VGW gears up for battle as anti-sweeps bill heard by California senate committee
Australian sweepstakes giant Virtual Gaming Worlds (VGW) showcased its lobbying pursuits from across the globe on Monday, as a proposed bill banning sweepstakes casino sites appeared before the California Senate Appropriations Committee. No action was taken, meaning it will stay in committee, although it is not currently listed on the 25 August agenda.
California is a huge market for grey-area offerings like sweepstakes, and a ban would be hugely detrimental to the US addressable market for VGW and other operators. Multiple other states, including Montana, Nevada, Connecticut and New Jersey, enacted laws banning sweepstakes sites this year.
The bill (AB831), which is sponsored by Assemblyman Avelino Valencia, is backed by California’s powerful Indian gaming tribes, chiefly the Yuhaaviatam of San Manuel Nation. San Manuel operates the Yaamava Resort and Casino in Highland, California and the Palms Casino Resort in Las Vegas.
State tribes have been successful historically in squashing various gaming expansion attempts, which are viewed as an encroachment on tribal sovereignty. Under California law, there is no legal digital gambling and tribes compact with the state for exclusivity to operate Class III casino games like slots and tables.
In 2022, Indian Country defeated Proposition 27, a mobile sports betting initiative funded by commercial operators such as FanDuel and DraftKings. Supporters and opponents spent $463.3 million in combined funding on the duelling measures, the most expensive state ballot fight in US history. In the end, Prop 27 garnered just 18% of the vote.
Tribes backed an initiative that also failed, Proposition 26, although leaders maintain that the real goal was to defeat Prop 27.
Since then, tribes have spoken strongly against prediction markets, daily fantasy operators, card rooms and sweepstakes. Each battle is unique, although VGW indicated on Monday that it is not backing down yet.
No unanimous support among tribes, operators
Before Monday’s hearing, VGW announced a partnership with the Kletsel Dehe Wintun Nation of the Cortina Rancheria, a tribe with fewer than 300 enrolled members, according to its website. It does not have any gaming operations, but the release says the VGW partnership encompasses “free-to-play online social games platforms (including associated sweepstakes promotions) in California”.
The partnership appears to be in direct response to AB831, as most of the announcement is dedicated to it. In addition to the bill’s contents, VGW takes issue with the “gut and amend” process through which it was introduced.
Originally, AB831 dealt with the tribal-state compacting process. It was essentially killed in June, but it was then chosen as the vehicle to later introduce a sweeps ban and was amended with that new language. From there, it unanimously passed two lower committees in July.
VGW, by partnering with a small tribe, is attempting to highlight that not all groups are against sweepstakes. Of 109 federally recognised tribes in California, fewer than 70 have gaming operations, according to the California Nations Indian Gaming Association (CNIGA).
“We respectfully oppose AB831. This bill lacks unanimous support among California tribes, has advanced without meaningful consultation with many of us and threatens our inherent right to operate legitimate revenue streams to support our people,” Eric Wright, CEO of the Kletsel Economic Development Authority, testified to the committee.
Smaller tribes without massive gaming operations need other ways to generate revenue, and sweepstakes could be one. However, some money is shared through the state’s Revenue Sharing Trust Fund, an existing revenue sharing structure designed to help bridge that gap.
Regulation vs. prohibition on California sweepstakes
Shane Levine, speaking on behalf of the Social Gaming Leadership Alliance (SGLA), an advocacy group formed by VGW, asserted that a sweepstakes ban would cost 1,200 jobs and “over $1 billion” in annual economic impact.
“Instead of a prohibition of online sweepstakes, we should instead regulate and tax it, which could generate between $200 million-$300 million a year in new revenue to the state of California,” Levine testified.
Only two statements are allowed to the committee, with subsequent testimonies reduced to only for or against. Those offering opposition were: Derek Brinkman, on behalf of “the VGW employees in California”; Lloyd Melnick, chief growth officer of VGW; and Brian Schroeder, general counsel for fellow sweepstakes operator and SGLA member ARB Interactive.
The state’s Department of Finance had no comment on the bill, and there were no testimonies in favour.
In addition to fiscal impacts, sweepstakes groups caution that a ban would inadvertently affect non-gaming promotions. Companies like McDonald’s and Publishers Clearing House have run sweepstakes contests for many years.
Divide and conquer approach among tribes?
VGW’s approach appears to be similar to previous expansion attempts in California. In 2022, Prop 27 TV ads leaned heavily into this divide.
In late 2023 and early 2024, another surprise sports betting initiative sprouted up, spearheaded by Kasey Thompson. Thompson also garnered support for his initiative from a group of smaller tribes, but ultimately stood down when facing the majority’s opposition.
“My intent was to unite the tribes and not divide them. I can now see the support is not coming and I always promised not to move forward without it. I am a man of my word and will not create any more division,” Thompson told Legal Sports Report at the time.
The truth, as tribal leaders often say, is that with over 100 tribes, unanimity is rare and difficult to attain. Nearly three years after defeating Prop 27, there is still no path to legalising sports betting in the state, and there is inevitably some level of dissension among such a large group of sovereign nations. CNIGA plays a huge role in facilitating those conversations, and it has noted tribes’ ability to band together when facing a common enemy over the years.
The association did not respond to a request for comment.
Fork in the road on sweeps
It has been an eventful few years for VGW, which has grown tremendously but has also encountered setbacks. Several US states enacted outright sweepstakes bans and others issued cease-and-desist orders.
The company pulled its sweepstakes offering from numerous markets, including New York, but appears to be holding firm in California for now. It greatly increased its lobbying efforts through SGLA and criticised some tribes, including San Manuel, for offering similar products.
VGW founder and CEO Laurence Escalante also recently took control of the company by acquiring it through a special purpose company formed by his family office. Escalante faced growing unease from investors, mostly due to the company’s dwindling financial disclosures.
“As we’ve previously said, our focus is on respectful engagement with legislators and calling for the establishment of modern, appropriate regulatory structures that can benefit players and states alike – not rushed, flawed legislation with unintended consequences being pushed by parties with clear vested interests like AB831,” Escalante said in a statement on Monday.