California Provides Some Transitional Relief for Gift Card Cash-Out Compliance

The new law provides transitional compliance relief for gift card issuers still selling physical gift cards printed with the former $10 cash-out threshold. Issuers may continue selling those cards until December 31, 2028, provided they meet specified notice, recordkeeping, and manufacturing-date requirements. This update follows our earlier alert on SB 22, which raised California’s gift card cash-out threshold from $10 to $15, effective April 1, 2026.

What SB 1078 Does

The new provision creates a transitional safe harbor for gift card issuers that still hold physical inventory displaying the former $10 cash-out threshold, even though the new $15 threshold took effect on April 1, 2026, under SB 22.

Specifically, SB 1078 permits issuers to continue selling gift cards that display a cash redemption threshold lower than $15 — until December 31, 2028 — provided all three of the following conditions are met.

1. The gift card was manufactured or printed before April 1, 2026.

2. At each point-of-sale device where a gift card may be purchased, loaded with value, or redeemed in cash, the issuer displays a notice in at least 24-point font stating that a gift card with a cash value of less than $15 is redeemable in cash for its cash value.

3. The issuer maintains, in the ordinary course of business, records reasonably demonstrating the manufacture or print date of the gift certificate.

Issuers that satisfy these requirements are shielded from civil or criminal penalties solely because their physical gift cards display the outdated threshold. Importantly, the safe harbor protects only against liability arising from the printed language on the card itself; it does not excuse an issuer from honoring the $15 cash-out obligation.

Background: SB 22 and the $15 Threshold

Earlier this year, SB 22 raised California’s gift card cash-out threshold from $10 to $15, effective April 1, 2026. Under California Civil Code Section 1749.5(b)(2), retailers must provide a cash refund for any gift card with a remaining balance below the statutory threshold upon the cardholder’s request. With the new threshold, California now has the highest gift card cash-out threshold in the nation.

California’s gift card protections extend well beyond the cash-out requirement. The state already prohibits expiration dates and service fees on most gift cards under existing provisions of the Civil Code.

The National Patchwork

Approximately 10 states have enacted gift card cash-out laws, but thresholds vary considerably — typically ranging from $1 to $10. States with cash-out statutes include Colorado, Maine, Montana, New Jersey, Oregon, and Washington (each requiring cash redemption for balances under $5), as well as Massachusetts (which requires cash-out after 90% of the card’s value has been redeemed). California’s new $15 threshold significantly exceeds any other state’s requirement, amplifying the compliance burden for companies operating nationally.

Companies selling gift cards in California should act now to take advantage of the SB 1078 safe harbor for any pre-April 2026 inventory still displaying the $10 threshold, while simultaneously updating policies, retraining front-line staff, and modifying point-of-sale systems to ensure full compliance with the new $15 cash-out requirement. With the transitional relief set to expire on December 31, 2028, businesses should also plan for the eventual phase-out of legacy cards.