California’s Sports Betting Frenzy: Four Separate Initiatives Could Make 2022 Ballot

The Super Bowl, the National Football League’s championship game and annual, unofficial national holiday, was played in California for the 13th time, out of 56 Super Bowls, in 2022. The new SoFi Stadium in the Los Angeles suburb of Inglewood became the sixth different California stadium to host the game, which pitted L.A.’s own Rams against the Cincinnati Bengals. As always, the Super Bowl attracted not just a massive TV audience, estimated at 36 million households (about 30 percent of all households with a TV), but also a massive amount of gambling.

The American Gaming Association (AGA) estimated that 31.4 million Americans slapped down $7.6 billion on the 2022 game, which would be a new record and a 78 percent increase over 2021 Super Bowl bets, both legal and underground. The sports betting industry experts at PlayUSA estimated that just $1 billion of those bets would be placed legally. If that estimate proves correct (exact stats are not available at the time of this writing), it would also be a record, and twice the $500 million in legal bets placed on the previous Super Bowl.

None of that cash was wagered in California. (At least not legally.) The largest of the 50 states, with nearly 40 million people, remains a holdout against the wave of legal sports gambling that has flooded the country since 2018. As of early 2022, sports betting in California was illegal, one of only 17 states, according to AGA data, where betting on sports remained outlawed.

That may change in 2022, in what one gaming executive said would be a “seismic shift” in the American sports-betting market. In November of 2022, California voters could potentially see four initiatives on the ballot, each legalizing sports gambling in its own, distinctive way.

Is Sports Betting in California Legal?

Although there are numerous exceptions, most notably for casinos on tribal lands, the state constitution prohibits gambling in the state. To legalize sports betting in California, voters must approve a constitutional amendment.

As of 2022, there were 66 California gambling casinos operated by 63 different tribes. Those casinos were not permitted to operate sports books. The same holds for the California card rooms, a type of gambling establishment that traces its roots back to the early days of California’s gold rush. Gold prospectors, accustomed to risk, apparently felt that gambling was a natural way to pass the time. 

In 1891, most California gambling was outlawed. A series of card games were named as specifically verboten. Conspicuously omitted from the ban was draw poker, which the legislators considered a game of skill, rather than a game of chance like the prohibited “stud poker.” Two decades later, the California attorney general affirmed the legislature’s intent.

That ruling became the basis for a proliferation of card clubs. According to the California Gaming Association, the card room business dates back 150 years, with 72 currently operating in the state. Card rooms are not allowed to feature slot machines, unlike the tribal casinos. “House banked” games are also not permitted—that is, players win money from other players, not from the house. The club has no financial stake in any game, collecting its money instead from fees paid by players for the privilege of sitting at a table. Many also have bars.

California is also home to nine horse racing tracks. Betting on other sports is not allowed at any of them, but would be under two of the four proposed ballot measures that could face California voters in November. Of course, the California lottery is also playable at any one of 23,000 retail outlets throughout the state.

Tribal casinos bring about $9 billion annually. About $3.4 billion of that is collected by the state of California in taxes, according to the American Gaming Association. If sports betting was added to this mix of legal forms of gambling, it would mean an additional $3 billion per year pumped into the state economy, according to an estimate by the research firm Eilers and Krejcik Gaming LLC, which advises state governments looking to legalize sports betting.

Proposals for Legal Sports Betting in California

How do Californians feel about legalized sports gambling? There are very few polls available. A July 2021 poll by the San Francisco-based firm David Binder Research found that 62 percent of state voters would support a sports betting legalization measure that goes by the title “California Solutions to Homelessness and Mental Health Support Act.” The initiative, which had not yet qualified for the November ballot as of February 2022, is backed by a consortium of sports gambling firms, including DraftKings, Bally’s and WynnBET, who have reportedly poured about $100 million into the measure’s campaign.

A separate poll by ALG Research and paid for by the San Manuel Band of Mission Indians—one of several tribes backing their own, competing ballot measures—found 53 percent in support of the “Solutions to Homelessness” initiative. The tribe-backed poll also found, however, that when voters were told that the measure was backed by out-of-state sports betting companies, support fell to just 39 percent.

In November, California voters will almost definitely get a chance to express their views on their ballots.

“Solutions to Homelessness” is one of four ballot measures that could find their way onto the November ballot. The initiative takes its name from the measure’s provision imposing a 10 percent tax on wagering revenues and charging licensing fees on sports books. Under the measure’s provisions, 85 percent of those tax dollars would go to address homelessness and mental health issues, with the other 15 percent distributed among California’s tribes that are not involved in the gaming industry.

The initiative would legalize California internet sports betting, though the online operations would be run by tribes and the big-time gaming industry corporations who contract with them. The measure not only legalizes sports betting, but also online wagering on non-sports events such as the Oscars and other awards shows, as well as video game competitions. Betting on elections, however, would remain outlawed.

The measure backed by DraftKings et al. has won the support of  at least four major California cities, with mayors of Long Beach, Fresno, Sacramento and Oakland publicly supporting the measure which needs 1 million verified signatures to reach ballot status.

Long Beach Mayor Robert Garcia told KCBS-TV News that the measure would provide “sustainable sources of funding to house those experiencing homelessness and provide them the medical and mental health services they need.”

A second initiative also proposes to use revenue from sports gambling to help combat homelessness and other social ills. But this one, with the lengthy title “The California Solutions to Homelessness, Public Education Funding, Affordable Housing and Reduction of Problem Gambling Act,” is backed by the card room industry and several cities that are homes to multiple card room establishments including San Jose, Gardena, and Inglewood.

The card room-backed initiative legalizes both in-person and online sports betting, allowing card rooms to include sports books under the same roof as their poker tables. It also allows the card rooms to add other types of card games—blackjack or baccarat, for example—and tile games, such as mah jongg.

Card Rooms Sue to Stop Tribal Initiative

Only one sports betting measure has already qualified for the November ballot. The California Sports Wagering Regulation and Unlawful Gambling Enforcement Act would effectively solidify the tribes’ control over all forms of gambling in the state, except for card rooms. The initiative includes a provision that enables any private individual to file a civil lawsuit against card rooms that supposedly host illegal gambling. Card room owners say that the civil lawsuit provision is designed to bankrupt them by tying them up in multiple frivolous legal actions, and hitting them with excessive fines.

The ballot measure backed by Pechanga, Barona, Yocha Dehe and Agua Caliente tribes does not deal with online wagering, effectively shutting the national internet sports books out of the state. It would restrict sports betting to in-person wagers made at tribal casinos, or at one of the state’s horse-racing tracks, which would also be allowed to set up sports books. It also allows tribal casinos to add roulette and dice games, which are not currently permitted there. 

Not only did the card rooms file their own ballot initiative to compete with the tribal one, in December two card rooms—Parkwest Casino Cordova and Inglewood’s Hollywood Park Casino (located next to the 2022 Super Bowl site, SoFi Stadium)—requested that the California Supreme Court slap an injunction on the tribes’ initiative because, the card rooms claim, it is unconstitutional. By including the provision allowing dice and roulette games, the measure asks voters to decide on two separate issues in one vote, the card rooms say. The state Constitution limits ballot measures to one subject at a time.

“The Initiative’s proponents seek to exploit the popular demand for legal sports wagering by hitching two unpopular wish-list measures to a sports-wagering Initiative,” the card rooms said in their court filing.

Tax revenue collected as a result of sports gambling under the tribal-backed measure would go into the state’s general fund.

Tribes File a Second Proposed Ballot Measure

In December, yet another initiative appeared, this one also backed by four tribal nations—in this case, Rincon, Graton Rancheria, Wilton Rancheria, and San Manuel. This one, the Age-Verified Tribal Online and In-person Sports Wagering & Homelessness Solutions Act, covers all the bases, allowing tribes to operate both in-person and online sports betting shops, while earmarking 10 percent of revenue for a newly created “California Homelessness and Mental Health Fund.” Another 10 percent would go to tribes in a “Tribal Sports Wagering Revenue Sharing Trust Fund.”

The San Manuel Band of Mission Indians is already one of the state’s leading players in the gaming industry. The tribe operates the Yaamava’ Resort & Casino at San Manuel in San Bernardino County—which in December opened the doors to a 432-room, 17-floor luxury hotel with rooms starting at $600 per night. On weekdays. 

How Much Money Can California Make?

Most of the proposed legal sports betting plans are being sold with a veneer of social responsibility. But how much cash is really in it for the state? According to the National Conference of State Legislatures (NCSL), maybe not as much as one might suppose.

An NCSL report based on revenue data from 2020 showed that even in New Jersey, the country’s largest sports betting market, gambling on sporting events brings in approximately five percent of what the state lottery contributes to public coffers. In 2020, sports betting produced $49.4 million in new tax revenue for New Jersey—a pittance compared to the state’s $44 billion budget for that year. The state lottery kicked in $937 million in tax revenue.

The report also noted that gambling revenues tend to spike shortly after legalization is introduced, and then plateau, requiring a steady flow of new games and betting possibilities to keep interest—and cash flow—high.

Data compiled by the sports gambling news site Legal Sports Report shows that from the month after the Supreme Court handed down its decision legalizing sports betting in 2018, through February of 2022, the 27 states that have put legal sports betting in place have collected less than one billion dollars, total. Out of nearly $95 billion in total revenue, those states have ended up with $928.9 million.

What does that mean for California? Calculations by Action Network, another sports betting online publication, found that if California had legal sports betting in place it would take in an extra $331.1 million per year. While that total is far from nothing, it’s not a whole lot compared to the $286 billion state budget proposed by Gov. Gavin Newsom for the 2022-2023 fiscal year.