Gift Card Compliance in 2026: What Every Shopify Merchant Needs to Know

Why Gift Card Compliance Got More Complicated in 2026

Earlier this year, California raised the balance at which a customer can demand cash back for a gift card. Under SB 22, effective April 1, 2026, the mandatory cash-out threshold moved from under $10 to under $15. If your store policy still says "$10," it is out of date, and one sentence in one state bill made that true.

That is the core problem. There is no single United States gift card law. There is a federal floor, and every state plus DC and the territories layers its own unclaimed property and consumer protection statutes on top. A store selling nationally sells into dozens of overlapping rulebooks.

Important: This article is informational only and is not legal advice. Gift card statutes change, and most of them carry narrow exceptions for promotional cards, loyalty cards, and low face values that can change the answer for your specific situation. Before you set or change a gift card policy, consult a qualified attorney or an unclaimed property specialist familiar with the state or states you sell into.

The Federal Floor: What the CARD Act Actually Requires

The Credit CARD Act of 2009 added federal gift card protections that took effect on August 22, 2010. The rules live in Regulation E at 12 CFR 1005.20, first implemented by the Federal Reserve Board, now administered by the CFPB. Three provisions matter most.

1. Funds cannot expire for at least five years

Gift card funds must stay valid at least five years from the date of purchase, or from the date funds were last loaded, whichever is later. That is a floor on the money itself.

2. Dormancy and service fees are tightly restricted

Under Regulation E 1005.20(d), a dormancy, inactivity, or service fee is prohibited unless all of these conditions are met:

• The card has gone unused for at least 12 consecutive months
• No more than one such fee is charged per calendar month
• The fee terms are clearly and conspicuously disclosed before purchase

3. Some cards are exempt

Loyalty, award, and promotional gift cards are not covered by the five-year minimum in the same way, and can carry shorter expiration windows when clearly labeled as promotional. A card given away in a campaign is treated differently from a card a customer paid money for, and this is the exemption merchants most often misread.

The key point: the CARD Act is a floor, not a ceiling. It does not preempt stricter state law. Meeting the federal minimum does not make you compliant in California.

State Laws That Go Further Than Federal Law

States that ban or heavily restrict expiration

California is the most cited example. Under Civil Code section 1749.5, gift certificates generally cannot carry an expiration date or a service fee at all, subject to narrow statutory exceptions.

California is not alone. The National Conference of State Legislatures statute tracker and state law aggregators commonly list Connecticut, Florida, Maine, Minnesota, New Jersey, Oregon, Rhode Island, Vermont, and Washington among the states banning or heavily restricting expiration, with others setting their own minimums and carve-outs.

Treat that as a starting point for a conversation with counsel, not a compliance matrix. Exact statutory language and exceptions vary, and a name on a list tells you nothing about whether your particular card type falls inside or outside the statute.

Dormancy fees: narrower state variations

Where the federal rule allows a fee after 12 months of inactivity, several states extend that window or cap the amount. Per NCSL's statute summaries:

• New Jersey (N.J. Rev. Stat. 56:8-110(a)): no dormancy fee within 24 months of sale or last activity, and the fee is capped at $2 per month
• Arkansas (Ark. Stat. Ann. 4-88-703): no dormancy, inactivity, or service fee before two years from issuance
• New York: service fees limited to periods after 24 months of inactivity

The pattern: states either mirror the federal one-year floor or push it out, with two years the common extension.

Cash-out and redemption requirements

California's SB 22 change is the headline. Since April 1, 2026, a customer holding a balance under $15 can request cash back, up from $10, and it applies to both physical and electronic cards. Legal commentators noted that plaintiffs' firms were watching the April 1 date closely, given roughly two decades of California gift card class action activity. Colorado has a comparable, smaller cash-back requirement alongside its escheat rules, though confirm the current figure against the Colorado statute itself.

Escheatment: The Rule Merchants Miss Most

This is what catches small and mid-sized stores off guard. Unredeemed balances can legally become the state's property after a dormancy period, and the business must report and remit them. That process, escheatment, is entirely separate from expiration and fee rules. You can be compliant on expiration and still sit on an unreported liability.

Which state gets the money follows the priority rules from Texas v. New Jersey, as applied to gift cards: to the state of the cardholder's last known address if you have one on file, otherwise to your state of incorporation. For a merchant capturing recipient details on every order, that first branch matters.

Variation between states is wide. Some exempt gift cards entirely, some require a percentage of the balance, and some require the full balance after roughly two to five years of dormancy. Counter-intuitively, Delaware, the most common state of incorporation in the country, does not require gift card escheatment, which is exactly the kind of detail that makes a generic checklist dangerous.

One development to watch: the 2023 Supreme Court decision in Delaware v. Pennsylvania and Wisconsin shifted priority for certain financial instruments toward the state of purchase rather than the holder's domicile. It did not rule on gift cards, but commentators flag it as a precedent states may try to extend. Not settled law for gift cards.

The H&M case is the cautionary tale

In May 2022, the New York Attorney General recovered $36 million from H&M for failing to turn over gift card balances unredeemed past New York's five-year dormancy period, and for telling the state an outside company handled the liability. The settlement: roughly $28.26 million to New York State, about $18 million of it to the Abandoned Property Fund for cards sold before 2015, plus $7.74 million to the whistleblower under New York's False Claims Act.

The dollar figures are big-retailer scale. The failure mode is not. Any store carrying a meaningful outstanding gift card balance needs an annual review process rather than a sell-and-forget posture.

What Changed in 2025 and 2026

Three developments are worth knowing, and one non-development.

• California SB 22 (effective April 1, 2026): cash-out threshold raised from $10 to $15, the highest in the country.
• Virginia SB 1371 (effective July 1, 2025): prohibits dormancy, inactivity, and service fees on gift certificates unless specific conditions are met, and bars selling one that expires earlier than five years from issuance or last reload, per Virginia's official 2025 legislative summary. In effect, CARD Act style protection with state enforcement behind it.
• New York's Gift Certificate Scam Prevention Act (S704/A07916): adds packaging security and recordkeeping requirements for sellers, aimed at card-draining and tampering at physical point of sale. A legislative tracker reports an expected effective date of September 1, 2026. That date is from a secondary source, so verify current status and final language on the New York Senate site before building policy around it.
• Illinois SB 2014, the Gift Card Scam Prevention Act, is proposed, not law. As of the most recent tracked action in February 2025 it had been referred to committee and had not passed. If enacted, it would restrict open-loop gift card sales and impose recordkeeping duties on third-party resellers. Do not plan against it as if it were in force, and re-check its status before relying on it.

The theme across 2025 and 2026: state activity is trending toward anti-scam provisions, packaging, tamper evidence, and reseller recordkeeping, as much as classic expiration and escheatment rules. Compliance and fraud prevention are becoming two halves of the same job, and our gift card fraud prevention playbook covers the operational controls that pair with these new laws.

A Practical Compliance Checklist for Shopify Merchants

1. Know your Shopify default. Per the Shopify Help Center, Shopify gift cards do not expire unless you actively set an expiration. If you have never touched that setting, you are already clear of every state's expiration rule.
2. If you do set an expiration, respect both floors. At minimum five years under the CARD Act, and zero expiration in states that ban it outright, regardless of what the admin UI lets you configure. Shopify staff warn about this in the Community thread on setting a fixed expiry date, noting regional law may not allow an expiry date at all. One store owner in an r/shopify migration thread hit the same wall: local law barred any expiry date, which shaped how they could switch platforms.
3. Audit any dormancy or inactivity fees. Most small merchants do not charge these, which is the easy path, because the disclosure and timing burden is real if you do.
4. Work out where you owe escheatment. Your customers' last known addresses if you capture them, otherwise your state of incorporation.
5. Put outstanding gift card liability on an annual review calendar, like any other balance sheet item.
6. Disclose terms before the sale. Expiration terms and fees must be clear and conspicuous at purchase, not buried in fine print delivered afterward.

Treat that as a starting point, not a substitute for legal review, especially if you sell into California, New York, or Virginia.

Where Your Gift Card App Fits

No app decides your legal policy for you. What a good one does is make sure the policy you set actually reaches the person holding the card, which is where the clear and conspicuous disclosure requirement really lives.

GoGiftCards reads whatever expiration you have configured on the underlying Shopify gift card rather than setting one of its own, and exposes it as an expiry_date merge variable for the redemption page and the branded delivery email. Set no expiration and there is nothing to show. Set one, and the recipient sees it where they will read it. For more on where native gift cards fall short, see why Shopify's built-in gift cards aren't enough, or our 2026 gift card statistics roundup.

Legal disclaimer, once more, because it matters: nothing in this post is legal advice, and no part of it creates an attorney-client relationship. Gift card law varies by state, changes often, and contains exceptions that can flip the outcome for a specific card type or business structure. Consult a qualified attorney or unclaimed property specialist licensed in your state or states before setting gift card policy.

Once your policy is settled, delivery should be the easy part. Install GoGiftCards from the Shopify App Store to send branded, scheduled gift cards that show recipients exactly the terms you have set, with no manual forwarding and no guesswork.