Sports betting is on California’s ballot this November. Various groups have tried to get four California sports betting initiatives on the 2022 ballot. However, only two have made the ballot: Prop 26, from the tribes, and Prop 27, from the private sportsbooks. A third initiative failed to gather enough signatures, and the sponsors of a fourth pulled their initiative from the process of getting onto the 2022 ballot.
Prop 26 would allow in-person sports betting at tribal casinos and racetracks. It would not allow online sportsbooks. That initiative would block DraftKings’ and FanDuel’s apps from the market. Instead, major sportsbook brands would have to submit a new ballot initiative in a new election cycle or offer a retail sportsbook at a tribal casino. California tribal gaming groups back Prop 26.
In response, major sportsbook brands, including DraftKings and FanDuel, are backing Prop 27. It would allow mobile and online sports betting in California.
Prop 26 — In-Person Sports Betting at Tribal Casinos
Prop 26 would legalize retail sports betting at tribal casinos and the state’s four horse racetracks: Santa Anita Park, Golden Gate Fields, Del Mar Thoroughbred Club, and Los Alamitos Race Course. California bettors would have to drive to tribal casinos or racetracks to place legal sports wagers. The money from sports betting would go toward tribal communities, problem gambling programs, and California’s general fund.
Tribal casinos are leaning on their history of offering gambling in California to persuade Californians to vote for Prop 26. They’re also characterizing private sportsbook companies as dangers to California’s gambling market and threats to tribal sovereignty.
Recent ads from Prop 26 backers claim Prop 27 wasn’t written with Californians in mind — rather that it’s a self-serving measure from sportsbook operators on the East Coast.
Prop 27 — Mobile Sports Betting From Private Companies
Prop 27 would legalize mobile and online sports betting in California.
Private sportsbook companies, like DraftKings and FanDuel, would secure licenses from the state and partner with tribes in the state to offer their online sportsbooks to Californians. Sports betting revenue would fund homelessness and addiction programs in California. It would also share some revenue with non-gaming tribes.
The private sports betting companies are looking for a stake in what could become the largest online sports betting market in the US, with California having the country’s largest population by far at just under 40 million residents. Prop 27 is the private sportsbooks’ attempt to secure the largest stake possible in California’s potential sports betting market.
Recent ads from Prop 27 backers claim their measure will help the homeless population and the non-gaming tribes that larger California gaming tribes have “left in the dust.”
What if Both California Sports Betting Ballot Initiatives Pass?
If one initiative passes, then the winning sports betting framework will be deployed in California. However, if both initiatives pass, the courts will have to step in.
Prop 26 and Prop 27 propose opposite changes in the law regarding online sports betting. One allows it, and one prohibits it. So most legal experts think the Prop 26 vs. Prop 27 battle could go to the courts if both get passed.
The parties behind both initiatives have competing interests. California’s tribes want to maintain control of gambling. Business revenue funds social services on tribal lands. So, the tribes want to keep gambling revenue for continued economic development.
Major private sportsbook companies want access to what would be the largest sports betting industry in the US. California’s population is about double New York’s with a large pool of wealthy potential bettors. It would be a gold mine for private sports betting in CA.
The Other Two California Sports Betting Ballot Initiatives
California’s other two sports betting initiatives failed to qualify for the 2022 ballot. One was backed by three tribal casinos. It would’ve allowed mobile sports betting controlled by the tribes. That initiative’s backers have submitted it for the 2024 ballot instead.
California’s card rooms also sponsored a CA sports betting initiative that would allow them to offer sports betting. It was similar to the operator initiative, also funding homelessness programs. It failed to qualify for California’s ballot in November.
So, November will be a showdown between the private operators and California’s tribes.
California Ballot Initiative Donors
Prop 26 and Prop 27 have both generated millions of dollars in support and opposition.
Tribal Initiative Support and Opposition
According to state filings, the tribal initiative is backed by a group called the Coalition for Safe, Responsible Gaming. Its top donors include tribes with obvious stakes in California’s gambling industry. The San Manuel Band of Mission Indians, for instance, has donated $50 million; that tribe owns Yaamava’ Resort Casino, the largest casino in California.
Overall, the group has donated about $91.7 million in support of Prop 26, per the California Secretary of State’s database as of Aug. 15
The opposition is largely made up of a committee called the Taxpayers Against Special Interest Monopolies. The California Commerce Club (which owns Commerce Casino, one of California’s top card rooms) and several private casinos and gambling companies, including Hawaiian Gardens Casino, another prominent CA card room, comprise this committee. Gambling Company, PT Gaming LLC, made its own committee, No on the Gambling Power Grab, to oppose the tribal initiative.
Together, these committees have donated about $41.2 million to oppose the tribal initiative. Despite their grassroots-sounding names, these organizations are groups that want to open the gambling industry to private companies instead of keeping most of it with California’s tribes.
Most recently, the Tejon Indian Tribe announced its support for Prop 26. The Tejon Tribe consists of about 1,200 members, and most live in the Bakersfield area. The tribe plans to build its own casino, the Hard Rock Hotel & Casino Tejon.
“It’s another stream of revenue on top of whatever table games, slot revenue, entertainment that you’re offering at your facility,” Octavio Escobedo III, Chairman for the Tejon Tribe, told KBAK Bakersfield. “Now you can offer sportsbooks in person.”
Operator Initiative Support and Opposition
The operator initiative has raised $150 million in support from one group called Californians for Solutions to Homelessness and Mental Health Support. This group is made up of some of the largest gambling companies in the US, including:
- BetMGM LLC
- Betfair Interactive US LLC (FanDuel)
- Crown Gaming, Inc. (DraftKings)
- Bally’s Interactive LLC
- FBG Enterprises LLC (Fanatics, Inc.)
- Penn National Gaming, Inc. (PENN Gaming/Barstool)
- WSI US LLC (WynnBET)
Opponents to the operator initiative have raised over $119.2 million between two committees. Both the Californians for Tribal Sovereignty and Safe Gaming and the Coalition for Safe, Responsible Gaming are made of California tribes with ties to the gambling industry.
Three non-gaming California tribes — the Big Valley Band of Pomo Indians, Middletown Rancheria of Pomo Indians, and Santa Rosa Rancheria Tachi Yokut Tribe — publicly support Prop 27.
“Prop. 27 will provide us with economic opportunity to fortify our Tribe’s future for generations and protect Tribal sovereignty,” said Leo Sisco, Chairman of the Santa Rosa Rancheria Tachi Yokut Tribe, in a press release. “And it is the only measure that will deliver hundreds of millions of dollars each year to help solve homelessness and address mental health in California.”
There is a provision in Prop 26 that expands the Private Attorneys General Act, which would allow tribes to hire private attorneys to sue card rooms in potentially costly lawsuits that card rooms worry could put them out of business. Prop 26 could also hurt card rooms by providing another in-person gambling option — one that would be widely popular, and unavailable at card rooms. As a result, almost all CA card rooms oppose Prop 26. Some support Prop 27.
Ad Money Spent on Prop 26 and Prop 27
According to a recent analysis by AdAge and Kantar/CMAG, from Dec. 28, 2021, to July 25, 2022, ads for and against Prop 27 cost $118 million. That’s the fourth-highest ad spend of any campaign — including House of Representatives, Senate, and gubernatorial races — in the country.
The five most expensive House races combined add up to $82 million, a full $36 million less than pro-/anti-Prop 27 spending.
Ads for and against Prop 26, meanwhile, cost $100 million.
Combined, the $218 million total spent on Prop 27 and Prop 26 adds is nearly as much as the $242 million the Democratic Party spent on all House campaigns throughout the US.
What the Initiatives Do for Bettors
The sports betting initiatives do two things for bettors: Offer different sports betting frameworks and direct funding to different programs.
Prop 26 — Tribal Initiative
The tribal initiative would allow in-person betting at tribal casinos and California horse racetracks. Sports betting legislation often leaves out horse racetracks, but their inclusion allows the proposition’s fiscal note to read positive. Card rooms would be taxed while each tribe would negotiate revenue-sharing deals individually.
The tribal initiative would set a 10% tax rate on sports betting revenue. That money would be disbursed as follows:
- 15% to problem gambling programs
- 15% to the state regulator to enforce industry rules
- 70% to California’s General Fund
Its fiscal note estimates that state tax revenue could increase by the “mid-tens of millions.” Additionally, state regulatory and enforcement costs could increase by the “low tens of millions annually.” So, its fiscal note projects a smaller increase in regulatory costs than the operator initiative.
Prop 27 — Operator Initiative
The operator initiative would allow online sports betting to be offered through private gambling companies. Private companies would partner with California’s tribes to offer mobile sports betting across the state. So, bettors wouldn’t have to travel to a tribal casino to place sports wagers.
The operator initiative would tax sports betting revenue at 10%. After covering regulatory costs, those funds would be allocated as follows:
- 85% to homelessness programs
- 15% to nonparticipating tribes
Its fiscal note estimates that state tax revenue could reach the “mid-hundreds of millions of dollars annually.” In contrast, new regulatory costs could increase by “mid-tens of millions.” So, the operator initiative projects a larger increase in new tax revenue than the tribal initiative.
California Sports Betting Initiative Summary
Californians have two sports betting initiatives to vote on in November.
The tribal initiative, Prop 26, would allow tribal casinos and horse racetracks to offer sports betting. This initiative would not allow mobile sports betting. It would fund problem gambling programs, sports betting policy enforcement, and General Fund deposits. The tribal initiative’s fiscal note estimates a smaller increase in regulatory cost than the operator initiative. The tribal initiative’s full name is the California Legalize Sports Betting on American Indian Lands Initiative.
The operator initiative, Prop 27, would allow private sportsbook companies to offer mobile sports betting through partnerships with California’s tribes. This initiative would fund homelessness programs and tribal development. Its fiscal note estimates a larger increase in state tax revenue than Prop 26. Its full name is the California Legalize Sports Betting and Revenue for Homelessness Prevention Fund Initiative.