California Sweepstakes Ban Has Devastating Impact on Illegal Gaming Ops
A statute passed by California Governor Gavin Newsom (D) outlaws any online sweepstakes promotions that let participants increase their chances of winning by paying money. The rule, which was passed into law on Saturday, specifically makes it illegal for anyone or any company to host online sweepstakes games that "use a dual-currency system."
Over the past few years, online sweepstakes casinos have quickly grown in popularity in the United States. According to market leaders Stake and Chumba, their online platforms include engaging social casino games that are free to play. There is a secondary digital money that can be bought, commonly referred to as sweeps coins.
Sweeps coins can be "redeemed" (not "cashed out") for cash after a predetermined number of wagers. Sweeps operators argue that their games are similar to an online store giving a consumer a daily free spin to win a discount code on their next purchase since they give social gamers tiny sums of free sweeps coins, say 10 cents for logging in two days in a row.
Legislators and state attorneys general nationwide think that online sweepstakes casinos are just companies that are trying to circumvent state gaming laws that forbid iGaming.
Devastating Signature
California is the latest state to outlaw dual-currency online sweepstakes games, following Connecticut, Delaware, Idaho, Michigan, Montana, and Washington. There is pending legislation in Nevada and Ohio.
The major sweeps players have been the target of cease-and-desist orders from numerous other states. It has a huge effect on the uncontrolled online gambling market.
Online sweepstakes casinos are expected to bring in over $4.7 billion in gross gaming revenue by 2025, according to Eilers & Krejcik, a gaming consultant and market research firm that has promoted sweeps games after being hired by the Social Gaming Leadership Alliance (SGLA). It is estimated that California will pay $790.5 million.
The amount of money that operators keep after paying out winners is known as gross gaming revenue. Due to their lack of regulation, sweeps casinos are exempt from state tax and retain the full profit.
The sweeps prohibition in California will take effect on January 1, 2026. Assembly Bill 831 was signed by Newsom with the support of the vast majority of California tribes. Four tribes were allegedly bought off by the SGLA to support their resistance.
"Voters, players who love online social games, California tribes, and online social games operators all made their position clear: they didn’t want a ban on this popular, safe form of entertainment,” claimed Jeff Duncan, SGLA executive director. “We hoped that Gov. Newsom would see past the anti-competitive efforts of the powerful, well-funded tribes behind this bill and veto AB 831, but he chose the easy, short-sighted path and turned his back on choice, innovation, and economic gains.”
With an estimated 17% of the online sweepstakes market in California, Newsom's signing of AB831 is a significant setback for unregulated online gambling firms.
iGaming Limited's legal
Only seven states—Conn., Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia—permit real money online gambling through slot machines and live-dealer table games.
Thirty-three states, as well as Washington, DC, allow online sports betting. On December 1, Missouri is scheduled to enter the online sportsbook industry.
