Does California Bill Spell Doom for Sweepstakes Casinos?

It was unanimous. By a vote of 63-0, the California Assembly made clear that it wanted sweepstakes casinos banned from operating in the state. The bill (AB 831) will now go to Governor Gavin Newsom's desk, where it is expected to be signed in rather short order.

It's no secret that the Governor has long sided with the state's Tribal community when it comes to providing exclusive access to casino gambling. The right to control casino gambling was given to the nation's Indian population by the signing of the Indian Gaming Regulatory Act of 1988.

Newsom also indicated his support for federally recognized Indian Tribes when he signed a law in September that permits Tribes to sue card room operators. Based on the law, card rooms are not permitted to offer table games like Blackjack, Roulette, and Baccarat.

What Does This Bill Mean for the Future of Sweepstakes Casinos?

For several years, sweepstakes casinos have been operating without impunity by simply stating they were offering access to free casino gaming with the occasional sweepstakes drawing thrown in for good measure. It's the sweepsakes drawing feature that is causing all the ruckus. Why?

In order to participate in sweepstakes drawings, customers are required to use sweeps coins. Yes, a very small amount of sweeps coins is usually given to new customers during the registration process. However, that small amount is usually inadequate for drawing participation. Therefore, more coins are needed. Those coins can be purchased online. Therein lies the problem.

If someone purchases sweeps coins with cash or a cash equivalent to participate in a sweepstakes drawing, that is by definition gambling. To date, California has not passed legislation that makes it legal to gamble online. Therefore, sweepstakes casinos are violating state law by allowing customers to gamble.

Until recently, California regulators and legislators have turned a blind eye to what sweepstakes casinos have been doing. That was until the use of such sites by Californians became too big to ignore. When the Tribal community started complaining, it became clear that immediate action was required.

It's noteworthy that California is not alone in its opposition to sweepstakes casinos. Two months ago, New York Attorney General Letitia James led an effort to ban sweepstakes casino access in her state. Such bans have also been employed in Delaware, Michigan, and New Jersey, states that have legalized online casino gambling. Licensed casinos didn't like having competition from online operators that weren't being held to the same standards.

For her part, James expressed these concerns about regulating sweepstakes casinos:

“Without oversight, players have no way of knowing whether a sweepstakes casino’s games are rigged, whether it will be able to cover a winning bet, or whether it complies with the many other consumer protection measures required of legal, licensed casinos.”

Are Sweeptakes Casinos on the Way Out?

This issue has become too big to ignore. The notion that sweepstakes casinos are promoting casino gambling isn't sitting well with lawmakers in almost every state. As many as a dozen states have already drawn up legislation to attack this problem.

In states where online gambling has already been legalized, sweepstakes casinos are being asked to apply for an online gaming license in order to help level the playing field.