The California Senate has taken a significant step toward banning sweepstakes casinos by unanimously passing a prohibition bill this week. The vote on AB 831 was 36-0, and the bill will now return to the Assembly for concurrence. This legislative effort began in the Assembly but was amended in the Senate to include provisions specifically targeting sweepstakes casinos. Following amendments, the bill successfully moved through several committees with unanimous support.
Before its third reading, senators made sure to exclude traditional lottery games and well-known sweepstakes promotions from major companies such as McDonald's and Starbucks to address concerns raised by opponents. Those opponents had cited such promotions as potentially falling under the new ban.
This year, several other states, including Connecticut, Montana, and New Jersey, have enacted similar bans on sweepstakes casinos. Furthermore, different state regulators have sent cease-and-desist letters to operators.
Support for AB 831 comes from the California Nations Indian Gaming Association, the Tribal Alliance of Sovereign Indian Nations, and the influential Yuhaaviatam of San Manuel Nation, which operates both the Yaamava Resort and Casino in Highland and the Palms Casino Resort in Las Vegas. Tribal gaming interests in California have historically fought to keep outside gambling operations at bay, maintaining that gambling should occur exclusively under tribal sovereignty. In 2022, tribes succeeded in defeating Proposition 27, a sports betting initiative funded largely by FanDuel and DraftKings, which garnered only 18% of the vote despite a combined spending of $463.3 million.
However, four tribes oppose the bill, aligning instead with sweepstakes casino operators. These tribes are the Big Lagoon Rancheria, Kletsel Dehe Wintun Nation, Mechoopda Indian Tribe of Chico Rancheria, and Sherwood Valley Rancheria of Pomo Indians. Alongside them, the Social and Promotional Gaming Association and the Social Gaming Leadership Alliance have expressed strong disapproval of the legislation, criticizing its rushed approach and the ‘gut-and-amend’ method used to introduce it.
A spokesperson for the SPGA voiced concerns about political maneuvers, stating, “California voters didn’t sign on for backroom deals dictated by powerful political interests.” With ongoing crises such as wildfires and a housing shortage in the state, they emphasized the surprising prioritization of banning mobile games.
The increased scrutiny on sweepstakes has resulted in multiple suppliers and operators exiting the California market. In August, Los Angeles City Attorney Hydee Feldstein took civil action against Stake.us, accusing the operator of violating various state laws, including the Unlawful Internet Gambling Enforcement Act.
Suppliers like Playtech and Evolution have also withdrawn their games from still-active sweepstakes sites in California, further tightening the market.
Additionally, stakeholders in California are raising concerns about prediction markets and daily fantasy sports as operators persist despite increasing regulatory attention. Three tribes, Blue Lake Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians, and Picayune Rancheria of the Chukchansi Indians, have filed a lawsuit against Kalshi for allegedly offering illegal sports betting across the US, including on tribal lands, seeking a preliminary injunction. A hearing is set for October 9 in the US District Court for the Northern District of California.
The tribes argue that Kalshi presents illegal sports betting, while Robinhood has started offering Kalshi's football event trading markets. Kalshi’s operations are regulated by the Commodity Futures Trading Commission, but gambling on tribal land is protected under federal law. There are other federal lawsuits against Kalshi contending illegal sports betting operations.
Earlier this year, California Attorney General Rob Bonta stated that daily fantasy sports games constitute betting; however, Governor Gavin Newsom disagreed. While Bonta's opinion hasn't led to enforcement actions yet, DFS operators PrizePicks and Underdog have shifted to a purely peer-to-peer model in California.
