Not many winners came out of the 2022 California sports betting proposition battle. Caesars Entertainment and IGT could stake their claim among them.
As California tribes clashed with leading sportsbook operators over Prop 26 and Prop 27, these companies stayed out of the fray because of their established relationships with tribes in the state.
On Tuesday, Caesars CEO Tom Reeg and Enrico Drago, CEO for digital and betting at IGT, headlined a panel discussion at the Indian Gaming Association conference in Arizona.
That a tribal perspective on what’s next for sports betting in California featured only executives from Caesars and IGT speaks volumes about where the companies stand to tribes in the aftermath of the 2022 elections.
Reeg, who spoke additionally with PlayCA and Legal Sports Report after the panel, said Caesars was invited to participate in Prop 27 but declined. Caesars operates two California tribal casinos, one on behalf of the prominent Rincon Band of Luiseno Indians.
“I’ve been around the industry long enough to know we weren’t going to be able run around the tribes even if that was something we wanted to participate in. So the outcome was not a surprise. Do I recognize that this puts us in a more favorable light than those who pushed it? Sure. But that was not part of the calculus at the time.”
Reeg warned operators against filing Prop 27
FanDuel, DraftKings and BetMGM led the campaign for online sports betting Prop 27. In total, seven sports betting companies contributed $169.6 million to the campaign. Though not all of it was spent.
Knowing the success of California tribes on the ballot since the passage of Prop 5 in 1998 (which allowed tribal-state gaming compacts), Reeg warned fellow operators about filing an initiative without tribal support.
“I know the people that wrote Prop 27 well. They have confidence in themselves and they’re in a very big hurry. I told them I was around for Prop 5 and everything that’s happened since, and the tribes are undefeated against people like yourselves in this arena. So you’re going to lose, I told them this.”
Even though he knew Prop 27 was going to lose, even Reeg was surprised with how badly it finished. As of press time, the California Secretary of State’s unofficial results showed 17% voting yes. That would rank as the 10th-worst initiative finish in state history dating back more than 100 years.
“You’ve got to get on the same page with Indian Country if anything is going to happen in California. That’s very clear. They got poor advice. Some lobbyist told them you can go this way, do an end-around and go in for football season of next year. They believed what they wanted to believe and you saw the result.”
Tribes want technology providers, not partners
In Prop 27, sportsbook operators tried to partner with tribes. Multiple tribal representatives have indicated that they don’t want partners. They want to be the operators for sports betting in California with companies providing them the technology.
“We’re not going to let them come in here and be brands in the state,” San Manuel Band of Mission Indians chief of staff Frank Sizemore told PlayCA at the conference. “It’s just not going to happen. The San Manuel perspective is they have a role as a software provider, a technology provider. And if they’re willing to accept that, there might be something there. But we can’t even come to the negotiating table unless they accept that.”
Jason Giles, executive director of the Indian Gaming Association, also participated in the panel. He contended that operators came into California looking at tribes the wrong way. They viewed tribes as customers when they should have approached them as they do state governments.
“If they really want the help to perhaps capture the largest sports betting market in the United States and the largest in the world potentially, they’re going to need to come in with a full dose of humble pie and start talking with tribal leaders one-on-one, tribal governments one-on-one.”
Caesars and IGT are well-positioned in California
It’s clear the sports betting companies behind Prop 27 have a lot of ground to make up with California tribes.
But Caesars and IGT now find themselves well-positioned to work with California tribes on online sports betting in the future.
That’s not only because they did not support Prop 27. It’s also that they are willing to defer to California tribes and accept how they decide to move forward on sports betting.
“We want to participate in sports betting in California,” Reeg said. “But we’ve always recognized it only makes sense if the tribes are on board. So if there’s a place for us in that, we’d love to participate.”
Caesars and IGT also are open to participating in the business-to-business model described by San Manuel, which is a sticking point with the Prop 27 operators.
IGT excels in B2B. The company has filled that role by providing slot machines to tribal casinos in California for decades. IGT also provides B2B sports betting technology to many of the operators behind Prop 27.
Drago stressed that no proposition can move forward in California if tribal sovereignty to offer gaming is challenged in any way.
“There’s a lot at stake here. It’s a huge market. It is for gaming, and there’s no reason why it shouldn’t be the same for sports betting. But, again, everything should start from the tribes finding a way to go at this again and then eventually inviting these other stakeholders.”
