The California sweepstakes market is facing a complete ban as bill AB831 now only requires the signature of Governor Gavin Newsom.
The Golden State’s legislature unanimously passed AB 831 on 12 September, and now Gov. Newsom has until 12 October to sign or veto the bill, which criminalises both sweepstakes operators and those who supply the vertical.
This decision marks continued action against sweepstakes in the US.
If signed, California would join Connecticut, Montana, Nevada and New Jersey in bringing in similar measures.
However, there is still a small glimmer of hope for the sweepstakes operators in California until Newsom makes his decision.
In New York, the legislature passed a bill to ban the vertical but Gov. Kathy Hochul is yet to sign it into law. Meanwhile, earlier this year, Louisiana Governor Jeff Landry vetoed his state’s bill, deeming the legislation unnecessary.
Tribal opposition
Although bill AB831 enjoys the support of the Yuhaaviatam of San Manuel Nation and the California Nations Indian Gaming Association (CNIGA), other tribes in California have spoken out against it.
The Kletsel Economic Development Authority (KEDA), which recently signed a sweepstakes partnership with VGW, accused larger tribes of restricting digital commerce opportunities for smaller tribes.
Eric Wright, KEDA’s CEO, said in a letter to the California Senate Appropriations Committee: “Eliminating lawful, regulated digital opportunities will deepen these disparities, reduce self‐sufficiency, and undermine the State’s commitment to economic justice for all tribes. We urge the Committee to reject AB 831 and work toward legislation that expands—not restricts—opportunity for every tribal nation.”
The Social Gaming Leadership Alliance (SLGA), a trade association for sweepstakes operators, also testified in opposition of the bill, warning that the bill risks eliminating nearly 1,200 jobs and $1bn in economic benefits to the state.
Another trade body, the Social and Promotional Games Association (SPGA), criticised the way the bill came to the fore.
AB831 was initially intended to tweak California’s tribal-state compact laws, but Assembly member Avelino Valencia overhauled the bill to become a ban on sweeps.
The SPGA told iGaming Expert in June: “A last-minute effort to outlaw legal digital games, without public debate, expert input or economic analysis, sends a chilling message to entrepreneurs, innovators and investors across the state.”
Legal battles
The passage of AB831 by California’s legislature appears to be the final nail in the coffin for sweepstakes operators in the state.
Alongside contending with the ban, operators Stake.us and VGW are facing separate legal challenges.
Most notably, a legal case was brought against Stake.us by the Los Angeles City Attorney, Hydee Feldstein Soto, on behalf of the people of California, as well as a number of suppliers, including Evolution and Pragmatic Play.
As a result, Pragmatic Play has cut ties with the US sweepstakes sector, citing regulatory developments.
Meanwhile, Evolution has pulled its content from Stake.us in California and Playtech has exited the California sweeps market entirely.
iGaming Expert Analysis: Although sweepstakes operators have faced regulatory pressure in many states across the US, the passage of bill AB831 represents a particularly significant blow for the vertical given California’s status as the most populous state in the US.
The state’s sweepstakes market was projected to garner $2.42bn in sales and the SLGA has warned that banning sweepstakes risks eliminating nearly 1,200 jobs and $1bn in economic benefits to the state.
