Competing Interests Compete for Control of California Sports Betting

More than two dozen states and Washington DC have legalized some form of sports betting since a 2018 Supreme Court decision lifted a federal ban. California still doesn’t have that, but a few dueling initiatives in the vote in November could change things.

In the style of California politics, it’s all a giant, expensive mess of competing interests. Proposition 26 and Proposition 27 legalize betting on professional, collegiate and amateur sports. But who is allowed to make money from gambling, where the tax revenue for gambling goes and how citizens can gamble vary enormously. Existing tribe-owned casinos want to maintain a cartel free from competition from online gambling companies, who want to withdraw and serve more gamblers.

Proposition 26 is the baby of those existing gaming tribes, and it shows. It restricts sports betting to existing casinos and licensed racetracks, all owned by tribes in California. It would also allow dice games and roulette in existing tribal casinos if they change their agreements with the state to offer them. It does not allow online or mobile sports betting. Prop. 26 will impose a 10 percent tax on sports betting money. Fifteen percent of that 10 percent tax would go to the state for gambling addiction programs. Another 15 percent would go to the state’s Bureau of Gambling Control to enforce the rules. The rest would go to the state’s General Fund to be spent, however lawmakers choose.

Proposition 27 allows online sports betting companies to partner with gaming tribes in the state to offer online sports betting to people over the age of 21. It specifically requires people engaged in sports betting to be in the state of California but not in the Indian country. It also levies a 10 percent tax on sports betting. It would create a division within the California Department of Justice to regulate online betting and enforce the law. The tax revenue of Prop. 27 would go into a trust fund after financing the regulatory costs. A bill would set aside 85 percent of this money for homeless housing and aid and mental health care. The remaining 15 percent would be sent to “non-participating tribes” in California that do not have gambling contracts.

Prop. 27 is supported by Major League Baseball, and backers to the campaign include BetMGM (the online sports betting partner of MGM resorts) and the companies behind FanDuel Sportsbook and DraftKings, according to Ballotpedia. Prop. 27 is opposed, for obvious reasons, by the existing gaming tribes in California (some tribes that benefit from the Prop. 27 fund do support it, though).

Millions of dollars are being spent to support and oppose the two propositions as tribes and corporate gambling companies compete against each other. Ballotpedia charges approximately $150 million in donations both for and against Prop. 26 and $200 million both for and against Prop. 27. California residents are being hammered with advertisements.

The Los Angeles Times is in unabashedly paternalistic terms against both bills, is concerned about the negative consequences of the expansion of gambling and cares little about individual freedom. or people want gambling appears to play no part in their position, only that “the normalization of sports betting has been fueled by betting platforms, athletic leagues and media companies, who see gains in persuading people to gamble away their dollars.”

For those who value individual freedom over moral panic: Michelle Minton and Marc Joffe of the Reason Foundation (the nonprofit that publishes Rode) analyzed both Prop. 26 as Prop. 27 on their impact. When discussing Prop. 27, they note that any expansion of access creates panic about problem gambling, but that ‚Äúdespite extraordinary increases in access to gambling, problem gambling remains rare and its prevalence has been remarkably stable in the US since the 1970s. saying that problem gambling should be ignored, just that the risks should not be exaggerated.”

Their analysis shows that Prop. 27 the initiative would be to provide California consumers with a competitive gambling environment and give the state more revenue (because, unlike the tribal casinos, these gambling companies would pay additional taxes to the state on top of the 10 percent mentioned in the initiative). Here’s how they see the two stack up:

Prop. 27 would create a more robust and competitive sports betting market than Prop. 26 by allowing online and mobile betting, and generating billions in revenue for the state, gaming tribes and operators in accordance with those tribes. Still, it can divert some income from personal betting at tribal casinos. It can also put those tribes that want to enter the online sports betting market but do not want to partner with national brands at a disadvantage in the market.

Proposition 26 would benefit the state’s gambling tribes and block out-of-state gambling companies from the California market. But the benefits provided by Prop. 26 could be at the expense of Californians who have competitive choices where to gamble and would mean missing out on hundreds of millions in tax revenue. Proposition 27 would have generated for other communities, non-gambling tribes and housing programs.

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