Background

Several U.S. states provide statutory civil remedies for customers who lose money wagered through illegal gambling operations, and plaintiffs have relied on such statutes to launch a wave of class actions against sweepstakes casino operators across the country.

In California, Governor Gavin Newsom recently signed into law Assembly Bill 831[1] effectively banning dual-currency sweepstakes casinos outright in the state. The new law marks a decisive shift in the California’s treatment of sweepstakes-style gaming by exposing operators to potential criminal enforcement and strengthening the basis for consumer civil claims grounded in illegality.

Shortly after the introduction of AB 831, VGW—the world’s biggest operator of sweepstakes casinos and a defendant in several class-actions targeting such operations—updated the terms of service[2] for its Chumba Casino, Luckyland Slots, and Global Poker brands to include a waiver of California Civil Code § 1542, a statute that prevents consumers from inadvertently giving up unknown rights.

If enforced, the waiver would prevent California players from participating in class actions or settlements by releasing not only known but also unknown claims against the operator.

This raises a critical question: Can sweepstakes operators rely on § 1542 waivers to shield themselves from consumer claims in California?

Enforceability of § 1542 Waivers

Civil Code § 1542 provides that a general release does not extend to claims a party “does not know or suspect to exist in his or her favor at the time of executing the release.”[3]  

California courts, however, have long permitted express waivers of § 1542 when clearly stated and voluntarily made. In Jefferson v. California Department of Youth Authority,[4] the California Supreme Court upheld a settlement agreement that quoted § 1542 and expressly waived its protections. The court reasoned that where parties are represented by counsel, understand the terms, and receive consideration, the waiver can bar civil claims not expressly enumerated in the agreement. Similarly, in San Diego Hospice v. County of San Diego,[5] the California Court of Appeal enforced a release that included an express § 1542 waiver covering both known and unknown claims, even after new environmental contamination was discovered on the property at issue. The court emphasized that a party represented by counsel who knowingly assumes the risk of unknown claims cannot later disavow the waiver.

Read together, the decisions confirm that courts will enforce § 1542 waivers so long as the terms are clear and the waiver is entered into knowingly and voluntarily.

The Sweepstakes Context

VGW’s waiver is distinguishable from the negotiated settlements in Jefferson and San Diego Hospice. The company’s terms of service are standard-form consumer contracts presented on a “take it or leave it” basis. This distinction raises several enforceability concerns.

Unconscionability

California law subjects adhesion contracts—standardized agreements offered without real opportunity for negotiation—to scrutiny under the doctrine of unconscionability. As explained in Armendariz v. Foundation Health[6] and reaffirmed in Sanchez v. Valencia Holding Co.,[7] unconscionability has two elements. The first is procedural unconscionability, which addresses oppression or surprise resulting from unequal bargaining power. The second is substantive unconscionability, which considers whether the terms of the contract are overly harsh or one-sided.

A § 1542 waiver in dual-currency sweepstakes’ terms and conditions is procedurally suspect because consumers cannot negotiate the clause, are not represented by counsel, and may not understand its significance. Upon review, it may also be substantively unconscionable, as it combines with a strict liability cap to deprive consumers of meaningful remedies while preserving the operator’s protections. If found to be unconscionable, courts have authority under Civil Code § 1670.5[8] to refuse to enforce unconscionable terms.

California courts have long scrutinized contractual waivers and releases under the unconscionability doctrine. In Chui v. Chui,[9] the Court of Appeal examined a settlement agreement containing an express Civil Code § 1542 waiver in a trust dispute involving minors. The court agreed with the trial judge that the initial waiver was overbroad and not in the minors’ best interests, and it permitted approval only after the waiver was narrowed to claims related to trust administration. The case illustrates the judiciary’s willingness to limit § 1542 waivers that affect parties entitled to heightened protection. Although the Chui decision arose in a fiduciary context, its reasoning extends to consumer contracts, where similar concerns about imbalance and vulnerability apply. Consumers, like minors, often lack the sophistication or bargaining power to understand or negotiate comprehensive releases embedded in standard-form agreements.

In Perez v. Uline, Inc.,[10] the Court of Appeal considered a general release in an employment severance agreement that was offered on a take-it-or-leave-it basis. Although the release was ultimately upheld, the court emphasized that procedural and substantive unconscionability remain central to enforceability. The employee’s opportunity to seek legal advice and the presence of consideration were key to the finding that the agreement was voluntary rather than oppressive. By contrast, it is highly likely that most dual-currency sweepstakes casino customers have no ability to negotiate, no legal counsel, and little understanding of the legal effect of a § 1542 waiver. This disparity in bargaining power underscores why such clauses, when used in consumer platforms, may be more vulnerable to a finding of unconscionability.

Taken together, these authorities reinforce that California courts assess not only the clarity of a waiver but also the circumstances of assent. When a release operates within a non-negotiable consumer contract and strips one party of practical remedies, the risk of unconscionability is substantially heightened.

Illegality and Public Policy

Beyond unconscionability, the waiver may also be unenforceable under broader public-interest doctrines. Civil Code § 1668[11] voids contracts that exempt a party from responsibility for violating the law. In Tunkl v. Regents of the University of California,[12] the Supreme Court held that liability waivers are unenforceable when they affect the public interest. Similarly, in Bovard v. American Horse Enterprises,[13] the Court of Appeal declined to enforce a contract intertwined with federally prohibited activity, reasoning that courts will not aid parties seeking to profit from illegality.

Now that Assembly Bill 831 has been enacted and sweepstakes casinos are deemed unlawful gambling, VGW’s waiver operates to shield the company from statutory liability for violating the law. Under Civil Code § 1668 and the principles articulated in Tunkl and Bovard, such a clause would likely be deemed void.

Protection of Statutory Remedies

California courts also disfavor contractual provisions that strip consumers of statutory remedies. In McGill v. Citibank,[14] the Supreme Court held that a pre-dispute clause waiving the right to seek public injunctive relief under consumer protection statutes was unenforceable. The Court’s reasoning extends beyond injunctive relief and establishes that agreements cannot override laws enacted for public purposes. Civil Code § 3513 confirms that “a law established for a public reason cannot be contravened by a private agreement.”[15]

A waiver that forecloses restitutionary or injunctive relief in the sweepstakes context would therefore risk invalidation, as it conflicts with statutory schemes designed to protect consumers and the public at large.

Conclusion

California law recognizes the validity of § 1542 waivers in negotiated settlements, as demonstrated in Jefferson and San Diego Hospice. Those cases confirm that courts will enforce such waivers when the terms are explicit, the parties are represented by counsel, and the agreement is fairly negotiated.

§ 1542  waivers embedded in dual-currency sweepstakes casino terms of service, however, arise, in a materially distinct context. It is contained within a standard-form consumer contract, offered on a non-negotiable basis, and implemented at a time when sweepstakes casinos have been designated unlawful gambling under California law. This distinction makes such waivers vulnerable on multiple grounds. Courts may view them as procedurally and substantively unconscionable, as impermissible attempts to exempt parties from liability for illegal conduct under Civil Code § 1668, or as prohibited restrictions on statutory remedies under the McGill rule.

The likely outcome is that California courts would refuse to enforce § 1542 waivers embedded in dual-currency sweepstakes casino terms of service against consumer claims. While § 1542 waivers are not inherently invalid, the combination of adhesion contract concerns, public policy limitations, and the illegality of the underlying activity all weigh heavily against enforceability in this setting. In short, the waiver may be clear on its face, but in practice it is unlikely to withstand judicial scrutiny.

If you have questions about sweepstakes, gaming, or consumer protection law, we would love to hear from you. Please do not hesitate to contact our Gaming & Gambling practice group at 1-800-604-1312 or https://segevllp.com/contact-us/.

Disclaimer

***The above post is provided for informational purposes only and has not been tailored to your specific circumstances. This post does not constitute legal advice or other professional advice and may not be relied upon as such.***

Links:

[1] An Act to Amend Section 17539.1 of the Business and Professions Code and to Add Section 337o to the Penal Code, Relating to Gambling, Assemb. B. 831, 2025–2026 Reg. Sess., ch. 623 (Cal. 2025).

[2] To see the updated Terms of Service, please see: https://luckylandslots.com/terms.

[3] Cal. Civ. Code § 1542 (2025).

[4] Jefferson v. California Department of Youth Authority, 28 Cal. 4th 299 (Cal. 2002).

[5] San Diego Hospice v. County of San Diego, 31 Cal. App. 4th 1048 (Cal. Ct. App. 1995).

[6] Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (Cal. 2000).

[7] Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (Cal. 2015).

[8] Cal. Civ. Code § 1670.5 (2025).

[9] Chui v. Chui, 20 Cal. App. 5th 903 (Cal. Ct. App. 2018).

[10] Perez v. Uline, Inc., 76 Cal. App. 5th 1098 (Cal. Ct. App. 2022).

[11] Cal. Civ. Code § 1668 (2025).

[12] Tunkl v. Regents of the Univ. of Cal., 60 Cal. 2d 92 (1963).

[13] Bovard v. American Horse Enterprises, Inc., 201 Cal. App. 3d 832 (Cal. Ct. App. 1988).

[14] McGill v. Citibank, 2 Cal. 5th 945 (Cal. 2017).

[15] Cal. Civ. Code § 3513 (2025).