California’s Sweeps Casino Showdown: Power, Money, and Unexpected Allies

The tale of sweeps casinos in California continues to take some wild turns in what many assumed would be an open-and-shut case, much as it has been in states like Connecticut and Montana, where sweeps were made illegal earlier this summer. Even New Jersey, where there was some last-minute drama from the Governor about signing the legislation, can’t match the twists and turns starting to unfurl in the Golden State. 

Avelino Valencia amended and filed California Assembly Bill 831 in its current form back in June. Some of the pushback from the Social Gaming Leadership Alliance (SGLA), an industry trade group that often represents the sweepstakes casinos' interests in these matters, concerns this so-called gut and amend tactic. 

This is when legislators take an existing bill, in this case one filed back in February and then amended into its current form months later, leaving little time to form core political opposition. 

The bill had been a priority of the many tribal casinos in California, who have watched an increasingly vocal sweeps casino industry spend millions on advertising in the state, with the likes of Paris Hilton and Ryan Seacrest luring away gamblers to the unlicensed and unregulated online sites.

Traditionally, only land-based tribal casinos had been allowed in California after voter referendums on Prop 5 in 1998, and then a constitutional amendment, Prop 1A, in 2000 awarded the tribes the sole right to casino-style gaming in the state.

Over the years California-style cardrooms have continuously tried to encroach on the Tribe’s casino mandate by offering up “player” banked versions of Blackjack and Baccarat and other games, which they say aren’t covered under the Tribe’s monopoly, and the Tribe’s lack of standing in California courtrooms has proved a hindrance. 

This has naturally led many of the tribes to form deep ties with some California lawmakers as their first line of defense against this type of encroachment on what has become a billion dollar lifeline for the nearly 80 casinos on reservations dotted around the state.

The political clout of the Tribes had many convinced that the fate of the legally dubious and, at best, gray market Sweeps industry was already decided. And while Attorney General Rob Bonta has mostly eschewed the flood of cease and desist letters we have seen in states like Michigan, he has been a strong proponent of AB 831 and in July went a step further, declaring that daily fantasy sport operations were also illegal in the state, which seemed like yet another nail in the coffin.

Governor Newsom, however, did publicly disagree with his attorney general on the DFS ruling and has not yet issued a statement on the pending Sweeps legislation. Still, most pundits believe that the Governor will also eventually side with the tribes, which seems to seal the deal. 

Still, the SGLA has spent the last month winning over some state senators and assemblymen to the idea that there is no need to hurry through the legislation, calling the process “too vague, too rushed, and too risky.” And calls to make the Bill a two year process have risen. 

But most interesting has been the motley assortment of organizations that have thrown their hat in the ring with the sweeps industry. Some groups like the Association of National Advertisers, whose members pocket millions in online advertising from the sweeps industry, seem a bit brazen in their opposition, though it's carefully couched in the usual concerns about ambiguous language, overreaching regulation, and, of course, the perennial harm to existing businesses.

Others, like the ACLU, are a bit more nuanced in their approach. They point to language that might see individuals charged with a crime as well as the casino operators, an approach not seen in other anti sweeps bills in other parts of the country. In fact, the law does state that it is a crime for an individual or entity to “operate, conduct, offer, promote or offer an online sweepstakes game.” It also makes it a crime to knowingly support, either directly or indirectly, these types of dual currency sweep games.

While many argue, including the bill’s sponsor, that this is aimed at prosecuting payment processors and other companies that sweep operators need to conduct their business, the ACLU has managed to cast some concern amongst both the gambling public and even some politicians that an overzealous prosecutor might use the law in a way that was unintended. 

Then in a surprise move this week, a small tribe titled the Kletsel Economic Development Area kicked off a new internecine war by being the first tribe to come out against AB 831. This tribe is backed by VGW, one of the world’s largest online sweepstakes operators.

While this may be a bit of a red herring, they made national news with their concerns that many of California’s smaller and isolated tribes had either been ignored or left out of discussions about the need for prohibition rather than inclusive regulation. And they made a case that these tribes with little chance of developing land based casinos might be able to join with social casino and sweeps sites and prosper.

What looked like a straightforward path to prohibition is now quickly splintering into one of the most complicated gambling debates California has seen in years. Between deep pocketed sweeps operators, heavyweight tribal interests and national advocacy groups of every stripe, and now small tribes beginning to stand up and be heard, AB831 is no longer a fait accompli. 

The bill now sits in suspension, a fancy word for being held up due to suspected costs of enforcement, which all bills that will cost the state money have to go through. Whether it passes out of suspension, which it will need to do in the next week before the August 29th deadline passes, remains to be seen.

And then, regardless of whether lawmakers choose speed or caution, they will still set a powerful precedent, not only in California, but also for how much of the wider US will approach and shape the future of sweepstakes casinos.