Voters in California have two initiatives about sports wagering to decide on this fall. San Jose leaders have rejected both sports betting measures, propositions 26 and 27.
Prop 27, backed by operators such as FanDuel and DraftKings, would allow sportsbooks to partner with tribes to offer online betting. Online revenue would be taxed at 10% after various deductions such as regulatory costs, licensing fees, prizes and renewal fees.
What’s left would be divvied between undefined permanent and temporary housing needs (85%), and tribes for expanding tribal government, public health, education, infrastructure and economic development (15%).
Councilmembers unanimously opposed to sports betting props
The San Jose City Council saw the competing initiatives as harmful to Northern California casinos. The city collects 16.5% in revenue tax from its two cardrooms – Casino M8trix and Bay 101. As a result, San Jose takes in about $15 million annually.
Councilmember Dev Davis told the San Jose Spotlight that that was the central issue in rejecting the initiatives.
“These new measures could force them out of business, and we do not want to lose revenue. It expands the ability of the casinos that are not in San Jose to do business, so it makes them more attractive. And it’s very possible that we could lose business that way.”
California cardrooms could be sued out of existence
Prop 26 poses an additional threat. It could expand the Private Attorneys General Act, which allows tribal casino operators to pursue lawsuits against California cardrooms. That could bankrupt businesses, officials have said.
According to Ron Werner, general manager at Bay 101, non-tribal casinos could find themselves vulnerable to frivolous lawsuits from tribal casinos looking to run them out of town. Many of the card rooms couldn’t bear those costs.
“It’s death by attrition, death by lawsuit,” Werner told San Jose Spotlight.
Moreover, the measures don’t provide a level playing field for all card rooms. Some non-tribal casinos, racetracks and card rooms could be left out of participating in sports betting. Werner believes both initiatives were written for special interest groups and that they would be of little benefit to the people of California.
“We’re not opposed to sports betting, per se. We’re opposed to continuing a monopoly for special interest groups.”
Lines drawn over Prop 26
The main proponents of Prop 26 are a group of 18 Native American tribes that would stand to benefit immensely from the measure. The Pechanga Band of Luiseno Indians, Yocha Dehe Wintun Nation and the Barona Band of Mission Indians are part of this coalition that strongly backs the measure.
So far, $73.08 million has been collected by the coalition through campaign funds. On its website, The Coalition for Safe, Responsible Gaming, Sponsored by California Indian Tribes wrote this:
“Prop 26 will bolster Indian self-reliance, create new jobs and economic opportunities, and generate tens of millions of dollars each year in new revenues to support vital state services.”
Among the loudest and most generous opponents of Prop 26 are gambling-related companies, such as the California Commerce Club, the Hawaiian Gardens Casino and Knighted Ventures LLC.
Governmental authorities indisposed to the bill are the California Contract Cities Association Union and the California Cities Gaming Authority.
Some prefer Prop 27, as it promises more money
A comparable set of supporters can be found for Prop 27 with the addition of advocacy groups like Bay Area Community Services, the Sacramento Regional Coalition to End Homelessness as well as mayors from Oakland, Sacramento, Fresno and Long Beach.
The rationale behind their support is that the initiative could generate more money to combat the problem of homelessness. That’s how Bay Area Community Services CEO Jamie Almanza sees it.
“By creating a safe and age-restricted online sports betting market, California can capture hundreds of millions of dollars in revenue and use it to help solve one of our greatest challenges.”
San Jose officials skeptical of Prop 27 claims
Despite this, San Jose officials are not confident in its ability to generate much money. The problem, they say, is that the proposition does not specify the amount allocated to local municipalities. Neither does it outline how much it could keep after fees are collected, according to Davis.
“Tying up vices like gambling to something that sounds good is one of the ways that proponents try to get voters to approve these things when they otherwise might not. The money generated is such a small amount that it ends up not being worth it.”
These remarks are similar in nature to recent ones made by Gov. Gavin Newsom. Newsom has maintained neutrality, but dismissed claims regarding Prop 27 and homelessness at an appearance last week.
Mayor Sam Liccardo’s opposition to Prop 27, meanwhile, is simple: He’s just not a fan of gambling. In 2020, the city asked voters to pass Measure H, a bill to raise the cardroom tax from 15% to 16.5%. Liccardo was the only one against it.
“I have opposed all local and statewide gambling proposals because studies continually show the negative impacts gambling has on our most vulnerable communities. Including domestic violence, child neglect, loan sharking and deepening poverty.”
How do other cities see Prop 26 and Prop 27?
Many leaders in larger cities, including the mayors of Sacramento, Long Beach and Oakland, support Prop 27. San Diego’s CEO of the Regional Task Force on Homelessness, Tamera Kohler, is on board.
Kohler expects San Diego to receive $30 million annually if online sports betting becomes a reality in The Golden State.
Fresno mayor Jerry Dyer supports Prop 27 as well.
“This ballot measure would give cities like Fresno a guaranteed funding source to address homelessness.”
When it comes to Prop 26, though, Fresno leaders strongly urge a “no” vote. Two Fresno councilmembers, Luiz Chavez and Mike Karbassi, both feel the measure would ultimately hurt cardrooms in Fresno and have a direct negative economic impact on California’s poverty-stricken regions.
“We receive over a million dollars from our local cardroom folks here. They employ over 400 people. And we know that those resources are used for our parks, police, fire, [and] infrastructure in our communities.”
Councilmembers are concerned that once Prop 26 passes, bettors will no longer frequent Fresno card rooms. Instead, they’ll head over to tribal casinos to scratch their gambling itch.
Conversely, the city of Atwater prefers Prop 26. City leaders argue that Prop 26 would keep all gaming on tribal land, as it’s been since 1988.
The measure would generate tens of millions of dollars for the state’s general sports wagering fund. It would also create additional revenue and jobs for tribes, and local businesses near casinos would also benefit.