CALIFORNIA SPORTS BETTING
When the voters of California went to the polls in November 2022, they had two opportunities to legalize sports betting and, at a stroke, create the world’s largest market in the gambling vertical. Following an expensive and accrimonious campaign by sponsors of both propositions, the two competing sports betting bills placed were both soundly defeated. Proposition 26, drafted by tribal gaming interests, was rejected by approximately 62% of the voters. Proposition 27, which was drafted by mobile and online gaming interests, was rejected by approximately 82% of the voters. These are both dramatic defeats. What is the voters’ message? Are they opposed to sports betting? Did they believe that the two sports betting proposals smacked of self-interest? Did they see Proposition 26 as an attempt by the tribal casinos to further control the gambling industry in California and, in effect, create a monopoly? Did the voters understand that the mobile and online sports betting option dramatically increases the handle and thus creates more tax dollars for California? Are the voters demanding a comprehensive sports betting structure that is inclusive rather than exclusive? In attempting to answer these questions, it is necessary to understand and take into account certain basic facts that are not seriously in dispute. California has approximately 40 million residents, as well as tens of millions of visitors each year. It is a sports happy state. It has a US$ 3.6 trillion economy, which constitutes the 5th largest economy in the world. In gaming parlance, California has liquidity standing alone without any partnerships. California has a very large gaming footprint composed of tribal brick and mortar casinos, cardrooms, horse racetracks and a state-run lottery system. This is a deeply entrenched multi- billion-dollar industry. Sports betting comes in a variety of forms. Many bettors enjoy the atmosphere of brick and mortar-based sports books with big screen televisions and food and beverage amenities available at casinos, cardrooms and horse racetracks. March madness in Las Vegas is an excellent example. Many bettors enjoy the privacy and convenience of mobile and online sports betting, as demonstrated by the success of mobile and online sports betting in the states that currently permit such betting. What is missing from California’s gaming industry is legal sports betting. Notwithstanding the absence of legal sports betting, California residents are active sports bettors. As it stands, billions of dollars are wagered with offshore sports
betting sites leaving sports bettors vulnerable to unregulated sports betting. Is the better option to have a well-regulated sports betting industry if there is already unregulated widespread sports betting activity taking place in California? Currently there is no benefit to California’s taxpayers or state and local government entities based on the unregulated sports betting industry. The unregulated industry is not going anywhere, and with the popularity of sports betting in the United States, it will continue to grow. Neither Proposition addressed these basic facts in a comprehensive fashion that clearly benefited California’s residents, taxpayers, state and local government entities and services or all elements of the California gaming industry in a comprehensive manner. One can argue that the propositions reek of self-interest. Proposition 26, supported by many of California’s Native American Tribes (the “Tribes”), limited sports betting to in- person on-site betting at tribal casinos and horse racetracks, excluded California’s cardrooms and contained no provision for mobile and online gaming. It also contained provisions allowing the Tribes to attack the operation of California’s cardrooms (viewed by the Tribes as illegal serious competitors to tribal casinos), which are heavily regulated by the California Department of Justice. There are 66 cardrooms located throughout the state which provide substantial important financial support in the communities in which they operate. Proposition 27, supported by the mobile and online sports book industry, completely excluded in-person on-site sports betting. In addition, it excluded cardrooms and horse racetracks from mobile and online sports betting. It also included a huge one- time fee of US$100 million for a sports bettor operator license, effectively excluding medium and small mobile and online sports betting companies from the California market. The more options that sport bettors have, the more competitive the industry will be. Competition in the marketplace benefits the consumer. Limiting sports betting to in-person and making it user unfriendly is a disservice to the consumer. On the flip side, so is limiting sports betting to only mobile and online.
The winners and losers
Neither Proposition presented California’s voters with a comprehensive legal sports betting structure that encompassed both all existing California private ownership gaming interests
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IMGL MAGAZINE | JANUARY 2023
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