According to a report from an independent research firm in the United States gambling sector, a regulated and taxed sweepstakes casino market could generate more than $200 million — and perhaps more than $300 million — in annual tax revenue for California, with that number expected to grow as the industry does.
Eilers & Krejcik Gaming produced the report at the request of the Social Gaming Leadership Alliance, one of two prominent sweepstakes gaming advocacy organizations.
Eilers & Krejcik has a strong reputation and conducts research focused on product, market, and policy insights across global gaming. Most of EKG’s analysis has centered on the real-money gambling space. It also publishes a weekly newsletter, The EKG Line.
Per the report, California’s unregulated sweepstakes gaming industry is also benefiting the state’s economy to the tune of $1 billion.
“Combined with the direct and indirect economic benefits that the industry already provides to California,” the report says, “introduction of a license fee and player purchases tax — both of which would largely be paid by operators who are based out-of-state — could bring the total economic benefit of the social casino with sweepstakes industry to California to more than $1.2 billion.”
Let’s dig in a bit.
READ MORE: California DOJ, Courts Could Face ‘Potentially Significant’ Costs If Sweeps Ban Passes
$500,000 for sweeps license fees
Researchers analyzed license fees for online casinos in other states and also the typical EBITDA margin for a sweeps casino, 15%, to arrive at what they thought was a license fee that:
- Would not discourage major operators, like VGW and B-Two Operations
- Falls within the range that optimizes revenue for the state
- Would discourage smaller, less desirable operators
And that number was $500,000, as an annual fee.
This would be per brand not per operator. So VGW, for instance, would pay $1.5 million in annual license fees to have Chumba Casino, LuckyLand Slots, and Global Poker all live and regulated in California.
Based on that cost, and using a 10% EBITDA to build a conservative estimate, researchers determined a sweeps casino would need to make $5 million in annual California revenue to break even in that state. That will weed out many of the smaller operators by itself.
Researchers wrote that “due to the top-heavy distribution of revenue in this market between brands,” they believe most of the biggest brands would apply for 2-3 licenses — again, like VGW or B-Two Operations (McLuck, Hello Millions, SpinBlitz, PlayFame, etc.).
In total, researchers estimated $15-25 million per year paid to California in sweeps casino license fees.
Tax revenue comparable to Pennsylvania sports betting
In this hypothetical, whatever body regulates California sweeps casinos would determine what is taxed and at what rate.
For the purposes of this study, EKG researchers selected a player purchases tax and set it at 7.25% — the same as California’s sales tax — and believe that “is a very reasonable amount that would create healthy revenue for the state without being overly burdensome to operators.”
“Taxing player purchases at social casinos with sweepstakes is a simple way to expand the economic benefit of the industry to California,” researchers wrote, “and it’s an approach that scales alongside growth of the space.”
From there, it’s simple math:
- EKG estimates annual California sweeps casino revenue to be $2.42 billion
- Apply a 7.25% player purchases tax to $2.42 billion and you get …
- $175.4 million in annual tax revenue
That $175.4 million figure is right on par with with $183.9 million in tax revenue Pennsylvania made from sports betting in 2024. Sportsbook revenue in Pennsylvania is taxed at 36%.
For further exploration, EKG also provided an example using an 11.25% tax rate — and that would lead to more than $272 million in tax revenue.
Combining license fees and a proposed 7.25% tax, EKG says California could generate more than $200 million in annual revenue, in addition to the $1 billion in economic benefits sweeps casinos already provide to the state.
Researchers wrote “it’s easy to imagine” that annual revenue exceeding $300 million if:
- Operators partner with local businesses for promotional efforts.
- Operators advertise on channels that require a license for casino-style advertising.
- More social casinos — like Light & Wonder’s Jackpot Party Casino or Zynga’s Hit It Rich! — decide to offer sweepstakes platforms as well.
Current economic impact
Before any hypothetical license and tax revenue, EKG researchers analyzed the current economic benefit sweeps casinos are providing to California.
They estimate that impact at slightly above $1 billion.
That breaks down to $802 million in direct economic benefit, and $208 million in indirect benefit.
Broken down further, the $802 million comes from:
- $731.9 million spent advertising via California-based companies, including Google and Meta
- $35.8 million in payment processing fees to California-based companies, including Visa
- $34.2 million spent on cloud hosting fees with California-based data centers
The $208 million indirect benefit stems from the sweeps industry supporting an estimated 1,191 California-based jobs.
“We used conservative approaches to arrive at each of the individual components above, and our list of those components does not represent a comprehensive list of areas through which economic benefit is provided to California,” researchers wrote. “That said, the figures certainly help demonstrate that the industry provides substantial direct and indirect economic value to the state.”
What’s the latest with CA’s sweeps ban bill?
Currently, Assembly Bill 831, which would ban sweeps casinos in California and criminalize entities that support them, is sitting in the Senate Appropriation Committee’s suspense file, where it landed after its Aug. 18 hearing.
Bills are sent to the suspense file when they’re deemed to have a significant fiscal impact. So they aren’t voted on right away. Rather, their fates are decided during a dedicated “suspense hearing” later in the session.
If AB831 successfully makes it out of suspense, it must then pass the full Senate and return to the Assembly for re-approval, since the current version differs from the one that cleared the Assembly earlier in the year.
California’s 2025 legislative session ends on Sept. 12. But the state operates on a two-year legislative cycle, so AB831 could pick up where it left off when lawmakers return in January if it simply runs out of time in this session.
