Virtual Gaming Worlds (VGW), the Australian sweepstakes powerhouse, showcased its global lobbying efforts on Monday during a California Senate Appropriations Committee hearing on a proposed bill aimed at banning sweepstakes casino sites. The committee took no action on the bill, leaving it in limbo without inclusion on the agenda for August 25.
California is a significant market for grey-area operations like sweepstakes, and a ban could severely impact VGW and similar operators across the United States. This year, states including Montana, Nevada, Connecticut, and New Jersey have already introduced laws prohibiting sweepstakes.
The bill, known as AB831 and sponsored by Assemblyman Avelino Valencia, is supported primarily by California's influential Indian gaming tribes, notably the Yuhaaviatam of San Manuel Nation, which operates the Yaamava Resort and Casino in Highland and the Palms Casino Resort in Las Vegas.
Historically, California tribes have successfully blocked various attempts for gaming expansion that threaten their sovereignty. California law currently prohibits legal digital gambling, with tribal exclusivity for Class III casino games negotiated through compacts with the state.
In a notable prior conflict, Indian Country defeated Proposition 27 in 2022, a mobile sports betting measure backed by major commercial entities like FanDuel and DraftKings. The campaign involved $463.3 million in spending from both supporters and opponents, making it the most expensive ballot battle in U.S. history; Proposition 27 secured only 18% of the vote.
Despite tribal backing, another initiative, Proposition 26, also failed, although tribal leaders indicated that a primary goal was to defeat Prop 27.
In light of ongoing challenges, tribes have voiced strong opposition to prediction markets, daily fantasy operators, card rooms, and sweepstakes, highlighting the unique nature of each battle. Nonetheless, VGW asserted on Monday that it remains steadfast in its efforts.
Before the hearing, VGW revealed a partnership with the Kletsel Dehe Wintun Nation of the Cortina Rancheria, a small tribe with fewer than 300 enrolled members that does not operate any casinos. The partnership focuses on free-to-play online social gaming platforms, including associated sweepstakes promotions in California, and seems calibrated against AB831, with the announcement prominently addressing the bill's implications.
Originally, AB831 was focused on the tribal-state compacting process but was amended to introduce the sweepstakes ban, progressing through two lower committees in July without challenge.
By allying with a smaller tribe, VGW aims to highlight that opposition to sweepstakes is not universal among tribal groups. Among California's 109 federally recognized tribes, fewer than 70 currently operate gaming facilities, according to the California Nations Indian Gaming Association (CNIGA).
Eric Wright, CEO of the Kletsel Economic Development Authority, voiced opposition to AB831, citing the lack of unanimous support among tribes and highlighting that it threatens essential revenue streams for smaller tribes. He stated, "This bill lacks unanimous support among California tribes, has advanced without meaningful consultation with many of us and threatens our inherent right to operate legitimate revenue streams to support our people."
For smaller tribes, alternative revenue sources like sweepstakes are vital, although some funding is shared through the state's Revenue Sharing Trust Fund designed to aid those without extensive gaming operations.
Shane Levine, representing the Social Gaming Leadership Alliance (SGLA) formed by VGW, warned that a sweepstakes ban could cost 1,200 jobs and lead to a $1 billion reduction in annual economic impact. Levine proposed that instead of prohibiting online sweepstakes, California should consider regulating and taxing the industry for potential new revenue of $200 million to $300 million annually.
Only two statements are permitted during committee hearings, restricting testimony to those opposing the bill, including representatives from VGW and ARB Interactive, another sweepstakes operator and SGLA member. The California Department of Finance did not provide comments on the bill, and there were no proponent testimonies during the hearing.
Additionally, sweepstakes operators caution that a ban could impact popular non-gaming promotions run by major companies, such as McDonald's and Publishers Clearing House.
VGW's strategy seems reminiscent of previous efforts to expand gaming in California. During the campaign for Prop 27 in 2022, advertisements sought to emphasize divisions among tribal opinions.
In late 2023 and early 2024, another sports betting initiative surfaced led by Kasey Thompson, who garnered backing from smaller tribes. However, he ultimately withdrew due to majority opposition, emphasizing his commitment to unity among tribes. "My intent was to unite the tribes and not divide them," Thompson stated.
Achieving consensus among over 100 tribes is inherently challenging. Nearly three years since defeating Proposition 27, the pathway to legalized sports betting in California remains unclear, reflecting ongoing dissent among sovereign nations. CNIGA plays a critical role in fostering dialogue among tribes but has not responded to requests for comment.
VGW has faced numerous challenges in recent years, experiencing significant growth alongside setbacks, including outright sweepstakes bans in certain states and cease-and-desist orders. The company has retracted its sweepstakes offerings from various markets, including New York, but is currently holding its ground in California. VGW has ramped up lobbying through the SGLA and criticized some tribes, particularly San Manuel, for providing similar products.
Laurence Escalante, VGW’s founder and CEO, recently regained control of the company through a family office-backed acquisition. Escalante noted rising concerns from investors due to the company’s diminished financial disclosures. He stated, "Our focus is on respectful engagement with legislators and calling for the establishment of modern, appropriate regulatory structures that can benefit players and states alike – not rushed, flawed legislation with unintended consequences being pushed by parties with clear vested interests like AB831."
