The California Senate passed a bill on Monday aimed at prohibiting dual-currency online sweepstakes casinos. This legislation could significantly impact the industry, given that California captures 17.3% of the U.S. sweepstakes casino market, as noted in a report by Eilers & Krejcik.
Assembly Bill 831 (AB 831) was approved with a 36-0 vote, alongside four abstentions, and is now set to return to the Assembly for final approval before reaching Governor Gavin Newsom, who has yet to announce his decision regarding the bill.
AB 831 prohibits any person, corporation, or partnership—including financial institutions, payment processors, or content providers—from “knowingly assisting in any form” online sweepstakes casinos in California. Those found in violation could be subject to fines or imprisonment.
The bill was recently revised to ensure it does not affect licensed cardrooms, the state lottery, or corporate sweepstakes linked to legitimate product sales. Several operators and suppliers have already pulled out of the California market.
“Many of these ‘sweepstakes’ operators are based offshore and operate without adequate regulation, evading essential consumer protections, responsible gaming measures, background checks, and tax obligations,” remarked Assemblymember Avelino Valencia, the bill’s author.
Over 50 Native American tribes, including the Yuhaaviatam of the San Manuel Nation and the California Nations Indian Gaming Association, support this bill, viewing unregulated sweepstakes operators as a threat to their legally operating casinos.
“The state’s voters have repeatedly expressed their confidence in Native American tribes to manage gaming operations ethically and responsibly,” the Yuhaaviatam of San Manuel Nation stated in a formal letter. “Allowing unregulated and exploitative sweepstakes operators to skirt these laws compromises the trust and integrity of California’s gaming regulations.”
Conversely, a minority of tribes, including the Kletsel Dehe Wintun Nation and Sherwood Valley Rancheria, oppose the legislation, arguing that it jeopardizes tribal sovereignty and may limit digital commerce opportunities for rural tribes.
Industry organizations have also voiced their concerns. The Social and Promotional Games Association stated: “To disrupt an entire legal industry in under two months without sufficient discussion, education, public outreach, and evidence supporting the proponents’ claims appears remarkably reckless and short-sighted.”
“AB 831 is a hastily constructed and flawed piece of legislation that lacks widespread support from the tribes,” said Jeff Duncan, Executive Director of the Social Gaming Leadership Alliance and a former congressman. “California lawmakers should instead be focused on creating a regulatory framework that nurtures online social games while also establishing new revenue streams for the state and safeguarding economic opportunities for all tribes.”
VGW, a sweepstakes operator, expressed: “We aim to collaborate with the California Legislature to develop reasonable legislation that establishes a comprehensive regulatory framework prioritizing consumer safety and simultaneously generates new revenue for the state.”
The U.S. sweepstakes casino sector collected $3.1 billion in revenue in 2022 and is projected to exceed $8 billion, according to a Senate analysis. If this legislation is enacted, California will become the sixth state to ban the dual-currency model, potentially paving the way for similar actions in other regions.