California sports betting
of tax revenues will continue to leak without mobile and online sports betting. Very simply, if one of the goals is to maximize handle and keep wagers from going offshore, then mobile and online sports betting should be an option for the consumer; mobile is money and money is mobile. The argument against mobile and online sports betting is that it will increase the likelihood of underage and problem gambling. It goes without question that the consumer must be protected in order to maintain the integrity of the sports betting industry. The opportunity to place unregulated wagers with sports books offshore currently exists: that is a fact. It is also a fact that the unregulated offshore sports books provide absolutely no protection for their players. A legal, regulatory infrastructure in California would offer the consumer infinitely better protection than the offshore sports books. The sports betting companies that will enter California will be some of the best sports betting companies in the world. Sophisticated compliance plans that incorporate Know Your Customer (“KYC”) and Anti-Money Laundering (AML) policies are required by every licensed sports betting company. Every state that has legalized sports betting has regulations requiring sports betting companies to comply with their respective KYC and AML procedures. The sports betting operators are licensed in a “privileged industry” and the key to ongoing success is maintaining those licenses in good standing. One only has to review their regulatory backgrounds to understand that the sports betting companies involved with the initiative in California are very sophisticated. Maintaining gaming licenses in jurisdictions like Nevada and New Jersey is not easy and the compliance requirements in these jurisdictions are sophisticated and costly to maintain. The California sports bettor will be looking for betting options from the sports book operators and artificial barriers to entry may limit competition driving the sports bettors to the offshore sports books. There are many tribal casinos in California and this indicates there are opportunities for sports book operators in California. There are also well- regulated cardrooms in California and in many cases the cardrooms are the biggest taxpayers to the local cities they operate in. If cardrooms were allowed to operate sports books further possibilities are added for operators who are ultimately licensed in California. There are also the horse race tracks who would add a third tier to the groups allowed
to operate sports books in California. Another option would be to allow sports books to operate solely mobile and online operations and have the option of being associated with a brick-and-mortar casino. Sports events are different from casino games that fall under the strict rules and surveillance of the casinos. Every slot machine and table game has some sort of surveillance oversight. In contrast, the sporting events may not even occur in the same state and take place outside of the casino surveillance systems. If this is the case, why then do sports books have to be tied to an existing licensee such as a tribal casino in California? There are many possible locations to operate sports books even if the online option without any nexus to a brick and mortar is not available. The issue then is whether there are going to be enough licensed qualified operators to fill all the available opportunities in California. Even if only the tribal casinos and horse race tracks are locations where sports books can operate, will there be enough operators? The high costs of entry into the market will keep out smaller operators who may be just as qualified to run a sports book in California. There are many companies in Europe and Latin America who have been operating sports books for decades arguably gaining experience of much more sophisticated operations than the sports books currently operating in the US market. Is it in in the best interest of the California sports bettor to have limited choices? Another barrier to entry is a proposed requirement that the sports book operators are currently conducting business in a specified number of states. The primary California gaming regulatory authority is currently the Tribal Gaming Agency that is tasked with the gaming regulatory oversight for each tribal casino. There are examples in California whereby a tribal gaming agency had the authority to grant transactional approvals if a certain vendor for the tribal casino was licensed, for example, in Nevada. After all, a review conducted by the regulators in Nevada is very comprehensive and recognized by many as the most difficult in the gaming industry. This is fair and rewards quicker access to those entities that have successfully navigated the regulatory review process in Nevada. However, to bar other operators from entering the sports betting market in California because they do not currently operate in a certain number of jurisdictions makes no business sense except to the big operators. In fact, many smaller operators have attempted to gain access to sports betting markets in the
IMGL Magazine • July 2022 • 43
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