California Ban on Sweepstakes Gambling Awaits Gov. Newsom’s Signature: Where Does the Industry Turn Next?

The addressable market for sweepstakes poker continues to shrink, as a pending ban in California is poised to deal a devastating blow to the player pool.

California is a state with both the largest population in the U.S. and a strong history of poker. That makes it uniquely important to sweepstakes poker rooms, whose main advantage over regulated U.S. sites has been that they have access to a larger player base.

However, the days of Californians accessing these sites appear numbered. Last week, the State Senate unanimously passed AB 831, which would ban sweepstakes gambling sites in California. A subsequent Assembly vote on Sept. 12 was equally overwhelming — the bill passed 79-0. It never received a single opposing vote in its swift journey through the legislature.

That means the bill now heads to the governor’s desk. It will become law as soon as Gov. Gavin Newsom signs it, or on October 12 if he takes no action. Hopes of a veto seem slim, given the overwhelming, bipartisan, and bicameral support the bill received. Even if he were to issue a veto, it appears that the votes would be there to override it.

Popular poker sites like ClubWPT Gold and Global Poker rely on the sweepstakes model, which typically involves a “dual-currency” system. Whereas regulated sites like WSOP, BetMGM, and PokerStars battle one another for market share in just a few states, the sweepstakes sites enjoyed a competitive advantage thanks to their much larger geographic footprint.

That may finally be changing as the legislative tide turns against sweepstakes sites.

Which States Have Passed Sweepstakes Bans?

The question of where the sweepstakes gambling industry goes from here is difficult to answer due to the fact that different operators seem to be taking different stances in response to the various states’ efforts to shut them down. Some states are passing outright bans. Others, like Louisiana, have simply sent cease-and-desist letters to operators (while also suing for back taxes). Some operators are heeding these demands, while others continue to press on as usual.

The following sites have passed definitive bans on sweepstakes poker or had already banned them under existing laws:

• Connecticut
• Idaho
• Montana
• New Jersey
• Washington

However, the list of banned jurisdictions on ClubWPT Gold and Global Poker don’t exactly match this list. Nor do they match each other, for that matter. For example, ClubWPT Gold still accepts players from Connecticut, but not Michigan. Global Poker, meanwhile, has a more expansive list of banned states, including New York, Nevada, and Louisiana, among others.

Like California, New York has passed a ban but is still waiting on gubernatorial action.

Player Pool for Sweepstakes Poker Shrinking Fast

As bans seem imminent in California and New York, things may look very different for these sites before the end of the year. Assuming the projected bans go through and the sweepstakes sites steer clear of places like Louisiana and Nevada that have sent cease-and-desists, here’s how their situations have changed:

Population data via 2020 U.S. Census

Obviously, the data above isn’t exact. The last census was in 2020, and only individuals who meet appropriate age requirements can play on the sites. But it still gives an approximation of the shrinkage of the sweepstakes poker player pool.

Sweepstakes poker sites might see their market access shrink from almost the entire U.S. to less than 70% of it. The projected cut doesn’t even take into account states like Ohio, another high-population state that looks like it’s inching toward a ban.

That’s still a lot more than the legal, regulated, and taxed sites, which are only working with a little more than 10% of the population.

But the landscape for sweepstakes operators looks markedly worse than it did six months ago. They’re also not competing only with regulated domestic sites. The offshore industry is likewise eyeing the situation, as sites like ACR Poker have a different set of restricted markets than the sweepstakes sites.

Will Sweepstakes Poker Sites Find a New Workaround?

Does that mean the good times are about to end for players enjoying the greater liquidity offered by sweepstakes poker sites? Maybe, but it’s too early to say that for certain.

First, there’s still the remote possibility of gubernatorial vetoes in New York or California. If not subsequently overturned by the legislatures, those would preserve huge chunks of the market for the sweepstakes sites. There is some precedent, in that Louisiana Gov. Jeff Landry vetoed similar legislation, although in that case it was because he deemed an explicit ban unnecessary in light of the attorney general’s ongoing pursuit of the sites under existing gambling laws.

Second, and perhaps more intriguingly, sweepstakes operators may find a new legal workaround to continue operating. Most of the bans reference the dual-currency model and “simulated gambling.” A modification to the sites that circumvents one of those two parts of the definition could create enough legal ambiguity to allow them to keep operating.

At least one sweeps poker operator has sent clear signals it’s working on something of the sort, although it’s not clear what. ClubWPT Gold announced in early September that it would be discontinuing the sale and use of Gold Coins on September 17. These play money tokens are the underlying product on which the “promotional sweepstakes” is based. In practical terms, removing Gold Coins deprives players of the main way to add new Sweeps Coins to the system, akin to a real-money site disabling deposits. However, it means the site is no longer “dual-currency” and thus should be exempt from the ban, assuming the operator finds some other pretext under which to offer the sweepstakes.

Finding that alternative appears to be taking longer than the site expected. When September 17 rolled around, it left Gold Coin play turned on and quietly pushed the deadline back to September 24.

Players will soon find out whether decision-makers there have come up with a novel method to reopen market access or at least keep something close to the status quo in place. Otherwise, Sweeps Coins will flow out of the system but not in, and we can expect to see games on the site begin to dry up.

Image credit: Alan O’Dowd/Wikimedia Commons (license)