the largest, to ban the dual-currency model, potentially setting a precedent for other jurisdictions.