The walls may be closing in on California’s “gray market” for online gambling.
- California lawmakers and Native American gaming tribes are taking action against so-called “gray market” gambling in the state.
- California has yet to legalize sports betting, and may not for some time, so those “gray” products, such as DFS and sweepstakes casinos, have allowed online operators to get a piece of the state’s gaming market.
- That market, though, is dominated by the tribes, who were granted their legal monopoly on brick-and-mortar casino gambling by voters and are now aiming to protect their businesses and sovereign rights via legislation and legal action.
Lawmakers in Sacramento, with the support of Native American tribes with gaming operations in the state, are trying to remove all doubt about the legality of sweepstakes casinos and sportsbooks, as well as paid daily fantasy sports contests.
Those efforts include Democratic Assemblymember Avelino Valencia and his recently amended Assembly Bill 831, which would ban online sweepstakes games using a “dual currency” model for casino-like wagering.
“We cannot look the other way while these platforms exploit legal gray areas,” Valencia said in a statement on Tuesday. “These operations undermine the voter-approved framework that affirms Tribal governments’ sovereign right to conduct gaming in California.”
California has not legalized sports betting or online casino gambling, so sweeps and DFS, while not authorized by state lawmakers and regulators, form part of a “gray market” for online gambling in the most populous state in the U.S.
For example, companies such as DraftKings and FanDuel can’t offer online sports betting in California, but they can and do offer paid daily fantasy sports contests.
So, despite losing a costly battle in 2022 to legalize online sports betting in the state, the two operators continue to have a business presence there.
I told ya https://t.co/DsW2QzZI5Q
— Victor Rocha (@VictorRocha1) June 26, 2025
However, the California Attorney General's Office has been working on an opinion about the legality of DFS in the state since late 2023.
Former state Sen. Scott Wilk posed the following question to the AG’s office: "Does California law prohibit the offering and operation of daily fantasy sports betting platforms with players physically located within the State of California, regardless of whether the operators and associated technology are located within or outside of the State?"
That answer could be coming soon. That’s according to Victor Rocha, conference chairman for the Indian Gaming Association and editor of gaming news site Pechanga.net, who posted on Twitter/X on Monday that sources are telling him the opinion is “about to drop.”
“I'm also hearing they're shopping legislation ... badly,” Rocha added.
Rocha’s reporting was backed up by KCRA 3 in Sacramento reporting on Wednesday that, according to unnamed sources, the opinion was indeed coming soon. Moreover, the TV station said the AG’s opinion will be that all online fantasy sports platforms in the state are illegal.
“The opinion … could put billions of dollars at risk for the companies that have been operating in the state for several years,” KCRA 3’s story said.
If the AG offers a negative opinion of DFS in the state, it could indeed have negative consequences for DFS operators such as DraftKings, FanDuel, PrizePicks, and Underdog. It could also be a blow for another “gray” form of gambling in California that state lawmakers and gaming tribes want brought to heel.
From gray to glum
In other words, the alternative forms of wagering that Californians have dabbled in for years are suddenly facing very real threats. And, depending on how things go in the legislature and the AG’s office, those online sweeps and DFS contests could face real pressure to exit what is likely a very lucrative state for them.
Rocha added on Wednesday during the IGA’s weekly “New Normal” webinar, apropos of the anti-sweeps bill, that it is not the “endgame.”
“The profits need to be disgorged because they were taken out of California illegally,” Rocha said. “And, to me, that should be the endgame for Indian country.”
During the same webinar, James Siva, chairman of the California Nations Indian Gaming Association, said he would be “very surprised” to see another sports betting-related ballot measure in the state next year. If that’s the case, California sports betting may not be legalized until 2028 or later, making action against “gray” gambling all the more important.
Siva also said during Wednesday’s webinar that he believes it's possible to pass the anti-sweeps bill this legislative session in Sacramento, which ends Sept. 12.
“[The sweeps’] arguments are about technological advancement and accusing the tribes of only wanting to protect our market share,” Siva added. “This is about holding up the constitution of California. Our exclusivity is in the constitution.”
Clearing things up
California is one of several states trying to crack down on sweeps operators and clarify more generally what forms of gambling it will permit. Legislation has recently been passed in Connecticut, Montana, and New York this past year that similarly targets sweeps. Louisiana lawmakers also passed an anti-sweeps bill, but it was vetoed by the governor and followed by a regulatory crackdown.
Another effort California’s gaming tribes are involved in is pushing back against federally regulated prediction markets that allow users to make de facto wagers on politics, economics, and sports in all 50 states. That could qualify as another form of “gray” gambling, albeit one that exchanges such as Kalshi claim is exclusively under federal oversight.
Michael Hoenig, vice president and associate general counsel for the Yuhaaviatam of San Manuel Nation, said during Wednesday’s webinar that there are “so many different threats, frankly,” to tribal and commercial gambling in the U.S. right now.
Siva said the anti-sweeps bill is “probably our top legislative priority,” although the pushback against sweeps will likely require years of effort.
“I fully expect, if we're able to get this bill through this session, there'll be a legal challenge in court, and it'll tie it up and nothing will be resolved yet,” Siva said. “But we have so much going on, and CNIGA’s kind of at the nexus of all of these things, with sports betting, with sweepstakes, with [the Commodity Futures Trading Commission on prediction markets]. But again, because of that, I think everyone is on high alert, and everyone knows now is the time to take action.”
