California's New Law Cracks Down on Crypto: Will It Affect the Future of Online Sports Betting?

Recent developments in these sectors will affect the future of online sports betting. Published in cooperation between Techopedia and San Jose Inside

Recent developments in California's gambling and crypto industries have shaped the state's stance on legalizing online sports betting, regulating cryptocurrency, and resolving disputes over gambling rights. Here's a summary of these key events.

Despite efforts to legalize online sports betting in California, the state legislature failed to pass a bill that would have brought legal sports betting to the state. This decision leaves the fate of sports betting in California uncertain and stalls any potential integration with crypto payment methods.

However, California Governor Gavin Newsom took a different approach in the crypto realm by passing a bill to enhance cryptocurrency regulation in the state. This legislation, known as the Digital Financial Assets Act (DFAL), aims to create a framework for licensing and regulating digital asset businesses, such as cryptocurrency exchanges and custodians. The DFAL, which is set to go into effect in 2025, will require any company engaging in "digital financial asset business activity" to obtain a license from the California Department of Financial Protection and Innovation (DFPI).

The DFAL defines "digital financial asset" as a digital representation of value that is recorded on a cryptographically secured distributed ledger or blockchain and used as a medium of exchange, a store of value, or a unit of account. It excludes digital currencies issued by a central bank and securities.

This law aims to protect consumers by ensuring that crypto companies follow rules for security, record-keeping, and customer notification. The DFAL also grants the DFPI authority to supervise licensed businesses, conduct examinations, and enforce compliance with the act's regulations.

While online sports betting remains illegal in California, the state's tribal groups and cardrooms continue to argue over gambling rights. Native American tribes in California rely on revenue from certain gambling games to support their communities. However, cardrooms in the state offer games that tribes say they should have the exclusive right to operate.

Tribes are considering legal action against cardrooms, arguing that the cardrooms are violating a 2020 ballot measure that legalized sports betting at tribal casinos and satellite cardrooms. The tribes claim that cardrooms are offering games, such as roulette and craps, that are not authorized under the measure.

Cardrooms and the cities where they are located maintain that they are operating legally and that a lawsuit would be devastating for their businesses. They say a legal challenge would force cardrooms to close, resulting in lost jobs and revenue for the state and local governments.

The Assembly Governmental Organization Committee passed a bill in July 2024 that could give tribes legal authority to challenge cardroom operations. The bill, SB 549, is advancing in the state legislature, but its fate remains uncertain as both sides lobby heavily.

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