Drivers could select messages to display and could earn rewards from advertisers that pay the state.
The state senate is considering a bill to allow research into the move.
At least one firm, in San Francisco, is developing an electronic number plate that would scroll adverts while a car is stopped at lights and in congestion.
The company, Smart Plate, holds a patent on the technology but has yet to produce a demonstration model.
“We’re just trying to find creative ways of generating additional revenues,” said Democratic Senator Curren Price of Los Angeles, who introduced the legislation to explore whether to adopt the new plates.
“It’s an exciting marriage of technology with need, and an opportunity to keep California in the forefront.”

Jon Cherry is a Director of leading personalised number plate dealer Regplates.com. Jon has over 25 years industry experience handling some of the most expensive plates ever sold with many high profile and celebrity clients. Active since 1991 in the number plate industry, Jon is currently Chairman of the Cherished Numbers Guild, a trade body representing number plate dealers in the UK. Jon has written many articles on the industry and insight into the future of numberplates and the market as a whole.