The Indian Gaming Association (IGA) and California Nations Indian Gaming Association (CNIGA) came out strongly in support of legislation to dismantle the growing network of sweepstakes-style casinos.
IGA hosted a webinar Wednesday to talk about the bill that targets the entire ecosystem: operators, payment processors, platform providers, geolocation services, content developers, media affiliates, and celebrity endorsers.
IGA executives called the online-sweepstakes casinos “gray-market schemes that erode the state’s constitutional gaming framework.” Tribal leaders are leading the charge to protect their sovereign rights and gaming exclusivity in the state as part of a major escalation in the fight against unregulated online gambling.
The webinar featured James Siva, chairman of CNIGA, Michael Hoenig, vice president and associate general counsel of the Yahaaviatam of San Manuel Nation, and Brian Giles, executive director of IGA. Victor Rocha, tradeshow conference chairman for IGA, moderated the panel discussion.
The panel unpacked California’s latest effort to confront sweepstakes casinos and outlined what’s in the legislation, why it matters, and how it fits into a growing movement to shut down illegal operators and defend the future of tribal gaming.
The issue is Assembly Bill 831 introduced by Avelino Valencia to ban sweepstakes casinos, after tribes complained that Attorney General Rob Bonta wasn’t taking action against the operators as other states have done with cease-and-desist letters. Rocha told webinar viewers last week that he heard the legislation was coming in the next two weeks.
Sweepstakes operators contend the bill would move players to the black market and even impact commercial offerings unrelated to gaming like McDonald’s Monopoly game and the Reader’s Digest sweepstakes.
“This bill closes any loopholes, saying it’s not allowed,” Hoenig said of the legislation.
Giles said the legislation “is taking no prisoners” by even going after the celebrity endorsers and payment systems.
“A pretty strong bill is moving through the California legislature.”
Hoenig said there’s a need to go after these companies in this way; otherwise, it’s chasing after one outfit or app, and then they shut that down and start another.
“It has to be a fundamental change,” Hoenig said. “Otherwise, it’s just the newest grifter popping up. If you don’t go after the whole package, they will find another way to maneuver and change slightly what they are doing and call it a new product. The only way to shut it down is to go after them top to bottom.”
Rocha said it has been interesting to hear the blowback from the sweepstakes operators, claiming the legislation “steps on innovation.” They even argue the San Manuel Band of Mission Indians are hypocrites by offering online gaming.
Hoenig argued that the tribe’s social-media site is different from sweepstakes. It’s free to play and players can obtain gold coins like in sweepstakes, but unlike them, at no point is currency switched. “All these free gold coins have no value. You can’t cash them out. There is no prize payout at all. It’s not gambling.”
Hoenig said the proposed legislation doesn’t make all sweepstakes illegal in California. McDonald’s and Starbucks can still run their games. “It’s not designed to stop those. Their claims it will bring an end to all sweepstakes everywhere are overblown and disingenuous.”
Rocha told the panel that sweepstakes operators run as soon as states pass laws banning them and suggested, “They won’t stand and fight in California, but keep running like the cowards that they are. This is not new to anyone.”
Giles pointed out that the industry has its own lobbying organizations, the Social Gaming Leadership Alliance and the Social and Promotional Games Association, prompting laughter from the panel. “They must be confident to think they’re going to usher in a new era.”
The deeper issue, Rocha added, is that the two lobbying groups distrust each other and have failed to block efforts in other states to shut them down. “They’re on a bad losing streak,” Rocha said. “They’re in trouble. They know it and we know it. A lot of us have said that once you chase them out of California, that will be the end of the industry.”
Siva said the bill came as California tribes are energized about the threats to their sovereignty from unauthorized online gaming and sports betting.
“We view this as our top legislative priority,” Siva said. “We’re ready to do what we have to do to protect our exclusivity, our sovereignty. It was easy to get massive tribal support on this bill. I haven’t heard any pushback from any tribes. If the California tribes get together against you, you’re in trouble.”
Siva expects the bill to achieve approval in this legislative session, but it will take a lot of work.
“This is about holding up the constitution of California. Our exclusivity is in the Constitution. We’re about protecting laws and regulations. We’re not stopping innovation,” Siva said. “California tribes have always been innovators. Their argument is full of hot air.”
Once the bill gets passed, Siva said he expects a legal challenge that will be drawn out over a few years.
“Everybody is on high alert and knows that now is the time to take action and defend what we built,” Siva said. “This is one of those key moments. If we can’t work on these things, we might start to lose control of it. Those ramifications would be wide reaching for everybody in Indian Country.”
Rocha said it was stupid for sweepstakes operators to think the tribes wouldn’t push back against them after spending tens of millions of dollars fighting FanDuel and DraftKings in a 2022 ballot measure to legalize online sports betting.
“FanDuel, DraftKings, and the tribes are all on the same side on this,” Rocha said. “There’s no air gap in the industry. Everybody wants the same thing — the complete and total annihilation of the sweepstakes industry.”
Any blowback from the industry is about “muddying the waters, throwing out accusations, and saying it will cost jobs. But they’re not affecting any jobs in California,” Rocha added.
“Tribes have come out so ferociously against this because it threatens what they’ve spent 30 years building. It’s not just threatening the bottom line, but the integrity of this industry that tribes care deeply about.”
Giles said California should “stand tall and hard against all this stuff” and that’s especially true for tribes, an easy mark to go after, due to their exclusivity. “They will never understand or care to understand why tribes have exclusivity for gambling in a state,” Giles said.
As for other options, Hoenig said tribal gaming commissions could bring enforcement actions against the operators and seek fines.
On a federal level, Hoenig said there are some potential options like the Wire Act of 1961, because sweepstakes operators are crossing state lines to offer gaming, which the Act covers. The Unlawful Internet Gaming Gambling Enforcement Act could also apply, depending on how the bets are moving across state lines.
“The National Indian Gaming Commission has the ability to issue a letter of concern or notice of violation,” Hoenig said. “That’s if they don’t pull out and leave states where they’re told to leave with cease-and-desist letters.”
Rocha said, however, that operators haven’t been standing and fighting, because they’re aware that what they’re doing is illegal. He wants more than the operators just to quit operating in California.
“They need to be brought into court and the profits need to be disgorged, because they were taken out of California illegally,” Rocha said. “That should be the end game for Indian Country. This isn’t done by a mile. Think about the billions of dollars taken out of California. They thought they were going to come in here and we wouldn’t respond. Here we are.”
