Online gambling will become illegal in California three months from now. Governor Newsom recently approved a bill banning sweepstakes gambling in the state. The law not only applies to gambling operators but also to partner services, such as financial systems, geolocation providers, marketing affiliates, and related solutions.
California Enforces Sweepstakes Gambling Ban: Key Insights
- On October 11, California Governor Gavin Newsom signed Assembly Bill 831 (AB-831) into law. The legislation bans sweepstakes gambling and prohibits third-party entities from facilitating services like financial systems, geolocation, media, etc.
- The bill received unanimous support in the Senate and from California’s tribal gaming associations. Supporters argue that remote gambling platforms pose a significant risk to consumers, as most exploit legal loopholes.
- The Social Gaming Leadership Alliance (SGLA) vigorously opposes the bill, claiming it would cost the California exchequer millions in lost tax revenue and eradicate a $1 billion industry.
Governor Signs Assembly Bill 831, Closing Regulatory Loopholes
California Governor Gavin Newsom signed the Assembly Bill 831 (AB-831) on Saturday (October 11), enacting it into legislation. As per the new law, it is illegal to offer online sweepstakes gambling services, also called dual-currency gambling, in the state. The Bill received unanimous support in the Senate and will be enforced from January 1, 2026.
The prohibition order isn’t limited to gambling operators but also applies to third-party services facilitating remote gambling. This includes financial systems, geolocation services, affiliate partners, gaming content suppliers, and platform providers. California is now the 17th state in the U.S. to take prohibitive action against online sweepstakes gambling.
Sweepstakes gambling has thrived in California over the last several years. However, with the lack of a proper regulatory framework, operators functioned in a grey area. Sweepstakes casinos would market themselves as “social platforms”, while enabling consumers to purchase virtual coins that could later be exchanged for real money prizes.
Players also received a second type of virtual coin, known as sweeps coins, which could be used to enter a draw similar to slot machines. Derek Brinkman, Executive Product Advisor at Virtual Gaming Worlds, explained that sweepstakes platforms exploited legal loopholes to offer gambling services:
Brinkman noted:
It looks exactly like a slot machine because it functions just like a slot machine. The reason that it’s a video game and not gambling is because you’re playing with gold coins; you’re not playing with real money.
Avelino Valencia, a Member of the California State Assembly, introduced Assembly Bill 831 in the Senate on February 19, 2025. The Act proposed to amend Section 17539.1 of the Business and Professions Code and to add Section 337a to the Penal Code. Valencia had called for transparency and accountability while introducing the bill.
Valencia explained:
These companies were exploiting a technicality. AB 831 reaffirms that gambling in California must be licensed, transparent, and accountable.
Lawmakers are hopeful that AB 831 will finally close legal loopholes and ensure that only regulated gambling operators continue to offer their services. The Bill also defines enforcement provisions. Violators could face fines of up to $25,000, up to a year in county prison, or both. Licensed gaming operators, regulated sweepstakes tied to real products or services, and casual players are exempted from the Bill.
Mixed Reactions Emerge from Lawmakers and Industry Stakeholders
California’s regulated tribal gaming sector has been the primary force behind AB-831. Operators argue that illegal sweepstakes casinos encroached upon their market share and jeopardised player safety. Tribal operators are hopeful that the new law will restore integrity to California’s regulated betting market.
While the legislation received overwhelming support from lawmakers and licensed betting operators in the Golden State, the Social Gaming Leadership Alliance (SGLA) had opposed the bill. They argue that “online social games are safe and fun to play and are enjoyed by millions of Californians across the state”.
The SGLA also claims that California’s sweepstakes industry contributes over $1 billion annually to the state’s economy and could generate even more revenue if proper laws were to be introduced to regulate the industry instead of a blanket prohibition. Several other industry stakeholders, including smaller tribes and operators, had also voiced their concerns over a blanket ban.
A faction explained that the new legislation might eliminate alternative revenue sources for community development. While others questioned whether the law would prohibit marketers and advertisers from partnering with legitimate entertainment companies. Several established sweepstakes casinos had already begun blocking California residents from their platforms in anticipation of the law, while others are expected to follow suit.
Jeff Duncan, Executive Director of the SGLA, commented on the unfair nature of AB-318 after one legislative hearing. He observed:
Today’s hearing exposed the committee’s complete disregard for facts, economic reality, and the voices of tens of thousands of Californians, all to hand monopoly power to tribes that have already invested hundreds of millions of dollars in Las Vegas and California coastal properties.
California isn’t the first state in the U.S. to ban sweepstakes gambling. Montana, Connecticut, and New Jersey have introduced prohibition orders on dual-currency gambling operations. New York and Nevada plan to introduce similar legislation in the coming days. Those bills are currently awaiting the respective Governors’ signatures.
While the U.S. continues to fight the remote gambling industry, neighbouring Mexico has done a commendable job of regulating the sector. The Mexican government is currently working on introducing new legislation to regulate the online betting market before the FIFA World Cup 2026. Lawmakers are also proposing to increase gambling taxes from 30% to 50% as part of the country’s 2026 Economic Package.