California has become the battleground for sweepstakes casinos. The state legislature is pondering a bill that would prohibit sweepstakes casinos in that state, and criminalize many activities surrounding them.
But analysis by a watchdog group reveals that efforts to make some forms of gaming illegal may not be worth the effort. This sobering claim should cause California lawmakers to pause as they consider banning a segment of the gaming industry that could reap the state hundreds of millions in tax revenue.
Researchers working for the Senate Appropriations Committee in California delivered a report earlier this month that shows law enforcement and courts could be buried under hefty bills if forced to pursue and prosecute sweepstakes casinos and their partners. Assembly Bill 831 is being debated by that committee for a possible action in the future.
The report says that enforcement “costs will likely be significant because enforcement actions against these providers are complex with difficult jurisdictional issues.”
California is considering moving AB 831 forward, but the bill has already attracted opposition from prominent organizations. The American Civil Liberties Union is against it because it infringes on the rights of commercial and native tribal nations to do business AND it will create a flood of criminal cases in the state.
The Kletsel Dehe Wintun Nation of the Cortina Rancheria tribe, the Big Lagoon Rancheria tribe, and a handful of other California tribal nations have recorded their opposition to AB 831. In some cases, tribal nations are citing dangers to their tribal sovereignty, and in others, it’s clear that a select few tribal nations wish to launch sweepstakes casino apps of their own. Most tribal nations have gaming rights that have been granted through compacts with the U.S. federal government or state of California agreements.
California is not the first state to tackle sweepstakes casinos. New York, New Jersey, Connecticut, and Montana have passed prohibitions against these gaming platforms. Other states, as many as a dozen, have issued cease-and-desist orders against sweepstakes casino operators.
At the heart of the issue in many states is the fact that sweepstakes casinos use non-tender currency such as tokens or “digital coins” for game play. That means customers can create an account and play “for free” without risking their own money. However, in most cases, the digital currency can be redeemed for prizes or cash. As a result, critics say, sweepstakes casinos are operating in a gray area of the law, tip-toeing around regulations because real money is not at stake.
Some California tribes have no problem withs sweepstakes casinos and the revenue they could make from them. But they don’t want unregulated commercial operators infringing on their gaming rights. In their view, criminalizing sweepstakes casinos would stop sovereign tribal nations from being able to pursue legitimate business opportunities.
A recent report estimated that California accounts for 17% of all sweepstakes casino activity in the U.S. In addition, according to estimates by a researcher for the State Senate, as much as $300 million in tax revenue could be garnered from a legal, regulated sweepstakes casino market in California.
That means lots of money is in play in regards to sweepstakes casinos. California has previously stumbled to legalize online gaming in large part due to bickering over how tax revenue would be divvied up. The sweepstakes casino debate could be an opportunity for lawmakers, tribes, and advocacy groups to come together to agree on a tax model for legal California gaming.
The next step is a hearing on Friday, August 29 by the Senate Appropriations Committee. So far, that body has heard more voices that oppose a ban than from those who support it. That may be a good thing, if the cost of enforcing a ban would actually be significant.
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