California now appears unlikely to join 30 other states who have legalized sports gambling.
Why has the future of legalized sports betting in California suddenly become so bleak?Daniel Hartwig / Wikimedia Commons C.C. 2.0 Generic License
California has more pro sports franchises than any other state, with 19 including the ones every American can name, plus three Major League Soccer teams and the Los Angeles Sparks of the Women’s NBA. But can Californians place a bet on any of those teams? Not now, and if polls ahead of the Nov. 8, 2022, election are any indicator, not at any time in the foreseeable future.
In 2018, the United States Supreme Court overturned a federal law banning sports betting, opening the door for individual states to decide the issue. Earlier in 2022, it appeared that as many as four ballot measures legalizing sports betting in California were potentially headed for the November ballot, and with one poll in February showing 45 percent of Californians favoring legal sports gambling and only 22 percent opposed, things were looking good for California to join 30 other states where wagering on sports events is legal—and taxed. (Native American tribal gambling operations, which are legal but are prohibited from offering sports betting, generate about $1.9 billion for the state and local governments annually.)
In October, three weeks ahead of the election, there were two competing sports betting measures on the ballot—Propositions 26 and 27— and both appeared doomed. What happened?
The unpopularity of the sports gambling measures is apparently, at least in part, driven by voter cynicism about the motives of the measures’ backers, cynicism that may well be justified.
Proposition 27: The Sports Betting Industry Goes All-In
Originally labeled by its backers as the California Solutions to Homelessness and Mental Health Support Act, Prop 27 sounds great, right? Who isn’t in favor of solving homelessness and providing support for mental health issues? In August, the proposition’s supporters unveiled their first ad wholly embracing the cause they purported to be supporting.
The measure, if passed, would legalize all online sports betting throughout California. The law would require that an online sports betting company partner with a gaming tribe, and would create a new state Division of Online Sports Betting Control to regulate the new industry.
The ad focused on a Sacramento homeless facility, City of Refuge, which houses 26 families, and featured the shelter’s co-founder, Rachel Ditmore, telling voters that a “yes” vote on Prop 27 “means more people get the assistance that they need. … Yes on Prop 27 because there’s no place like home.”
And who were the sponsors of that ad, and the proposition, who appeared so deeply concerned about the homeless problem? They include most of the country’s largest online sports books including DraftKings, Bally’s, WynnBet and four others.
Homelessness Advocates Scoff at Measure
Homelessness advocates didn’t exactly line up to support the initiative, though it specifies that 85 percent of the 10 percent tax collected on online sports betting revenue would go to homeless services.
The California Legislative Analyst’s Office estimated that the increase in total revenue from Prop 27 “likely would not be more than $500 million annually.” But homeless advocates just haven’t been buying it.
“I don’t think there’s anybody in homeless services that actually thinks that we would realize a windfall from this, that we can instantly start building housing units and getting people off the street and getting them into mental health service,” Fran Butler-Cohen who heads a San Diego organization that provides services for about 27,000 people each year, told the San Francisco Chronicle.
The sports betting giants have financed their campaign prolifically, to say the least, raising $169.3 million, the largest share of which comes from out-of-state sources according to a Los Angeles Times breakdown. Among the donations, DraftKings contributed $17.5 million while its chief rival FanDuel kicked in twice that figure.
The measure’s opponents, however, have been even better financed. Led by gaming tribes worried that the measure would confront them with unwanted competition, cutting into their own cash intake, the “no” side had raised $245.9 million as of mid-October—a whopping $103 million of that total came from the San Manuel Band of Mission Indians, a relatively small, San Bernardino County-based tribe that has become a major player in the gaming industry, even purchasing the iconic Palms Resort Casino in Las Vegas in 2020.
Prop 26: Keeping Sports Betting on Tribal Land
The second, rival ballot proposition—Prop 26—is backed by a coalition of 30 tribes already in the gaming business, led by the Agua Caliente Band of Cahuilla Indians in Palm Springs, the Barona Band of Mission Indians in Lakeside and the Yocha Dehe Wintun Nation in rural Yolo County.
The tribes’ proposal would not allow online sports betting. Instead it would permit gaming tribes to set up sports books within their casinos, to take bets in person. The measure would also allow legal sports books at four privately operated horse racing facilities—and legalize roulette and the dice game craps at the casinos. Currently only card games, slot machines and bingo are permitted at tribal casinos.
Supporters of Prop 26 have raised 129.7 million compared to only $42.5 million raised by opponents. Those opponents are mostly operators of California’s other type of legal gambling venue, “card rooms.” Those facilities, as their name implies, are allowed to offer only card games, and make their money from fees charged to players based on the amount of total cash bet in each game.
Prop 26, the card room operators say, directly targets them by allowing anyone, including the tribal casinos themselves, to bring a lawsuit against any facility that uses a non-player to serve as the “bank” at a card table. The card room operators say that the provision could put them out of business.
In addition to the card rooms' opposition, the lack of enthusiasm for Prop 26 reflected in polling could simply reveal a lack of enthusiasm for sports betting among the California public, which may just find the whole idea distasteful.
“Sports betting has become more socially accepted in recent years, so some might look at Propositions 26 and 27 as indicative of a cultural evolution,” wrote the Los Angeles Times in an editorial urging a “no” vote on both measures. “Perhaps. But it’s an evolution spurred by greed.”