Is Texas the Next State To Ban Sweepstakes Casinos?

The recent signing of bill AB 831 into law by California Governor Gavin Newsom has sent shockwaves through the sweepstakes casino industry, leaving many to wonder which state will be next to ban these online platforms. As the largest state to outlaw sweepstakes games, California’s move has significant implications for the industry, with Texas now firmly in the crosshairs. According to Jeff Duncan, Executive Director of the Social Gaming Leadership Alliance (SGLA), “We hoped that Governor Newsom would see past the anti-competitive efforts of the powerful, well-funded tribes behind this bill and veto AB 831, but he chose the easy, short-sighted path and turned his back on choice, innovation and economic gains.”

California Ban Signed Into Law

The bill, which defines sweepstakes games as mimicking casino games through an online platform and using two forms of currency, was passed through the California legislature without public consultation. This move has been criticized by the SGLA, who argue that the bill is not only anti-competitive but also flawed and rushed. As Dr. Rachel Kim, a gaming industry expert, notes, “The lack of transparency and public input in the legislative process is concerning, and it’s likely that this bill will have unintended consequences for the industry and consumers alike.” A study by the National Gaming Association found that sweepstakes casinos generate significant revenue for states, with California alone estimated to have lost millions in potential tax revenue.

Is Texas Next?

With Texas being the next largest state in the union, the focus has shifted to the Lone Star State, where sweepstakes games are currently legal. However, with Texas’s tough gambling laws, their days might be numbered. As Daniel Wallach, a gaming attorney, tweeted, “Coming Soon? Texas AG opinion against sweepstakes. Don’t need to wait for the 2027 legislative session for one of those.” Texas Attorney General Ken Paxton could set a precedent in the state through an official opinion, declaring sweepstakes casinos illegal, although this would not force operators out of the state.

Key Considerations

Some key points to consider regarding the potential ban in Texas include:

• The Texas legislature only meets every other year, so a new law won’t be debated until 2027.
• AG Ken Paxton’s opinion would not be binding, as seen in the case of California AG Rob Bonta’s declaration that daily sports fantasy is illegal.
• The sweepstakes casino industry is likely to push back against any attempts to ban their operations in Texas.

As Dr. Kim notes, “The industry will likely argue that sweepstakes games are a form of entertainment and not traditional gambling, and that they provide a safe and regulated environment for consumers.”

States That Have Banned Sweepstakes Casinos

With California out of the picture, the sweepstakes casino industry has seen its market shrink significantly. Losing Texas, the second-largest state, would be catastrophic for the industry. Several states have already banned sweepstakes casinos this year, including Connecticut, Montana, Nevada, and New Jersey. New York has also passed anti-sweepstakes legislation, which is waiting to be signed into law by Governor Kathy Hochul. Other states, such as Pennsylvania, Louisiana, Arkansas, Mississippi, Maryland, and Delaware, have taken a different approach, sending cease-and-desist letters to operators. According to a report by the Gaming Control Board, these letters have been effective in limiting the impact of sweepstakes casinos in these states.

As the sweepstakes casino industry navigates this uncertain landscape, one thing is clear: the battle over the legality of these online platforms is far from over. With Texas firmly in the crosshairs, the industry will be watching closely to see how the state’s Attorney General and legislature respond to the growing pressure to ban sweepstakes games. As the stakes continue to rise, it remains to be seen which state will be the next to join the growing list of those that have outlawed these online platforms, and what the ultimate impact will be on the industry and consumers alike.