Even the most apolitical gambler in the Golden State is likely to head to the voting booth this year.
Next month, there are not one, but two ballot initiatives that would legalize California sports betting.
Proposition 26 focuses on in-person wagering at California tribal casinos and select California horse racing venues. On the other hand, Proposition 27 is centered around bringing online wagering to California.
There are north of 39 million residents in California. That’s a larger population than most countries have. By comparison, there are roughly 38 million citizens in all of Canada.
As a result, a sports betting launch in the Golden State would almost certainly make it America’s largest sports betting market. And with so much money at stake, there are plenty of special interest groups fighting for their piece of the pie. It’s already the most expensive ballot battle in U.S. history.
To clear up any confusion for California sports bettors, here’s a breakdown of both proposals.
Editor’s note: Both props failed on the California ballot in November 2022. Check back to our California Sports Betting Propositions page for further developments.
Proposition 26: In-Person Tribal Sports Wagering Measure
Background:
The California Constitution limits gambling options. State law currently bans sports betting, roulette and craps. However, it does permit a state lottery, certain types of card games in both California cardrooms and tribal casinos, horse racing betting, and slot machines at tribal casinos.
In May 2018, the United States Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992 by a 6-3 margin. This landmark decision gave state legislatures the right to decide whether sports betting was legal in its jurisdiction. Before the case, the federal government only allowed sportsbooks in Nevada.
The move sparked a movement across the country to legalize sports betting, starting with New Jersey. As other jurisdictions saw the success of the Garden State’s market, they also used whatever avenue necessary to bring betting to their state.
This initiative is one of California’s first attempts at joining that movement.
What would it do?
The initiative would alter the language of the California Constitution to allow for a gambling expansion. Most notably, the proposal would allow for in-person sports betting at the state’s tribal casinos and four privately-operated horse tracks. Online sports betting would not be authorized under this proposal, Californians would not be allowed to bet on in-state college teams, and anyone above the age of 21 would be allowed to wager.
But Prop 26 is about more than sports betting. It would also allow tribal casinos to offer roulette and craps.
It wouldn’t be an overnight switch for the tribes. Tribal casinos that choose to offer sports betting must first change their compact with the state to allow it. If the state and the tribe can’t agree to new terms, then nothing would change.
However, this outcome is incredibly unlikely. Both parties are incentivized to agree because of increased revenues on both sides.
What would it cost the state government?
If voters pass the initiative, California’s state budget would increase slightly. The government would endure increased enforcement and regulatory costs from expanded gaming. The California Legislative Analyst’s Office said the increase would “not likely exceed the low millions of dollars annually.”
But the LAO also noted that the increase is less than one-half of 1 percent of the state’s total budget. Additionally, those increased costs would certainly be offset by the increased tax revenue. According to the LAO, the increased revenue could be in the tens of millions of dollars annually.
The new revenue streams would stem from the 10% tax on betting revenue from horse tracks. Tax revenue from tribal betting would depend on how the state compacts are amended.
Why is it on the ballot?
The initiative was filed in November 2019 by three tribal nations. After the pandemic stymied signature-gathering efforts for the 2020 ballot, the tribes resumed their efforts as restrictions were relaxed.
Last May, California election officials verified more than 1 million signatures in support of the proposal, which qualified the initiative for the 2022 ballot.
What supporters say
It provides more revenue for California’s tribes. Gaming revenue is the driving factor behind those nations providing services for its members. It also gives horse tracks a new way to attract business to their facilities. Some claim it is an incremental way to introduce sports betting to the state.
Supporters:
- 25 Native American Tribes
- Most notably the Pechanga Band of Luiseno Mission Indians, Baron Band of Mission Indians, Aqua Caliente Band of Cahuilla Indians and the Yocha Dehe Wintun Nation
- Western Regional Advocacy Project
- Several Law Enforcement groups
- Most notably the California District Attorneys Association, Deputy Sheriff’s Association of San Diego, Riverside Sheriffs’ Association and the San Diego Police Officers Association
- Numerous trade or business boards
- Most notably the American Indian Chamber of Commerce, Asian Business Association of San Diego, Beaumont Chamber of Commerce and the San Diego Regional Chamber of Commerce
- Numerous social justice advocacy groups
- Most notably the California/Hawaii State Conference NAACP, Greater Sacramento Urban League, Los Angeles Metropolitan Churches and the Santa Clarity Branch NAACP
- Two Labor Unions – Communications Workers of America and SEIU Local 280
- Two Veterans Groups – Veterans of Foreign Wars Department of CA and the Veterans Affiliated Council of Sacramento and Vicinity
- Several political groups
- Most notably the California Young Democrats, Asian Americans for Good Government PAC and the Madera Country Democratic Central Committee
What opponents say
By keeping online betting out of the market, the proposal produces very little revenue for state coffers. Instead, it mostly benefits the tribes. Additionally, the provisions could allow tribal interests to sue local cardrooms out of business.
Opponents:
- American Federal of State, County and Municipal Employees California
- California Contract Cities Association
- Mayors of Compton and Commerce
- The California Republican and Democratic Parties
- The California Animal Welfare Association
- Several major newspapers including the San Jose Mercury News and the Orange County Register
Where is the money coming from?
Most of the money used to promote Prop 26 comes from the tribes themselves. The Coalition for Safe, Responsible Gaming raised $118.3 million to both oppose Prop 27 and support Prop 26. The group is made up exclusively of tribes with gaming interests.
A group titled Taxpayers Against Special Interest Monopolies raised $38.3 million in opposition to the proposal. The group is comprised of California cardrooms and bars that offer gambling. Those groups will lose the biggest piece of the state’s gambling market if Prop 26 passes.
Proposition 27: Online Operator Sports Wagering Measure
Background: Like its competing proposal, this is a reaction to the overturning of PASPA and the legalization of sports betting in California.
However, this proposal doesn’t have much to do with the tribes. Instead, this proposal would bring some of the nation’s largest online sports betting operators into the Golden State.
What would it do?
Like its counterpart, Prop 26, this proposal would change the language of the state constitution to allow for sports betting. But in this case, it would allow for both tribal and non-tribal entities to offer online and mobile betting. The proposal would prohibit anyone under the age of 21 from wagering on sporting events.
However, operators like DraftKings, FanDuel and BetMGM must partner with a federally recognized Indian tribe. This gives tribes the flexibility to either partner with an online operator or run an online sportsbook independently.
The initiative requires prospective operators to be licensed in at least 10 other states. An online license will cost $100 million and is renewable every five years for an additional $10 million. Online wagers cannot be placed while on tribal lands.
Retail betting is not addressed in this initiative. Another major difference between the two initiatives is how the tax revenue is divvied up. Under Prop 27, both tribal and non-tribal operators would pay 10% of revenue to the state.
Additionally, the proposal would create the California Online Sports Betting Trust Fund. The new fund would be where sports betting tax revenue is directed. Once the regulatory costs are covered, the state must use 85% of the revenue to address its homelessness problem. The remaining 15% would be given to tribes that aren’t involved in online sports betting.
What would it cost the state government?
The online proposal would pose a much larger increase to the California state budget than its retail-only counterpart.
The initiative would create a new unit within the California Department of Justice to regulate the online betting market. The unit would investigate any potential illegal activity like match-fixing or point shaving. But it would have a mostly hands-off approach regarding regulating the operators.
Additionally, the initiative would create a 17-member board to make recommendations to the enforcement arm.
According to the LAO, the “size of the increase is uncertain.” But it could be in the mid-tens of millions of dollars. However, it also noted that the state revenue increase would outsize any regulatory cost.
The group estimates that there will be a nine-figure increase in the state coffers. But it likely won’t exceed $500 million annually.
Why is it on the ballot?
The California Secretary of State announced the online sports betting initiative also received enough signatures to be on this year’s ballot. The move came about a year after the tribal initiative initially qualified.
Election officials used a random count to verify the signatures and projected that the proposal received 1,142,317 signatures. The state only required 997,139 signatures to certify Prop 27.
DraftKings, FanDuel, BetMGM, Bally’s Interactive, Fanatics, Penn National Gaming and WynnBET backed the initiative. Those companies used a combined $100 million to fund the signature-gathering efforts.
These companies wanted to make sure they had a chance to get into the massive California market. Especially after election officials certified the tribal in-person initiative.
What supporters say
The online initiative would generate much more revenue than a retail-only market. In every other market with both retail and online betting, the online wagering revenue dwarfs the retail revenue.
Furthermore, the tax revenue would mainly go to help the homeless, which is one of the state’s most pressing issues. It would also be the first permanent funding source to fight the problem.
Lastly, most Californians that use black market sportsbooks would be converted to the regulated market. On the other hand, a retail-only market will still incentivize those residents further away from a sportsbook to use online black market operations.
Supporters:
- The major online sportsbooks that funded the initiative
- Big Valley Band of Pomo Indians
- Middletown Rancheria of Pomo Indians
- Santa Rosa Rancheria Tachi Yokut Tribe
- Sacramento Mayor Darrell Steinberg
- Fresno Mayor Jerry Dyer
- Oakland Mayor Libby Schaff
- Long Beach Mayor Robert Garcia
- President and CEO of United Way of Greater Los Angeles Elise Buik
- California Black Chamber of Commerce
- More than a dozen homelessness and housing service organizations
- Major League Baseball (though MLB stopped short of a full endorsement)
What opponents say
The main argument against Prop 27 is that out-of-state companies will benefit from this initiative the most. Other arguments include the high cost of entry to the market will limit the number of operators in the state and that gambling initiatives are a poor way to fight social problems like homelessness.
There is also a bit of fear that allowing online betting will end up with an increase in problem gambling.
Many of those opposed to Prop 27 are also in favor of passing Prop 26 (most notably the Coalition for Safe, Responsible Gaming).
Opponents:
- Gov. Gavin Newsom
- Both California’s Democratic and Republican Parties
- California Teachers Association
- Senate President Pro Tempore Toni Atkins
- Assembly Speaker Anthony Rendon
- Western Regional Advocacy Project
- California Coalition for Rural Housing
- Communication Workers of America
- California/Hawaii NAACP
- California League of United Latin American Citizens
- Los Angeles Metro Churches
- Veterans of Foreign Wars Department of CA
- California Nations Indian Gaming Association
- Tribal Alliance of Sovereign Indian Nations
- Temecula City Council
- California State Association of Counties
- More than 60 individual CA tribes
- Gwyneth Paltrow (yes, that Gwyneth Paltrow)
Where is the money coming from?
Not surprisingly, most of the money supporting this initiative is coming from the seven gaming companies that backed the proposal from the start. They are funding Yes on 27, a media campaign in favor of passing the ballot initiative. In total, the campaign raised $150 million for its efforts, representing nearly 35% of the total spending related to these initiatives.
A coalition of gaming tribes funded No on 27 to the tune of $66.2 million.
