The Governmental Organization Committee in the California Senate included a bill on its agenda this morning that would ban sweepstakes casinos in the state. The committee gave supporters and opponents to the ban an opportunity to record their stances and make short comments on the record in Sacramento.
The next step is discussion and debate in-committee in the Senate and Assembly, scheduled for July 15. If the bill is reported favorably out of state committees, it could be presented for debate and a subsequent vote in the State Assembly by September, according to legislative observers.
Historical compacts a big concern
The issue in California seems to be coming down to gaming rights and the promises made in historical compacts with tribal nations.
“California Indian tribes have been granted exclusive rights [to gaming]” said Theodore Hernandez, chairman of the Wiyot Tribe. He also pointed out that regulated tribal gaming “support[s] gambling addiction resources” and “upholds the will of CA voters,” while California sweepstakes casinos are “circumventing the rights of the voters.”
Isiah Vivanco, Chairman of the Soboba Band of Luiseño Indians reminded the committee that sweepstakes casinos are “unregulated online [operators] that threaten the gaming regulations established for California tribes, by operating illegal gaming.”
State Senator Laura Richardson was forceful in her support of the bill and her unwavering commitment to tribal nations and their exclusive gaming rights. The State Senator mentioned that tribal nations do not have the opportunity to simply pop up and operate casinos anywhere without regulation, as she views the sweepstakes casinos do. Tribal nations “were not given the right to go anywhere to open a casino anywhere.” She also added that “a private entity can … open wherever they want [to compete] with a tribal entity.”
Richardson explained that the tribal community built the gaming industry in California, and now it seems as if outside commercial operators are trying to horn in on that industry. She mentioned that tribes pay taxes and build their communities, while sweepstakes casinos are “internet companies flying in” to do business here.
“We made a compact, we made a promise. How dare us go back on a promise. Shame on us if any of us think it’s ok to break a promise again,” Senator Richardson said.
AB 831 is sponsored by California State Assemblymember Avelino Valencia (Democrat from Anaheim). The bill originally addressed revised definitions of gaming operations in this state, but on June 23 it was amended to include a prohibition on so-called sweepstakes casino operators. The bill in part reads:
This bill would make it unlawful for any person or entity to operate, conduct, offer, or promote an online sweepstakes game, as defined, in this state. The bill would make it unlawful for any person, entity, financial institution, payment processor, geolocation provider, gaming content supplier, platform provider, or media affiliate to support directly or indirectly the operation, conduct, or promotion of an online sweepstakes game within this state. The bill would make a person who violates these provisions guilty of a misdemeanor punishable by a fine not less than $1,000 nor more than $25,000, or by imprisonment in the county jail not exceeding one year, or by both the fine and imprisonment. By creating new crimes, the bill would impose a state-mandated local program.
AB 831 would put an end to dual-currency model
Assembly Bill 831 would target sweepstakes casino apps and websites that exist in a murky area of gaming law. Sweepstakes casinos do not require customers to put up their own money when playing casino-style games. Instead, a dual-currency system is implemented. That means consumers can earn “coins” or “tokens” while playing a sweepstakes casino. Later, they may redeem the coins or tokens for prizes or even cash.
Sweepstakes operators are unlicensed and unregulated. These operators do not pay taxes for the gaming activity they provide. Sweepstakes casinos have been doing business in states across the U.S., whether those jurisdictions have legal online casinos or not. California does not have licensed, legal online casino applications. The state is the largest economic market in the nation, and the seventh-largest economy in the world. Gaming companies have long had an eye on California for online casino style gaming.
Lawmakers want to see the bill fleshed out more
Lawmakers poked at the bill to see if it treats tribal nations, who offer casino mobile apps in California, differently than the sweepstakes operators. Assemblymember Valencia explained that casino games offered by tribal nations in the state do not permit the cashing out of coins for cash, in contrast to what commercial operators in sweepstakes and social casinos do.
Senator Angelique Ashby explained that her position is to support the ban, but she wants to see the bill fleshed out during the legislative process in the two chambers. Sen. Sabrina Cervantes and Sen. Megan Dahle registered their support during the hearing.
AB 831 garners support from tribal nations and the Sports Betting Alliance
AB 831 is supported by the vast majority of tribal nations in California. Those nations have almost exclusive rights to gaming in the Golden State. The legislation is co-sponsored by The California Nations Indian Gaming Association and the Yuhaaviatam of San Manuel Nation, two powerful native tribe advocacy and trade groups. These organizations filed support for AB 831 this morning, as well as more than a dozen representatives of tribal nations in California.
Sports Betting Alliance, a trade group that includes commercial operators Bet365, BetMGM, DraftKings, FanDuel, and Fanatics sportsbooks also registered support for AB 831.
Supporters shared the opinion that licenses gaming entities like tribes have decades of working in the industry and are committed to responsible practices. In their view, sweepstakes casinos do not.
“These platforms lack essential safeguards, including money laundering, and their systems make it difficult to keep underage people from illegal gaming,” Hernandez said.
SPGA and WPT Enterprises oppose the ban
Predictably, operators of sweepstakes casinos oppose the ban. The Social and Promotional Games Association (SPGA) filed its opposition with the Senate Committee on Tuesday morning. Adam Pliska of Orange County appeared in front of the committee to represent the World Poker Tour (WPT Enterprises). He expressed the opinion that poker is a unique casino game that helps attract consumers to casinos.
Card room operators expressed mixed responses. Some outright opposed AB 831, while others explained that they wish to see if the bill could be amended to be favorable to California cardrooms.
In addition, the Social Gaming Leadership Alliance files its opposition. Play Studios ( located in Burlingame), registered opposition, citing that in its view, the ban would negatively impact high-tech jobs in California.
