California has enacted new legislation that tightens regulations on automatically renewing subscriptions, a development that will impact adult industry businesses operating on such models. The law, Assembly Bill No. 2863, takes effect on July 1, 2025, and expands existing requirements under the state's Automatic Renewal Law (ARL).

New Requirements for Automatic Renewals

Governor Gavin Newsom signed Assembly Bill No. 2863 into law on September 24, 2024. This amendment to California’s ARL clarifies and expands rules for businesses offering automatically renewing subscriptions. The updated law specifically defines "automatic renewals" to include free trials that convert to paid subscriptions.

Under the new law, businesses must obtain "express affirmative consent" from every customer before charging for services under an automatic renewal or continuous service arrangement. While "express affirmative consent" is not defined within the law, businesses are required to maintain records of individual consent for three years or one year after contract termination, whichever period is longer.

The legislation also mandates that businesses send annual reminders to customers. These reminders must include a full summary of services provided, a breakdown of charges, and instructions on how to cancel membership. Additionally, the law requires online businesses to provide a simplified process for canceling a subscription. This includes allowing cancellation through the same medium used for the original transaction and providing a clear "Click to Cancel" button.

Industry attorney Corey D. Silverstein noted that adult websites often operate on subscription models, including free-to-pay conversions where a free trial leads to paid services unless canceled. Silverstein stated that this law will significantly impact operations, requiring adult businesses offering such subscriptions to implement an extra administrative layer for compliance, record-keeping, and regular communication with customers. Silverstein also indicated that the law protects businesses from claims of hidden fees or unauthorized charges.

Compliance and Legal Landscape

The amendments to California’s ARL are part of a broader trend by state and federal regulators and lawmakers targeting businesses offering subscription services. California has established comprehensive legal requirements for automatically renewing subscriptions, and the ARL is increasingly cited in consumer class actions, despite not creating a private right of action.

The federal law regulating negative option marketing practices is the Restore Online Shoppers’ Confidence Act (ROSCA). ROSCA requires businesses to clearly and conspicuously disclose material terms of a negative option contract and obtain consumers’ express informed consent. The amended CARL is largely consistent with existing federal law covering subscription and free trial marketing practices, with some exceptions.

The Federal Trade Commission (FTC) also announced amendments to its Negative Option Rule on October 16, 2024. These amendments detail new and largely parallel disclosure, consent, and cancellation requirements for programs subject to automatic renewal or continuous service terms. A first tranche of these FTC amendments went into effect in January 2025, with a second tranche, requiring clear and conspicuous disclosure of material terms and express informed consent, set to go into effect on July 14, 2025. However, on July 8, 2025, the United States Court of Appeals for the Eighth Circuit blocked the FTC’s amendments to its Negative Option Rule, holding that the FTC failed to conduct a preliminary regulatory analysis.

Companies offering automatically renewing contracts to consumers in California should review their disclosures, consent processes, cancellation flows, and record-keeping practices to confirm compliance with California’s new requirements before the July 1, 2025 effective date. Silverstein recommends that adult businesses take steps to comply with the law before it takes effect to mitigate risks, maintain consumer trust, and avoid potential legal liability.

Key Facts

  • California's Assembly Bill No. 2863, amending the Automatic Renewal Law (ARL), was signed into law on September 24, 2024.
  • The new law will take effect on July 1, 2025.
  • It expands and clarifies rules for businesses offering automatically renewing subscriptions, including free trials that convert to paid subscriptions.
  • Businesses must obtain "express affirmative consent" from customers and maintain consent records for at least three years or one year after contract termination.
  • Annual renewal reminders are required, detailing services, charges, and cancellation methods.
  • Online businesses must provide a simplified cancellation process, including a "Click to Cancel" button and allowing cancellation through the original transaction medium.