California Sweepstakes Casino Ban Awaits Governor's Signature

California is set to join several large states in banning online sweepstakes casinos after lawmakers approved Assembly Bill 831 (AB 831). The bill, introduced by Assemblymember Avelino Valencia, is meant to prohibit operators of online sweepstakes casinos from offering services in California.

The measure emerged from the Assembly on Friday with a 63-0 vote, following its unanimous Senate approval earlier in the week with a 36-0 vote. The measure now goes to California Gov. Gavin Newsom, who will have 30 days in which to veto or sign it. If he takes no action, the bill will automatically become law. 

The bill’s legislative journey included several amendments, particularly to exempt social sweepstakes games from prohibition. Those amendments ensured that legislation focused only on casino-style sweepstakes, facilitating its passage through three Senate committees before it reached the floor.

The measure went back to Senate in a second reading last week and was unanimously approved Monday, sending it to final concurrence in Assembly.

The Social Leadership and Gaming Alliance (SLGA), which includes some Northern California tribes with limited or no gaming operations, opposed the bill. The Kletsel Dehe Wintun Nation also voiced opposition at a recent committee hearing.

On the other hand, the Tribal Alliance of Sovereign Indian Nations (TASIN), which represents 13 tribes, praised the measure. Supporters said it will curb unregulated online gambling that threatens tribal operations. 

With its passage, California would become the fourth major state to adopt such a ban, following Nevada, New Jersey, and New York.

DFS faces legal pressure

The debate over gambling regulation in California has extended beyond sweepstakes casinos, after Attorney General Rob Bonta issued an opinion declaring daily fantasy sports (DFS) pick'em and draft-style contests to be illegal sports betting. Bonta stated these games constitute wagering on real-world sports events and therefore fall under the state's prohibition on sports betting.

Despite the ruling, DraftKings, FanDuel, and Underdog Fantasy indicated that they will continue to compete in California. FanDuel claimed to be ready to talk with the attorney general's office, and DraftKings made it explicit again that it thinks that fantasy gaming is a game of skill. 

Gov. Newsom distanced himself from Bonta's interpretation, instead signaling that he would be ready to sit down with stakeholders in arriving at a regulatory solution.

Bonta's decision is not legally binding, though it can also be predictive of future enforcement. Each of the consumer rights groups has already filed private actions against DraftKings, FanDuel, PrizePicks, and Underdog Fantasy.

The suits allege that the companies misrepresented their services as legal fantasy contests when, in reality, they were sports betting. The plaintiffs seek restitution and injunctive relief under California law, the Penal Code, the Unfair Competition Law, and the Consumer Legal Remedies Act.

The attorneys for the plaintiffs emphasized that Bonta's ruling supports them, and several of them cited deceptive marketing as being at the core. The suits aim to hold DFS operators responsible and obtain compliance with California gaming law.