California Senate Committee Passes Bill to Ban Sweepstakes Casinos

Days after California’s Attorney General issued an opinion that daily fantasy sports (DFS) contests violated state law, the California legislature took another step toward banning online sweepstakes casinos.

AB 831, a bill that would outlaw dual-currency gaming, passed the Senate Governmental Organization Committee on Tuesday. However, the bill was subject to criticism for its path through the Senate.

The next hearing is scheduled for July 15 in the Senate Public Safety Committee.

Fixing key issues

The Senate in May added anti-sweepstakes language to an unrelated bill that passed the Assembly in May. Although it passed its latest committee vote 10-0, questions remain.

Several senators who supported the bill said that details need to be added regarding several issues.

One of these is related to the punishment for illegal sweepstakes gambling. Asm. Avelino Valencia (D-District 68) said that the bill is only intended to punish nefarious operators, but others said that the wording of the bill made it unclear if customers would also face repercussions.

Another issue was the anti-sweepstakes language being added to an unrelated bill. While Senators supported the idea of keeping gaming reserved for tribal entities, they did not understand the pressure to add the ban to a separate piece of legislation.

Representatives for card rooms also took issue with the phrasing of the bill, which would aim to outlaw these legal gambling dens. Valencia said that the upcoming changes would remove card rooms from the bill, thereby restoring the support of their representatives. 

“In recent years, online sweepstakes casinos have increased in popularity by exploiting no purchase necessary and using dual currency models to take advantage of a gray area in the law,” Valencia said. “Players are able to convert winnings into actual cash. By operating as an online casino with real cash payouts, these platforms are circumventing the will of the voters and sidestepping the state’s gaming framework.”

What’s next for the bill?

Despite the timing, the anti-sweepstakes bill is not related to the recent decision by Attorney General Rob Bonta (D) regarding DFS platforms. Bonta’s opinion also did not carry the full weight of the law, and popular operators DraftKings and Underdog said they planned to continue offering DFS contests in California in the immediate future.

The anti-sweepstakes bill was first introduced in February but didn’t pass its first Senate committee until June 10. If approved, it would draw a line in the sand for state regulators, whose laws provide a gray area for sweepstakes platforms to exist.

“I do believe that this bill does aim to strengthen our existing sweepstakes laws and address the ambiguity in our state law, so that is why I support the bill today,” Sen. Sabrina Cervantes (D-District 31) said. “I do have concerns about the unintended consequences and just making sure there is some clarifying language as it relates to the criminalization or the misdemeanor penalties here for the individuals. 

“Everything else in this bill I am in strong support of, and make sure that my comments are aligned with some of the other committee members here.”

Punishments for guilty operators, payment processors, affiliates, and third-party associates could range from fines of up to $25,000 to a one-year prison sentence. 

Two tribal gaming officials testified in front of the Senate committee, claiming that sweepstakes casinos violate their right to gaming exclusivity. However, Bill Gantz, a gaming attorney for the Social Gaming Leadership Alliance said that sweepstakes platforms do not constitute gambling, and studies have shown that their existence has not impacted tribal retail casinos.