"We did just get some unfortunate news from our attorneys that ABC denied the alcohol permit for the event," said Steve Thacher, president of Premiere Media Group.
The latest development comes just two days after a judge denied the city's request to stop the event. City leaders have been concerned about the music festival for weeks.
In a past interview, Huntington Beach Mayor Connie Boardman had said the big concern was drinking and driving after the party.
"We don't want 8,000 drunk people partying on our beach, that's the bottom line. This is an alcohol-fueled wild party," Boardman said last Friday.
Preparations got underway Friday for the event. Workers assembled a walkway while artists created a sandcastle. Wet Electric comes in the wake of the riot following the US Open of Surfing in Huntington Beach in July. That led to numerous arrests and vandalism.
The event organizer says Wet Electric is not the same thing, insisting taxis and shuttles would be available and stressing only those 21 and older with a ticket are invited. The event starts at noon and ends by 9 p.m.
The organizer says by denying the alcohol permit, it may drive people to the very area hit hard in July.
"Think about it. Now you're going to have 5,000 to 10,000 people show up. They're going to be pretty upset. Usually when you go to a music festival, you like to have a beer or two. Now, they're going to show up and the only place I can think they might go is Main Street at this point, which was the city's initial concerns," said Thacher.
The mayor says she does not expect problems downtown.
"Our concern has always been about allowing people to drink alcohol on the beach, in an uncontrolled setting. I'm ecstatic with the ABC decision to deny the event's alcohol permit," Boardman said in a statement.
But the decision is affecting more than just partygoers in Huntington Beach. Organizers of the charity Giving It Back to Kids say it is impacting children in Southeast Asia, who were going to benefit from beverage sales.
"Just to put it in perspective, in Vietnam, we're able to do a heart surgery for about $2,000; that's saving a kid's life. So $10,000 is five kids' lives," said Robert Kalatschan with Giving It Back to Kids.