The California Senate has moved forward with AB 831, a bill that seeks to ban sweepstakes casinos, passing it unanimously with a 36-0 vote on Monday. This legislative action, targeting the prohibition of such casinos, positions California among a growing list of states undertaking similar measures aimed at regulating the burgeoning gaming sector. The bill now returns to the Assembly for final approval.
The legislative session is set to conclude on Friday, leaving a narrow window for finalizing this bill. The origins of AB 831 lie in the lower chamber, where it was initially proposed. However, it gained new momentum after amendments were introduced in the Senate to specifically address the prohibition of sweepstakes casinos. These amendments curiously exempt state lottery games as well as traditional sweepstakes promotions by major brands like McDonald’s and Starbucks. Such changes were deemed necessary after critics expressed concerns that the original language might inadvertently include these widespread and legitimate promotional activities.
This year has seen a concerted effort across multiple states to clamp down on sweepstakes casinos. With states like Connecticut, Montana, and New Jersey enacting similar bans, California’s move aligns with a broader trend of tightening regulations around this type of gaming. Multiple regulators have also issued cease-and-desist orders to operators flouting these emerging rules.
Support for the ban comes from significant entities like the California Nations Indian Gaming Association and the Tribal Alliance of Sovereign Indian Nations. The Yuhaaviatam of San Manuel Nation, a prominent gaming tribe operating the Yaamava Resort and Casino in California, is also backing the legislation. Historically, California tribes have been protective of their gaming exclusivity within the state, successfully fending off external gaming interests, as evidenced by their opposition to Proposition 27 in 2022, a sports betting initiative spearheaded by companies like FanDuel and DraftKings. Despite $463.3 million being spent on that campaign, the proposition garnered a mere 18% of the vote, demonstrating the tribes’ formidable influence.
Contrastingly, a small cohort of tribes has allied with sweepstakes casino operators in opposition to AB 831. This includes the Big Lagoon Rancheria, Kletsel Dehe Wintun Nation, Mechoopda Indian Tribe of Chico Rancheria, and Sherwood Valley Rancheria of Pomo Indians. These tribes, alongside industry groups such as the Social and Promotional Gaming Association (SPGA) and the Social Gaming Leadership Alliance, argue that the bill’s passage has been unduly hasty. They criticize the legislative process, describing it as a “gut-and-amend” tactic that circumvents proper debate and transparency, expressing that California voters deserve more than what they see as backroom dealings influenced by political power plays.
The SPGA has expressed dissatisfaction, pointing to the state’s pressing issues like wildfires and housing shortages as more deserving of legislative focus than banning mobile gaming. The spokesperson remarked on the irony of prioritizing such a ban amidst critical challenges facing Californians.
The heightened scrutiny on sweepstakes casinos in California has already led to market shifts. Many suppliers and operators have decided to withdraw from the state. Notably, Playtech and Evolution, prominent software providers, have pulled their offerings from active sweepstakes platforms in California. Moreover, Los Angeles City Attorney Hydee Feldstein took legal action against Stake.us, asserting that the operator breaches state laws and the Unlawful Internet Gambling Enforcement Act.
Besides sweepstakes, other gaming facets like prediction markets and daily fantasy sports (DFS) are drawing attention. This increased scrutiny follows the emergence of new prediction market operators amidst state and federal regulatory pressures. A recent legal battle involves three California tribes—the Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and the Picayune Rancheria of Chukchansi Indians—who are seeking a preliminary injunction against Kalshi and Robinhood for allegedly offering illegal sports betting.
Despite Kalshi’s operations being federally regulated by the Commodity Futures Trading Commission, the tribes argue that these activities infringe upon tribal sovereignty as safeguarded by the Indian Gaming Regulatory Act. The ongoing legal disputes further underscore the complexities at the intersection of state, federal, and tribal jurisdictions in gaming matters.
Earlier this year, California Attorney General Rob Bonta issued an opinion categorizing daily fantasy sports as betting, a stance that Governor Gavin Newsom does not share. Although this opinion has yet to spawn enforcement actions, DFS operators like PrizePicks and Underdog have adapted by transitioning to peer-to-peer models within California.
As the legislative session nears its end, the fate of AB 831 remains a focal point for both supporters and detractors. The outcome will not only influence the immediate future of sweepstakes casinos in California but also potentially shift the broader gaming landscape as stakeholders navigate these new legal boundaries.
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