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Legislation aimed at banning sweepstakes casinos from operating in California unanimously passed a Senate committee during a July 8 meeting.
Following testimony from both opponents and supporters and comments from various senators, Assembly Bill 831 passed the Senate Committee on Governmental Organization by a 10-0 vote.
Assembly Bill 831 would criminalize sweepstakes casino platforms that simulate gambling or allow users to play “gambling-themed games” with virtual sweepstakes coins for a chance to win “cash-equivalent prizes, or other prizes of value.”
If the bill is signed into law, those in violation, including any “financial institution, payment processor, geolocation provider, gaming content supplier, platform provider, or media affiliate” involved could face misdemeanor charges. AB 831 currently calls for punishment that would include fines between $1,000 and $25,000 and/or jail time.
AB 831 has widespread tribal support
AB 831 was introduced June 24 by Assemblymember Avelino Valencia, who led the discussion at the July 8 committee meeting. A leading argument against California sweepstakes casinos is that only Native American tribes have exclusive rights to operate casino gambling operations in the state.
After pointing out that 25 years ago California voters affirmed tribes’ exclusive right to conduct gambling activities – and that those activities are highly regulated and subject to state tax – Valencia explained how sweepstakes operate in the state.
“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. However, to be clear, players are able to convert winnings to actual cash by (these platforms) operating as an online casino with real cash payouts. These platforms are circumventing the will of voters and sidestepping the state’s gaming framework.”
Among those testifying in support of AB 813 was Johnny Hernandez Jr., vice chairman of the San Manuel Band of Mission Indians‘ tribal council. He provided testimony regarding what he said were online gambling platforms operating illegally and outside of the state’s gaming regulations.
“These platforms lack essential safeguards, including money-laundering protocols and responsible gaming safeguards, and their age verification is weak, making it possible for underage users to participate. Further compounding the problem is that many are run by offshore companies, making enforcement and accountability nearly impossible. AB 831 is very specific. It is designed to target only those online sweepstakes platforms that mimic gambling through a dual currency system and offer cash prizes.”
Opponents and senators raise questions
Opponents appearing on behalf of social and promotional gaming advocacy groups criticized the bill. Bill Gantz, a trial lawyer testifying on behalf of the Social Gaming Leadership Alliance, said sweepstakes casinos have been enjoyed by tens of millions of California residents since 2012. He said thousands of sweepstakes casino supporters have sent emails and made phone calls to lawmakers just since July 4.
Gantz said there hasn’t been enough time to properly study and debate the bill, which he called “rushed.”
“There hasn’t been any time to study opportunities to raise hundreds of millions of dollars in sales tax by having sales tax on digital entertainment services in this category of social casino. Nor have there been any law enforcement actions or cease-and-desists or anything coming from government … nor has there been any consumer outcry or backlash that supports the reasons for banning this industry on a summary and rushed basis.”
Some senators on the committee echoed that sentiment. The revamped bill was filed mid-session with a “gut and amend” tactic, in which the sweepstakes casino language replaced the original language in a dormant bill.
Sen. Rosilicie Ochoa-Bogh and Sen. Sabrina Cervantes both voted to move AB 831 forward but said they hoped some of the ambiguity in the bill’s language would be cleared up before a final vote on the Senate floor. Ochoa-Bogh said she wished the bill had been introduced at the beginning of the current session in January and not a couple of months before the session ends.
Some senators seek clarification that the law would not punish sweepstakes casino players. Other senators and stakeholder witnesses asked for assurances that the prohibition would not target California cardrooms or daily fantasy sports.
Next steps for AB 831
Valencia assured the committee members that there will be time to include amendments and make other adjustments to AB 831 as it continues to move through the Legislature.
“I do believe it gives us ample time to vet this issue, considering it is something that is impacting California as a whole.”
AB 831 next goes to the Senate Public Safety Committee, which is slated to take up the measure at its July 15 meeting. If the Senate ultimately votes to pass the bill, it would then go through the committee process in the California State Assembly, which would then also vote on its passage.
The deadline for both houses to pass bills this session is Sept. 12. If AB 831 passes in both the Senate and the Assembly, Gov. Gavin Newsom would then need to sign or veto the bill.
Newsom has not commented directly on the legislation. His office did recently issue a statement saying the governor “does not agree” with California Attorney General Rob Bonta’s opinion issued July 3 that said daily fantasy sports games constitute illegal sports betting.
That may give AB 831’s opponents hope that the governor would veto it.
