Governor Gavin Newsom of California has signed a pivotal piece of legislation that effectively prohibits sweepstakes casinos in the state, marking a significant regulatory shift in the nation’s largest state. The signing of Assembly Bill 831, which received unanimous support from the California Legislature, took place on Saturday, just a day before the deadline for gubernatorial action. This law targets dual-currency sweepstakes casinos, platforms that emulate the experience of online casinos and sports betting, and will come into effect on January 1, 2026.
The implications of this decision are substantial for the sweepstakes industry, which, according to analysts at the recent Global Gaming Expo in Las Vegas, stands to lose approximately 20% of its US revenue due to California’s new stance. The move is seen as a significant blow to the industry’s operations within the state.
Shawn Fluharty, a West Virginia Delegate and president of the National Council of Legislators from Gaming States, emphasized the weight of California’s unanimous legislative decision, describing it as a definitive stance against the sweepstakes industry. He remarked on the rare consensus, highlighting how difficult it is to achieve such agreement on any issue within California’s legislative process.
The panelists at the expo reflected on the industry’s struggle, suggesting that this legislative shift may mark the end of the road for sweepstakes casinos. The American Gaming Association’s Vice President of Government Relations, Tres York, criticized the business model, arguing that it represented a cunning attempt to offer online gambling under the guise of sweepstakes, diverging significantly from traditional notions of sweepstakes.
Prior to the legislative move, Los Angeles City Attorney Hydee Feldstein Soto pursued legal action against sweepstakes operator Stake.us, labeling the platform as an illegal gambling site. In a public statement, Feldstein Soto condemned Stake.us as a destructive force within the community, accusing it of operating under the false pretenses of being a social casino while engaging in real-money gambling activities. Her office’s lawsuit also targeted Stake’s suppliers and the streaming service Kick, many of whom withdrew from the market following the legal challenge.
The panelists at the Global Gaming Expo identified these suppliers as critical in halting the operations of sweepstakes casinos, indicating that cutting off their support could dismantle the industry entirely.
The crackdown on sweepstakes casinos is not unique to California. Other states, including Connecticut, Montana, and New Jersey, have enacted similar bans this year. Meanwhile, in Louisiana, despite legislative efforts to ban the platforms, Governor Jeff Landry vetoed the bill, arguing that existing regulatory bodies already possessed the authority to enforce the necessary controls. Following his veto, the Louisiana Gaming Control Board issued 40 cease-and-desist orders to unregulated gambling sites, including those operating under the sweepstakes model.
In New York, legislative action is pending as Governor Kathy Hochul has yet to decide on S5935, but state Attorney General Letitia James has proactively issued 26 cease-and-desist orders against sweepstakes operators. The New York State Gaming Commission Chairman, Brian O’Dwyer, expressed strong approval of these measures, emphasizing the need to eliminate unscrupulous gambling activities from the market.
The nationwide regulatory actions reflect a growing consensus among states to clamp down on sweepstakes casinos, which are often seen as exploiting legal loopholes by offering non-monetary rewards that can be converted into real money. This model has raised concerns about its potential to foster addictive gambling behaviors.
Following the legislative developments in California, Eilers & Krejcik Gaming, an industry analytics firm, adjusted its revenue forecasts for the US sweepstakes casino market. Initially estimating a revenue of $4.7 billion for 2025, the firm now predicts a decrease to $4 billion, with an anticipated 10% decline in 2026.
The future of sweepstakes casinos remains uncertain as they face increasing legislative and legal challenges. While proponents of the ban argue that these platforms pose significant risks to consumers and the integrity of the gaming industry, others may view them as an innovative, albeit controversial, business model that provides a unique form of entertainment. Nonetheless, the legislative actions taken by California and other states underscore a broader regulatory trend aimed at ensuring stronger consumer protection and maintaining the integrity of the legal gambling market.
4.6/5
