If the sportsbook industry was setting odds for either of California’s sports betting measures—Proposition 26 or Proposition 27—to win on the November ballot, they might have to admit that they are getting longer.
That’s the assessment of Eilers & Krejcik Gaming, an independent research and consulting firm, which published a report last week for its clients.
Despite the Golden State being the golden goose of sportsbook markets, the largest in the U.S., the aggressive sniping by both sides could be alienating and dividing voters so much that they will turn their backs on both.
It has done one unifying thing, however: it has prompted both major political parties to stand together to oppose one of the measures, Prop. 27.
The Eilers report declares, “The political power and deep pockets of interests with dogs in this hunt … together with competing sports betting measures whose back-to-back presentation on the ballot is likely to confuse voters have us leaning negative on California’s sports betting legalization prospects this fall.” It concluded, “We preliminarily put the odds of one or both measures passing at less than 50%.”
The seven out-of-state operators backing Prop. 27 include BetMGM, FanDuel and DraftKings. The measure would legalize online sports betting, although it would require the operators to be connected to a gaming tribe. Called the California Solutions to Homelessness and Mental Health Act, it earmarks 85 percent of its 10 percent tax revenue to treat homelessness and mental illness. It would also give money to non-gaming tribes.
Prop.26, also known as the California Sports Wagering Regulation and Unlawful Gambling Enforcement Act, is backed by most gaming tribes. It would allow retail-only sports betting in tribal casinos and racetracks—but not card clubs. It would not authorize online sports betting.
It would also further strengthen the grip of gaming tribes by allowing them to add roulette and craps to the menu of games they can offer. Which would make them virtually indistinguishable from their Las Vegas competitors. A further sweetener, and one that is anathema to card clubs, is a provision that would make it easier for tribes to take on the role of prosecutor and sue clubs it alleges are violating the state constitution.
Kathy Fairbanks, a spokeswoman for the coalition, says Prop. 26, “was designed to continue Californians’ long-standing commitment to allow Indian tribes to offer well-regulated gaming on tribal lands.”
It’s not surprising that card clubs have contributed $42 million to defeat Prop. 26. Some organizations that oppose strengthening racetracks by giving them sports betting, such as animal rights groups, have also contributed to this war chest.
Juan Garza, who represents five cities in Southern California that host card clubs, told Bloomberg, “It would devastate us. We just want to co-exist.”
The fact that gaming tribes hate card clubs so much and therefore refused to throw them a bone and allow them to also reap some of the sports betting largesse could be the fatal flaw that brings down their measure, says Nelson Rose, an expert on gaming law. In a recent Op-Ed on his blog, he wrote: “The extremely rich and politically powerful gaming tribes in California are spending nearly half a billion dollars this year to win the right to have sports betting. Or, I should say, they are throwing away their money on a fatally flawed initiative, which the voters will reject in November. And it is the tribes’ own fault.”
The fatal flow in the initiative, says Rose, is the provision allowing the tribes to sue the card clubs. The card clubs themselves aren’t that powerful themselves comparatively, but, as Rose says, “If you use a bomb to kill a gnat; you might end up killing yourself. For the clubs have politically powerful allies. Many municipalities rely on their gaming clubs to more than balance their budgets. The club in the small city of Hawaiian Gardens in Los Angeles County supplies more than 60 percent of the city’s revenue. If the clubs close, small cities will die.”
Although the measures are competing, both could win since their provisions don’t contradict each other. All they need is to get one vote more than 50 percent. But that might also spark lawsuits.
If either or both win, California will jump to first place in the U.S. as a sports betting market, with an annual gross revenue of about $3 billion, according to Eilers. “It’s a big market, on a global scale,” adds James Kilsby, an analyst with Vixio GamblingCompliance.
The two sides have put up about $364 million, almost evenly divided, to spend on their campaigns. That makes this the most expensive election campaign in the state’s history. Ads on TV, pop-up ads, social media, billboards, streaming services and radio are almost impossible to ignore.
Although Prop. 27’s provisions are imitative of what the majority of the 30 states that have legalized sports betting have adopted, most of California’s 100-plus tribes vehemently oppose it because it challenges their exclusivity. They want to control sports betting as they control all other casino gaming in the state except card games.
But three smaller tribes have lined up with the operators because of the money the proposition promises to non-gaming tribes.
The fact that sports betting is on the ballot instead of being passed by the legislature years ago highlights the fact that gaming tribes themselves disagree on what they want. That has prevented any bill from gathering a majority, especially since the racetrack and card clubs have also clambered for a place at the table.
Enter the disrupters: the out-of-state operators who saw California’s initiative system as the only way to break the logjam, and guarantee themselves a place at the table. Prop. 27 doesn’t make it that easy for the little fries to get a place, though. It says operators must be licensed in 10 states and pony up a $100 million license fee—which would make California an outlier among sports betting states.
Nathan Click, spokesman for Yes on 27, defends that provision as being necessary so that only “responsible actors with a track record of safety” need apply.
Now different groups are picking sides. Few, it seems, support both Prop. 26 and 27.
The leadership of both the Democratic Party and Republican party in California are united against Prop. 27. That’s a rarity in the state but demonstrates the long reach of tribal lobbying—and funding.
Jessica Millan Patterson, chairwoman of the California Republican Party, declared in a press release: “Prop 27 breaks the promise made to California’s Native American tribes to grant them the sovereign right to operate gaming in California in order to improve the lives of their communities across the state.”
Another press release announced opposition to Prop. 27 from the California Teachers Association, League of California Cities, and Veterans of Foreign Wars (California Department).
Although some big Las Vegas operators back Prop. 27, a few, like Caesars Entertainment, are staying neutral to avoid alienating people they do business with. Major League Baseball has also endorsed Prop. 27
The fact that both propositions are using tribal leaders to pitch their line is confusing to a lot of voters who are used to tribes speaking with a relatively united front on gaming issues.
