California Politics: A Sports Betting Showdown in 2022

Three times in California’s history, voters have ratified constitutional amendments related to gambling: in 1984 to create a state lottery, and then in 1998 and 2000 to enact regulations that allow Indian tribes to open casinos.

But the choice in these elections was binary, asking voters to accept or reject a single electoral action. And the opposition campaigns against these proposals focused mostly on general societal issues related to gambling, not the fine print of how businesses would be run.

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This historical context is well worth remembering as we head towards next November when voters might be asked to decide whether to legalize betting on professional and college sports in California. Tribes, card club owners, and online gaming companies vie to create a government-regulated system that promises a huge jackpot.

In a way, it’s a political struggle for control of a gambling industry that could be a 21st century gold rush.

“Assuming California largely sticks to other states that have approved sports betting, we would expect the California retail and online sports betting market to generate more than $ 3 billion in annual sales,” said Chris Grove, partner at Eilers & Krejcik Gaming.

It didn’t start with sports betting

Veteran political watchers know this battle involves a lot of prologue, most of it involving two decades of wrangling between the state’s Indian tribes, who operate 65 tribal casinos, and California’s long-established card clubs, which now include 86 locations in a variety of cities , many of them in Southern California.

Not only do the card clubs offer a fraction of the games found in tribal casinos, but their operation is based on rules that generally require that payouts come from funds wagered by other players, not the house . Tribal casinos also have exclusive rights to slot machines, a great money maker for any gambling establishment.

There have been violations of two decades of troubled truce between competitors, most notably the failed 2004 vote, backed by card clubs and horse racing groups, to participate in the slot machines. The tribes countered this year with a vote to expand their gaming operations significantly, which was partially defeated by the opposition of the government at the time. Arnold Schwarzenegger.

As the number of tribal casinos grew in the early 2000s, the number of California card rooms steadily declined. Even so, the card rooms had a built-in customer base with their facilities in a number of cities, while tribal casinos were only allowed on government-approved land, often far removed from urban areas.

The judgment, the clash

Tensions in the gaming industry have been high since 2018 when the U.S. Supreme Court overturned federal law preventing states from creating new sports betting industries. California lawmakers continued to discuss the problem, but found that the various stakeholders were at odds over how to proceed.

In the meantime, 33 states have either started sports betting activities or approved plans for them. Grove, whose company provides data and analysis on the gambling industry, said there are no rules preferred by most of the states.

“Every state and their respective stakeholders in that state have a unique agenda and outcomes in mind when they deal with legal sports betting,” he said in an email to the Times.

Any new legal gambling in California requires a constitutional amendment that must be ratified by voters. The hope, however, was that the various interested parties could find a legislative-mediated compromise, a unified plan that would provide voters with clear regulation and sufficient tax revenue to fund key government services.

The COVID-19 pandemic may have helped stop these efforts. In the early summer of 2020, legislators threw in the towel on their efforts and a trio of the state’s most successful gaming tribes went full steam ahead with their own electoral measure. This proposal, which qualified for the November 8, 2022 vote, would enable sports betting in tribal casinos and horse races while using 70% of the taxes on these operations for a variety of state general fund programs.

What the qualified choice measure fails to address is the growing sector of online sports betting. In August, officials in three California cities that are home to card rooms filed a voting action for both personal and online sports betting. Much of the resulting income would be spent on housing, education and mental health.

The $ 100 million bomb

Just days after the city-backed proposal was published, a group of large gambling companies including online operator DraftKings placed a big bet that submitted a separate voting action for 2022 solely on legalizing online gambling. Sports betting in partnership with California Gaming concentrated tribes that meet certain qualifications. Supporters of the measure have already deposited $ 100 million in a campaign account and developed their plan, similar to that of the cities, to set aside funds for homelessness and mental health services. Her proposal received its formal title and summary from the state on Thursday.

Amazingly, earlier this week, a fourth sports betting proposal was revealed that could be in the wings for 2022 – one that would give the tribes exclusive rights to operate personal and online sports betting. And, according to reports from the PlayCA.com website, that proposal would also include homelessness and mental health funding for government fees or taxes.

It is possible, perhaps even likely, that not all four measures will end up in the vote next November. Three of them have yet to collect voter signatures to qualify, a process that relies on paid petition distributors and costs several million dollars. There is also the chance – perhaps we should call it the equivalent of four of a kind in poker – that all sides can come together at the suggestion of the legislature and regulate all this, even though fewer players were involved in the failed negotiations last year than they are now.

It’s not just about sports betting

What many voters may overlook when these campaigns take to the streets is that the proposals are not all about legalizing sports betting.

The initiative, which has already earned a place on the vote next fall, would give the tribes permission to offer roulette and craps games like craps in their casinos. It also includes a provision allowing civil lawsuits for alleged illegal gambling activities to be brought by anyone – a volley that the card bureaus believe is intended to tie them into endless litigation.

Cardrooms could meanwhile offer games in which players bet against the house on the initiative of the city officials’ group and loosen the long-standing rules against so-called banked games.

The most far-reaching proposal could be that offered by the online betting industry – it wouldn’t just legalize sports betting, according to a review by the impartial Legislative Analyst’s Office. “The measure defines sporting events as sporting events as well as certain non-sporting events such as award ceremonies and video game competitions,” the analysts wrote last month.

Gaming analyst Grove estimates that about 75% of California’s potential market would come from online betting, which explains why the scramble now appears to be about an election move beyond the stationary locations envisaged in the tribal initiative that already have one Guaranteed space on the ballot. (Remember, proponents of an initiative since 2014 can withdraw their plan until the last minute, even after signatures have been collected.)

And Grove didn’t mince how big this debate will be.

“Assuming California approves both online and retail sports betting, the state would quickly become the largest single market by a wide margin in the US,” he said.

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