California Initiative Would Legalize Sports Betting
California has one of the more complicated gaming landscapes in the country, with multiple stakeholders dominated by gaming tribes. Now it has the potential to become even more complicated with the introduction by two lawmakers, including Senator Bill Dodd (l.), of an initiative that would amend the constitution to allow sports betting.
Two California lawmakers are sponsoring an initiative to give the voters the option of legalizing sports book in the Golden State by amending the state constitution. That would make it the ninth state to legalize the industry since the U.S. Supreme Court lifted the federal ban in May 2018.
Gaming tribes are promising a big fight on what they consider to be a direct attack on their monopoly of Las Vegas style gaming. Since the bill would require a two-thirds vote of the legislature to put it on the ballot next year, the tribes would seem to have a huge advantage. Rep. Adam Gray has introduced an identical bill in the Assembly: ACA 16.
The constitutional amendment that was introduced last week by Senator Bill Dodd would legalize sports betting and apply a set of regulations to the activity.
A constitutional amendment requires two-thirds of the legislature’s approval to advance it to the November 2020 ballot, where it can be approved by a majority of the voters.
Dodd released a statement that said, “I look forward to working with stakeholders in a collaborative effort to help bring this out of the shadows.” He added, “By legalizing sports wagering we can avoid some of the problems associated with an underground market such as fraud and tax evasion while investing in problem gambling education.”
Gray’s statement declared, “We need to crack down on illegal and unregulated online gaming and replace it with a safe and responsible option which includes safeguards against compulsive and underage gambling, money laundering and fraud.” He continued, “All other gaming activities in California are subject to regulations that ensure the safety of consumers. Sports wagering should be treated no differently.”
Several attempt to legalize online poker and sports betting, some of them by Rep. Gray have stumbled amid the rivalries between gaming tribes and card clubs.
The tribes, whose influence in the legislature is enormous, generally oppose new gaming enterprises that they fear might water down the profitability of their nearly 70 brick and mortar casinos and weaken their tribal state gaming compacts.
Complicating the tribes’ domination of gaming in the state are the 88 license card rooms, which offer approved forms of poker, along with some that offer player-banked versions of some casino games, and which the tribes consider violate the state constitution. Last year they went to federal court to sue the state to enforce the law. The card rooms, which consider this lawsuit an existential threat, have asked to be allowed to intervene in the case.
Dodd concedes this is the major hurdle to approving his bill. He told the Los Angeles Times: “I look forward to working with stakeholders in a collaborative effort to help bring this out of the shadows,” he said. “By legalizing sports wagering, we can avoid some of the problems associated with an underground market, such as fraud and tax evasion, while investing in problem gambling education.”
Steve Stallings, chairman of California Nations Indian Gaming Association, which represents a majority of gaming tries, indicated how steep a climb getting to two-thirds is likely to be. He called for the legislature to “proceed with caution,” adding “In short, CNIGA does not support any expansion of gaming in California, including sports betting, until the for-profit, commercial card rooms stop their illegal practices, including constitutionally prohibited banked games. A legitimate discussion on sports betting could then proceed as long as tribal exclusivity is maintained.”
Dodd’s bill lacks details, such as which entities would be able to offer sports betting. Or how much taxation would be levied, and where the taxes would go. But it’s the details upon which the bill is likely to fall or fly.
Dodd promises to provide the details soon. He told Legal Sports Report: “We’ll have the mechanics and everything done ahead of time so there’s transparency. Let’s face it: people are betting on games everywhere throughout the state of California. This is a way to pull it out of the shadows and put it into a regulated environment where the state will benefit and we can keep track of and identify gambling addicts to help them.”
The sponsors estimate that the market for illegal sports betting in the U.S. is about $150 billion a year. Since California has by far the largest population, its share of that amount is likely to be huge.
Jennifer Roberts, associate director of the International Center for Gaming Regulation at the University of Nevada, Las Vegas, told the Times: “California would be a premium market for sports betting given its population and sports teams’ presence.”
She noted that even if the voters approve of the initiative against the wishes of the tribes that the issue of how sports betting would impact tribal state gaming compacts would need to be addressed, as well as which state agency would be in charge. “I don’t see these issues being easily resolved,” she said.
Many card clubs are bullish on such a development. Kyle Kirkland, president of the California Gaming Assn., commented, “We look forward to working collaboratively with them as we learn more about the proposed constitutional amendment to legalize sports betting.”
Gray’s previous proposal last year that would have threatened the tribal exclusivity on casino gaming by allowing sports betting at card rooms, racetracks and tribal casinos drew this rebuke from Mark Macarro, chairman of the Pechanga tribe, which operates the largest casino on the West Coast: “This proposed measure would bring Vegas-style gaming to nearly 100 locations and urban areas throughout California,” he said. “This is not in keeping with California’s long-standing policy of limited gaming, and we will vigorously oppose this measure.”
Another group, called Californians For Sports Betting last year set up shop to try to get support for an initiative for the 2020 ballot. It quickly withered away since no big supporters came forward to pay for a signature-gathering effort.
Gray and Dodd co-chair the Assembly and Senate Governmental Organization committees. They promise hearings on the proposal in the near future, possibly late August.
Dodd said, “We’re looking to have a fully transparent process that hopefully people will appreciate. Those people that have knowledge of this, good or bad, can come and testify and let us know their thoughts on it.”
Despite the expected tribal opposition, Dodd is optimistic about the bill’s chances. “A lot of times, if a bill makes sense then representatives don’t mind allowing the voters to decide for themselves. But we absolutely have to present a strong case.”
Dodd added, “Going into a protracted battle on a ballot issue like this, the more deep pockets that are interested, the less chance of having those issues turf wars. Hopefully they’ll come to the table looking for a solution and not a fight.”
The sports betting landscape has rapidly evolved since the Supreme Court declared PAPSA (Professional and Amateur Sports Protection Act of 1992) unconstitutional last year. A few weeks ago Nevada was surpassed as the sports betting capital of the U.S. by New Jersey, the state that took the federal government to court over PAPSA. The state has collected more than $127 million in taxes as a result in the year it has offered the wagers.
California is likely to make those figures look like a child’s game in comparison, supporters argue. Eilers & Krejcik Gaming, which calls itself a “Boutique Research Firm,” told Forbes that the Golden State could realize more than $2.1 billion in a fully mature betting market if mobile sports betting is allowed.