Could California actually join the list of states with legalized sports betting? It was thought that California could get there eventually, but that the most populous state in the country would take quite a bit of time getting to that point. Recent legislation and progress have industry observers and sports betting operators more excited than ever.
As far as sports betting goes, this would be a new kind of gold rush. Industry projections suggest that California could easily be the biggest market for sports betting with upwards of $200 million in taxes initially, not to mention three commas and a whole lot of zeroes worth of betting revenues.
The COVID-19 pandemic is going to point several states towards legalized sports betting as a means of getting back some of the large budget deficits created by all of the assistance programs that were required for residents and businesses. California has had sports betting legislation active in the House and Senate at various points since PASPA was overturned by the US Supreme Court on May 14, 2018, but it was never thought to be all that serious. Now, things have changed.
Proposed legislation would include a 10% tax on gross revenue in a retail setting and a 15% tax on mobile or online wagering. While the 15% number is a little bit high for operators based on other states, the amount of money at stake in California will not make 15% cost-prohibitive in any way. In fact, Pennsylvania, which has what was thought to be an obscenely high tax rate, could the preeminent sports betting market east of the Mississippi within the new few years.
While the bills are moving forward in the eyes of the state’s elected officials, a lengthy legal battle appears likely. Tribal casinos, card rooms, and racetracks are going to have to come to an agreement.
This expansion of gaming would also include the ability for those Native American-run facilities to offer craps and roulette. Card rooms generally offer only blackjack and poker while operating in a grey area of California law. The proposed bill in California would legitimize the card rooms, but the trade-off is that tribal casinos would get sports betting and the card rooms would not.
Tribal representatives, however, are upset that the proposed bill includes mobile wagering, as retail sports betting would be better for the tribes because it would force people to their properties.
Therein lies the primary battle. These casinos and card rooms carry the weight of a special interest group. The tribal casinos, especially, and we have seen the heavy impact of tribes in states across the country, whether they are for or against sports betting. They definitely have more than a say at the table.
The tribes had started their own initiative, but the coronavirus outbreak ended their ability to get enough signatures for a measure to go on the ballot for the November general election. They’d have to wait until 2022 now if the state of California doesn’t move forward first.
In other words, there are a ton of interests in play. Some groups are excited to just get a piece of the pie and others want to take the entire pie and run away with it. The proposed bill also has to make it through both bodies of the state legislature with a two-thirds vote. That seems like a big ask at present, especially with so many of the state’s representatives and senators pulled in all kinds of different directions.
If the legislature can pull the upset, then it goes to a popular vote, which would most likely pass since the major sports leagues are totally on board with California getting added to the ranks of the states with wagering, but it would still be a hot-button issue in November in a lot of different ways.
Furthermore, with California putting out a lot of money to fight the COVID-19 pandemic, some of the money was re-appropriated from education. The plan would be to sell sports betting revenue as a way to prop up the schools in California. The state is very unlikely to get a federal bailout unless President Donald Trump is voted out in November and it may still even be a tough sell after that because the federal government has been operating at such a loss.
That means that California needs to find new solutions for revenue and sports betting seems to be at the forefront of the proposed ideas. SCA 6 is an amendment to the state constitution, which is why it would have to go to the voters if enough legislators pass it.
As usual, the chief selling point boils down to “It’s happening anyway, so let’s tax it” per State Senator Bill Dodd and he’s not wrong.
Let’s hope the state legislature can get the tribal casinos and the card rooms on board and get enough of a vote to get it to the people. Even if it doesn’t happen for 2020, these have been productive discussions and have gotten California much closer far earlier in the process than anybody expected.
