California’s legislature’s unanimous passing of AB 831 last week has left the Golden State one signature away from an outright ban on dual-currency sweepstakes casinos.
As things stand, AB 831 now sits on Governor Gavin Newsom’s desk, which, if signed off on, has the potential to set a new lasting precedent across the U.S. sweepstakes industry moving forward.
The announcement that California is pushing ahead with an all-out ban on online sweepstakes platforms will be a blow for bettors who took part in the fastest-growing casino niche.
At the heart of the format, sweepstake casinos leveraged virtual currencies that helped firms, including Virtual Gaming Worlds, build billion-dollar platforms that attracted casual gamers with lucrative cash-based payouts.
In it, AB 831 includes sweeping measures that could see operators face $25,000 fines, a year in county jail, or both for non-compliance. Furthermore, third-party service providers such as payment processors, affiliates, and geolocation firms could also be liable for knowingly supporting sweepstakes casinos in the state.
Alternative California Gaming Sector Status
| Gaming Market | Status | Available Formats |
| Tribal Casinos | Legal | In-person only casinos offering slots, poker, and table games. |
| California State Lottery | Legal | Draw games, scratchers, and limited online draws. |
| Sports Event Contracts | Legal | Platforms such as Kalshi, Polymarket, and Underdog are currently regulated by the CFTC. |
| Sports Betting | Illegal | All forms of sports wagering remain unregulated. |
| Daily Fantasy Sports | Illegal | Classified as unlawful wagering on sporting events. |
AB 831 fuels mixed reactions from key stakeholders
News of the bill’s approval hasn’t gone down well as industry advocates argue that the law will deprive California’s economy to the tune of over $1 billion annually. In addition to this, the Golden State is said to be turning away over $300 million in tax revenue.
Meanwhile, powerful tribal operators Yuhaaviatam of San Manuel Nation and the California Nations Indian Gaming Association have applauded the bill’s progression – primarily because for tribes that already control traditional casinos, the elimination of sweepstakes competitors further consolidates their own monopoly.
This proved to be an instrumental factor in VGW’s recent compact with the Kletsel Dehe Wintun Nation that potentially circumvents the likelihood of the bill passing in California.
Investors wary as California looks set to follow other states
Investors tracking gaming stocks will already be aware of how California’s continued push to eliminate sweepstakes casinos mirrors a seemingly national crackdown.
In fact, states including Connecticut, Montana, Nevada, and New Jersey have all enacted similar bans already this year, with New York’s governor expected to sign one shortly.
It may represent a changing of the tide as so-called predictive market operators such as Kalshi and Polymarket continue to expand with few obstacles in the USA. It appears challenging to regulate such entities as they only offer simple yes/no contracts that are similar to futures markets, which are fully legal across the USA.
Aside from the economic benefits the states are passing up, the impact of the latest legislative measures has already had an impact on industry operators. So much so, even titans of the industry have not been exempted, with global firms including Playtech (LSE: PTEC) and Evolution (STO:EVO) having already pulled their sweepstakes product lines in California. Privately-owned Pragmatic Play has gone one step further and removed its games from all sweepstakes products.
Given the scale of the Californian market, should Governor Newsom sign off on the deal, there is a genuine danger of further states following suit. While U.S. state legislators hope the move shifts investment back towards tribal casinos, lotteries, and eventually, voter-approved sports betting, California’s decision to ban sweepstakes casinos could prove to be the beginning of the end of the popular gaming format.
