Fiscal Analysis Challenges California Tribal Mobile Sports Betting Initiative

Written By Matthew Kredell on January 6, 2022 - Last Updated on August 22, 2022
Analysis of CA Indian tribes sports betting proposal raises concerns

A fiscal analysis of the mobile sports betting initiative proposed by some Native American tribes raises doubt as to how much money it would bring to help fight homelessness. The report even questions if revenue generated from the initiative could go toward that purpose at all.

Last week, the state’s legislative analyst and director of finance issued a fiscal impact estimate report for the Age-Verified Tribal On-Line and In-Person Sports Wagering & Homelessness Solutions Act.

Chairpersons of the San Manuel, Rincon, Graton Rancheria, and Wilton Rancheria tribes filed the mobile sports betting initiative two months ago. The initiative is a possible alternative to a brick-and-mortar tribal initiative already qualified for the November 2022 ballot, and a mobile sports betting initiative backed by sports betting operators.

Tribes mobile betting model reveals revenue uncertainties

The San Manuel initiative permits retail and statewide mobile sports betting only by Indian tribes.

It earmarks 15% of sports betting revenue to smaller or non-gaming California tribes and 10% to a California Homelessness and Mental Health Fund (CHMHF). It includes no licensing fees.

The fiscal analysis provides a wide range of revenue projections. It cites unknowns regarding the number of tribes that would adopt the model compact agreement.

According to the report:

“The magnitude of the increase in state revenues is highly uncertain. Revenues could range from the tens of millions of dollars to the mid-hundreds of millions of dollars annually depending on how it is interpreted and implemented.”

Revenues contributed to the CHMHF would first cover state regulatory costs from sports betting. The analysis projects regulatory costs in the low-to-mid tens of millions. The lower end of revenue projections could leave no money for addressing homelessness and mental health.

The initiative language limits reimbursement of state regulatory costs to 10% of the amount paid into the fund. Clearly, tribal petitioners must expect more on the higher revenue range.

The legality of planned homeless fund contributions questioned

In addition to highlighting uncertainty in the revenues, the analysis questioned requiring tribes to make payments to a homelessness fund through tribal-state compacts.

The report notes that a federal court previously determined that payments required by certain tribal-state compacts into the state’s general fund for use at the state’s discretion generally were an illegal tax, and therefore prohibited under federal law.

The report’s authors state this also would apply to the model compact agreement.

Why this could impact the CA sports betting initiative

It’s typical in a fiscal analysis of ballot measures to identify plausible revenue ranges and potential legal issues. And initiatives involving tribal compacts are bound to have revenue uncertainties.

However, analyses of the California sports betting initiatives proposed by the cardrooms and operators indicate that revenues could reach the mid-hundreds of millions of dollars annually. They didn’t receive a lower range.

The fiscal report projects revenues in the tens of millions of dollars annually. And increased state regulatory costs potentially reach the low tens of millions.

Specifically, because critical points from the fiscal report appear in the ballot summary of the initiative, the analysis could be significant.

Consequently, it’s possible for multiple sports betting initiatives to appear on the ballot. Voters may decide between them based on which would bring in the most money for the state.

A synopsis of the fiscal analysis also will appear in the title and summary issued by the California Attorney General. Its release is coming on Jan. 11.

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