Sweepstakes Casinos in the Firing Line in California

Article by : Erik Gibbs Oct 28, 2024

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Sweepstakes casinos are under increasing fire in California as tribal gaming representatives and major online betting operators discuss a potential alliance to limit their spread. The outcome could greatly impact the sweepstakes casino operators’ finances. 

In a recent webinar titled “Common Ground: Will California Tribes and Sports Betting Alliance Join Forces Against Sweepstakes Threats?”, Victor Rocha, chair of the Indian Gaming Association and editor of Pechanga.net, hosted Sports Betting Alliance (SBA) spokesperson Jeremy Kudon to discuss the topic. The SBA represents major players such as FanDuel, DraftKings, BetMGM, and Fanatics, which have been key advocates for regulated sports betting across the U.S.

The conversation comes in the wake of California’s 2022 election cycle, which saw both tribes and commercial operators fiercely competing with rival sports betting proposals. Both initiatives ultimately failed, leaving industry stakeholders uncertain about the future of legalized sports betting in the state. In the aftermath, operators expressed that any future legislative efforts should be led by California’s tribal gaming community, which holds significant influence in state politics.

During the webinar, Kudon advocated for more stringent regulatory oversight of sweepstakes casinos, which he described as very similar to platforms like DraftKings and FanDuel in states where those platforms are legally operating. He drew comparisons between today’s sweepstakes operations and the internet cafes of the early 2010s, which were ultimately deemed unlawful in many jurisdictions.

Kudon, a partner with international law firm Orrick, Herrington & Sutcliffe, which also represents sweepstakes casino VGW, underscored his support for legislative rigor in the gaming industry. According to him, rigorous regulation safeguards stakeholders’ interests and ensures fair standards, ultimately fostering a balanced industry landscape.

While the future of sweepstakes casinos in California remains uncertain, some legal experts suggest these operators may face significant challenges in the state. In recent months, various sweepstakes casinos have received cease-and-desist orders from state attorneys general, prompting companies like VGW to exit certain markets without contesting the legality of their operations.

California could become a critical battleground for the sweepstakes industry. Some analysts argue that the state’s substantial market size and gaming revenue potential make it too valuable for sweepstakes operators to abandon without a legal challenge. 

However, gaming attorney Daniel Wallach believes that sweepstakes casinos could be particularly vulnerable under California’s existing legal framework, which includes a ban on “gambling-themed” sweepstakes. Additionally, Wallach pointed to payment processor exposure and unfavorable case law as further potential obstacles for the industry.

The webinar’s central question—whether California’s tribal gaming leaders and commercial operators could join forces against the perceived threat of sweepstakes casinos—remains unanswered, though the discussion marks a step toward possible collaboration. Given their shared interests in ensuring regulated, transparent gaming, both groups have significant incentives to unify on this issue. 

For tribes, the expansion of sweepstakes casinos poses a potential threat to their economic sovereignty, as unregulated gaming options could draw customers away from tribally-operated casinos. For commercial operators like DraftKings and FanDuel, the expansion of sweepstakes operations into key markets presents a competitive risk to the carefully built regulated environments in which they operate.