California officials are escalating efforts to rein in online sweepstakes casinos, a growing breed of gambling-style websites that use virtual credits and sweepstakes laws to skirt traditional gambling regulations. These platforms – which offer slots, poker, and other casino games under the guise of “sweepstakes” promotions – operate in a legal gray area. Now, a proposed law in Sacramento aims to explicitly ban them, raising questions about enforcement, consumer protection, and the balance of power in California’s gambling industry.
The California State Capitol in Sacramento, where lawmakers are considering Assembly Bill 831 to outlaw online sweepstakes casinos. The bill has drawn support from tribal gaming groups and opposition from the sweepstakes gaming industry.
A Legal Gray Area in California’s Gambling Laws
Online sweepstakes casinos have exploded in popularity nationwide, offering what amounts to real-money gambling without technically taking bets. Players buy packages of play-money credits (often called “Gold Coins”) and receive bonus sweepstakes entries (or “Sweeps Coins”) that can be used to play casino-style games and redeemed for cash prizes. Operators claim this dual-currency sweepstakes model makes their platforms legal promotions rather than gambling. In practice, however, these sites run continuous slot machine and table game simulations nearly indistinguishable from online casinos.
California’s existing laws cast doubt on the legality of such schemes. The state constitution generally prohibits non-tribal gambling, and sweepstakes cafés – storefront operations that used similar tactics by selling internet time or phone cards bundled with sweepstakes entries – have long been deemed unlawful. In 2015, a California Supreme Court ruling unanimously affirmed that these sweepstakes games are illegal slot machine gambling in disguise. Then-Attorney General Kamala Harris convened a sweepstakes task force and reached a $700,000 settlement with a software provider accused of helping run illegal slot-style games under the pretense of promotions. As Harris put it at the time, “Capital Sweepstakes profited by misrepresenting their slot-machine style operations as legal enterprises… These illegal and unregulated gambling operations often are magnets for other crime”.
Current California statutes address sweepstakes gambling primarily in physical business establishments. For example, the state’s unfair competition law prohibits using any electronic video monitor to simulate gambling or play gambling-themed games in a business setting if it awards cash prizes or equivalents. This was aimed at the strip-mall “internet café” casinos of the 2000s. However, operators of modern online sweepstakes casinos argue that the law, as written, doesn’t clearly extend to websites accessible from a user’s home. They maintain that because no purchase is necessary (users can theoretically request free play tokens by mail) and the games are structured as sweepstakes, they fall outside gambling prohibitions.
Regulators have not seen it that way. Every relevant court decision to examine a casino-style sweepstakes with prizes proportional to money spent has found it to be illegal gambling, even if a free entry option exists. Nonetheless, enforcement in California has been scant in recent years. Online sweepstakes casinos – many now U.S.-based – continue to operate openly, attracting more than a million American players and billions in revenue. They do so without oversight or licenses, unlike California’s heavily regulated tribal casinos and card rooms, and without paying state gambling taxes or contributing to responsible gaming programs. This regulatory gap has set the stage for a showdown in the state legislature.
Assembly Bill 831 Seeks to Ban Online Sweepstakes Casinos
Facing what one lawmaker called a “legal grey area” that allows unregulated online gambling, California legislators are moving to explicitly outlaw the sweepstakes casino model. Assembly Bill 831 (AB 831), introduced by Assemblymember Avelino Valencia (D–Anaheim), would prohibit any person or business from operating or promoting an “online sweepstakes game” in the state. The bill defines that term to encompass websites or apps offering gambling-themed games that use a system of virtual currency purchased with real money and can be exchanged for a chance to win cash or prizes. In effect, AB 831 targets the dual-currency model directly. “These operations undermine the voter-approved framework that affirms tribal governments’ sovereign right to conduct gaming in California,” Assemblymember Valencia said in a statement, arguing the law will “close a loophole” and ensure online gaming remains “fair and accountable”.
Under AB 831’s provisions, it would not only be illegal to run a sweepstakes casino website in California, but also unlawful to knowingly facilitate or enable one. Payment processors, financial institutions, software suppliers, advertising platforms, and even media or affiliates could face misdemeanor penalties if they “support” an illegal sweepstakes game operation. The bill authorizes fines from $1,000 up to $25,000 per violation and up to one year in county jail for offenders. Notably, the language specifically carves out that legitimate promotional contests without cash prizes remain lawful – “a game that does not award cash prizes or cash equivalents” is not made illegal. State-sanctioned lottery or raffle games and traditional promotional sweepstakes (like a fast-food chain’s giveaway) would thus not be affected, according to lawmakers.
Assemblymember James Ramos (D–Highland), a co-author of the bill and former tribal leader, framed AB 831 as a necessary update: “We cannot look the other way while these platforms exploit legal grey areas to offer Californians gambling,” he noted during legislative hearings. Initially, AB 831 dealt with tribal-state gaming compacts, but in late June lawmakers amended it via a “gut-and-amend” process to focus squarely on sweepstakes casinos. The revised bill cleared the state Assembly in May and by mid-July was advancing in Senate committees with unanimous votes. Lawmakers did voice some concern about the last-minute nature of the changes and the breadth of the language. The legislative session runs until September 12, 2025, and if AB 831 does not pass both chambers by then, it could carry over into 2026.
Supporters of AB 831 say it will fortify California’s online gambling safeguards and protect consumers. The state has not legalized any form of internet casino gaming to date, and repeated ballot measures to allow online sports betting were defeated by voters in 2022. In that context, “unregulated online sweepstakes gambling” is seen by many officials as an end-run around California law. The bill’s backers emphasize that AB 831 is narrowly aimed at “dual currency” games that mimic real-money casinos, not at common promotional sweepstakes. “AB 831 does not make traditional and promotional sweepstakes unlawful,” Assemblymember Valencia assured in remarks, “It solely targets dual currency models that mimic casino-style wagering”. Regulators in other states have echoed that sentiment – in New York, for instance, officials stressed that genuine short-term sweepstakes (like those by Publishers Clearing House or McDonald’s) are not under fire, but rather the casino-like platforms misusing the label.
Tribal Casinos and Lawmakers Call for a Crackdown
California’s powerful tribal gaming sector has emerged as a strong proponent of AB 831. Tribes operate dozens of legal casinos under exclusive compacts that generate roughly $25 billion in annual economic activity and 112,000 jobs statewide. Tribal leaders argue that online sweepstakes casinos directly undermine this voter-approved gaming framework by siphoning gambling activity to unregulated outlets. The California Nations Indian Gaming Association (CNIGA) and the Yuhaaviatam of San Manuel Nation (a prominent Southern California tribe) co-sponsored AB 831, framing it as necessary to protect the integrity of California’s gambling laws.
“For over 25 years, tribal governments like [ours] have upheld the will of California voters by operating gaming with integrity,” said Lynn Valbuena, chairwoman of the San Manuel Nation, referencing the tribal casino system established after Proposition 1A in 2000. “Illegal online gaming now threatens this foundation – compromising voter-approved law and putting Californians at risk”. James Siva, chairman of CNIGA, likewise warned that “these illegal platforms erase the benefits of regulated gaming while exposing consumers to serious risks”. By drawing gamblers to offshore or unlicensed sites, he said, the sweepstakes model “threatens the economic engine” of tribal casinos that funds tribal government services and shared community revenue.
State and local authorities also appear aligned in cracking down. Although California’s Attorney General has not yet taken public legal action against the online-only sweepstakes sites, officials are watching moves in other states. In June, New York’s Attorney General Letitia James issued cease-and-desist orders to 26 sweepstakes casino websites, declaring, “Online sweepstakes casinos are illegal, dangerous and can seriously ruin people’s finances”. New York and Connecticut have also advanced laws expressly banning the model. The American Gaming Association (AGA), representing the regulated casino industry, has urged states to clarify that these quasi-casinos are unlawful. In California, the lack of regulation means no state oversight of fairness, age verification, or problem gambling measures on the sites – gaps that supporters of AB 831 find unacceptable. “AB 831 strengthens [California’s gaming] framework and ensures gaming in California remains fair and accountable,” Valencia said, emphasizing consumer protections and the need to bring operators into compliance or force them out.
Industry Groups and Civil Liberties Advocates Push Back
The push to ban online sweepstakes casinos has met fierce opposition from the sweepstakes gaming industry and its allies, who argue that AB 831 is overbroad and heavy-handed. Leading the charge is the Social & Promotional Games Association (SPGA), a trade group representing sweepstakes and social casino companies. The SPGA warns that the bill’s sweeping language could “effectively make numerous lawful digital entertainment and promotional platforms illegal”, including legitimate marketing promotions that use points or tokens. In an open letter and media statements, the association criticized AB 831 as “overly broad, rushed, and [posing] potential harm to California’s economy”, claiming it was amended late in the legislative process “without consulting key stakeholders or conducting a detailed examination”.
One major concern is that the definitions of banned activities – such as “dual currency systems” and “cash equivalents” – are not clearly defined in the bill. SPGA officials fear that popular non-gambling reward programs or sweepstakes by mainstream brands could unintentionally fall under the ban’s wording. “Changing gambling definitions too broadly may inadvertently harm legitimate business practices,” the group cautioned, noting that many app-based games use virtual coins or have prize elements. For example, a coffee shop loyalty program or a mobile game with an in-app sweepstakes could technically involve virtual points and prizes, potentially inviting scrutiny if the law isn’t precise. The bill’s proponents insist it exempts those scenarios, but the lack of explicit carve-outs has raised alarm in the tech and advertising sectors.
In fact, an unusual coalition has formed in opposition, bringing together industry and civil liberties groups. ACLU California Action, the Association of National Advertisers (whose members include major tech and media companies), the American Transaction Processors Coalition, and even a criminal justice reform group (Californians United for a Responsible Budget) have joined the SPGA in urging a pause on AB 831. They argue the enforcement provisions – which extend criminal liability to third parties like advertisers, payment processors and app stores – could have a chilling effect. Under AB 831’s current text, simply “supporting” or “facilitating” an illegal sweepstakes game could trigger fines and jail time. The SPGA notes this could ensnare software developers who make generic gaming platforms, marketing affiliates who run ads, or financial services processing payments for sweepstakes companies.
“The bill, as written, could have unintended consequences for lawful promotional practices without offering clear consumer protections,” an SPGA spokesperson said in a statement, emphasizing the “shared belief” among diverse opponents that lawmakers should clarify the intent. The Social Gaming Leadership Alliance (SGLA), another group backed by major sweepstakes operators like Virtual Gaming Worlds (owner of Chumba Casino and Global Poker), has been rallying players to contact legislators. The SGLA reported that over 20,000 letters, calls and texts were sent by California residents urging lawmakers to reject the ban. Former U.S. Congressman Jeff Duncan, now SGLA’s executive director, blasted the process: “AB 831 was written by those with clear vested interests… Before shutting down a burgeoning digital-gaming scene, legislators should demand a full hearing on the economic impacts and consumer protections at stake”.
Industry advocates maintain that sweepstakes casinos have operated for years without major incident, providing entertainment to players who often cannot access legal gambling in their state. They claim to implement age verification, fraud controls, and responsible gaming messages voluntarily. Moreover, they argue that consumer harm has not been clearly demonstrated in California. “There’s a lack of evidence linking these sweepstakes games to consumer harm,” the SPGA contends, suggesting that the rush to legislate might be driven more by competitive interests – pointing out that some opponents of sweepstakes casinos have themselves “promoted similar gaming formats lacking robust player safeguards” in the past. This appears to allude to the tension between traditional gambling operators and newer online entrants. The clash essentially pits California’s established, regulated gambling interests – tribal casinos and their political allies – against upstart online platforms and the tech-business coalition aligned with them. The outcome of this debate could set a national precedent for how far states will go in policing sweepstakes gaming models.
Legal Cases Pile Up but Results Remain Elusive
While lawmakers debate, the legality of online sweepstakes casinos is also being tested in the courts. In California, several civil lawsuits have been filed by individuals seeking to hold sweepstakes operators accountable under existing anti-gambling and consumer protection laws. These cases echo a common accusation: that the sweepstakes model is a sham designed to evade gambling bans while taking real money from players.
One high-profile suit was filed in March 2025 in Orange County against Stake.us, a popular sweepstakes casino site affiliated with global crypto-gambling brand Stake. The plaintiff, a California resident, alleged that Stake’s sweepstakes-based games were “operating an illegal gambling enterprise in the state” by “disguising real-money gambling under a sweepstakes model”, similar to the outlawed internet cafés of years past. The lawsuit sought to shut down Stake’s operations in California and cited the company’s offshore registrations in Europe as an attempt to avoid U.S. jurisdiction. Industry expert Daniel Wallach – who first publicized the case – noted it “focuses on Stake’s sweepstakes-based casino games, which the plaintiff contends violate California’s gambling laws”.
However, like many such cases, the Stake lawsuit has yet to yield a clear legal victory for opponents. In May 2025, a federal judge granted the operator’s motion to compel the case into arbitration, citing the fine-print of Stake’s user terms. The plaintiff, Dennis Boyle, had created a Stake.us account and thus agreed to arbitrate disputes – a common provision that sweepstakes casinos have used to deflect litigation. U.S. District Judge James Selna’s ruling means Boyle’s claims will be heard privately by an arbitrator rather than in open court. This mirrors outcomes in other cases: a similar California lawsuit against Fliff, a sports-themed sweepstakes app, was sent to arbitration in 2024, and Boyle’s separate suit against Pulsz, a social casino, has been put on hold pending the Stake arbitration result. So far, no California court has squarely adjudicated whether these sweepstakes games violate gambling laws – the procedural roadblocks have kept that question unresolved.
At the same time, class-action lawsuits and enforcement actions elsewhere hint at the legal peril for the industry. In one example, a December 2024 complaint in San Francisco (Thomas Portugal v. High 5 Entertainment) directly invoked California’s anti–internet café statute, accusing the High 5 Casino app of having “scaled up, on a massive scale, an illegal tactic that criminals once used to evade state gambling laws”. That suit points to how High 5’s online slots mirror the old sweepstakes café model almost exactly – a comparison the plaintiff’s lawyers dub the “Internet Cafe Gambling Scam”. They note that California courts and law enforcement “repeatedly determined such tactics [to be] an obvious pretext and cover for illegal gambling”. High 5 and other companies targeted have insisted their products are lawful entertainment, and these cases remain in early stages.
Additionally, the California Unfair Competition Law and consumer protection statutes like the Legal Remedies Act are being tested in these arguments. Plaintiffs argue that offering slot machine-like games to Californians under a sweepstakes veneer is a deceptive business practice. No definitive judgment has been rendered yet, but legal experts point out that courts in states from Florida to Kentucky have ruled against similar sweepstakes gambling schemes. The pressure is clearly mounting.
Regulators are also stepping in beyond California’s borders. Aside from New York’s cease-and-desist campaign, the state of Washington earlier reached a settlement with one sweepstakes casino operator for nearly $25 million to resolve allegations of illegal online gambling. And in the past two years, companies behind social casinos like Big Fish and DoubleDown (which are slightly different, as they don’t offer cash prizes) paid hefty class-action settlements after courts found virtual casino chips could be an illegal “thing of value” under Washington law. These developments underscore the legal risk of offering casino-style play without a gambling license.
Back in California, the outcome of AB 831 is poised to influence how – or if – enforcement against online sweepstakes casinos will ramp up. If the bill becomes law, state authorities would gain a clearer mandate (and stronger penalties) to go after operators and their business partners. The California Department of Justice’s Bureau of Gambling Control, which participated in the sweepstakes café raids of the 2010s, could potentially take a similar role online, though jurisdictional challenges remain when companies are based offshore or in other states.
Outlook: High Stakes for the Golden State
As the legislative session winds down, the fate of online sweepstakes casinos in California hangs in the balance. If AB 831 passes, California would join a growing list of states drawing a hard line against these quasi-casinos, effectively banning the model and putting violators on notice of criminal liability. Such a law would likely prompt major sweepstakes platforms to block California users – much as offshore sports betting sites have done when states enact stricter laws – or to face legal action. “This latest lawsuit is part of a growing wave of regulatory takedown efforts,” a recent industry analysis noted, as multiple states seek to “claim authority over overseas gambling websites” offering sweepstakes gaming. Bills similar to AB 831 have been floated in Florida, Maryland, Mississippi, New York, and other jurisdictions in 2025.
On the other hand, if the bill stalls due to the concerns raised – or if legal challenges succeed in softening its scope – the status quo may continue a while longer. Sweepstakes casino operators would likely celebrate a reprieve, but they’d still operate under the shadow of California’s existing gambling laws and the risk of consumer lawsuits or future enforcement. The SPGA and its coalition have urged a more deliberate approach: perhaps clearer regulations distinguishing genuine sweepstakes from illicit gambling, rather than an outright ban. “This isn’t how sound policy gets made,” an SPGA spokesperson remarked about the process, calling for “open dialogue, expert input, and economic analysis” instead of quickly outlawing an entire sector.
For now, California gamblers enticed by sites like Chumba Casino, LuckyLand Slots, Stake.us, and others remain in a legal limbo. These platforms are accessible and actively marketing to Californians, yet state officials maintain they are unauthorized if not outright illegal. “They’re taking money away right now. It’s amazing how long this went under the radar,” observed Jeremy Kudon, an advisor to legal gaming operators, noting estimates that the sweepstakes casino industry could reach $4 billion in revenues by 2025. That money isn’t taxed or regulated in California – a status quo that AB 831’s supporters are determined to end.
The coming weeks will be telling. Lawmakers must reconcile the compelling arguments on both sides: the need to uphold gambling laws and protect consumers versus the risks of stifling innovation and criminalizing legitimate promotions. Whichever way the decision falls, California’s handling of online sweepstakes casinos is poised to become a bellwether for other states and a pivotal chapter in the evolving battle over online gambling legality. As the legislative clock ticks, all stakeholders – from tribal nations to tech companies to players – are anxiously awaiting the final deal or no-deal on this high-stakes issue.
Sources:
- California Assembly Bill 831, 2025–26 Reg. Session (as amended July 2025).
- Assemblymember Avelino Valencia press release, June 24, 2025.
- Tribal Business News – “California bill targeting sweepstakes casinos draws tribal support, industry opposition”, June 30, 2025.
- California Dept. of Justice Press Release – “$700,000 Settlement with Capital Sweepstakes for Illegal Gambling”, July 31, 2015.
- Covers.com – “California Lawsuit Targets Stake and Sweepstakes Gaming Model”, March 28, 2025.
- SBC Americas – “CA judge sends sweeps case involving Stake.us to arbitration”, May 29, 2025.
- Social & Promotional Games Association statement, July 14, 2025.
- Legal Sports Report – “CA Sweepstakes Ban Bill Passes Another Committee”, July 16, 2025.
- Public Gaming Magazine – “California Lawsuit Accuses Online Sweepstakes Site of Operating Illegally”, Dec. 31, 2024.
- New York Attorney General Letitia James announcement on online sweepstakes casinos, June 2025.
