After months of waging the war for California sports betting in advertisements and commercials, spokespersons for Prop 26 and Prop 27 stepped into the same room for a live debate.
Nathan Click represented Prop 27 and Kathy Fairbanks represented Prop 26 in the event hosted by the Sacramento Press Club. Los Angeles Times reporter Taryn Luna and CalMatters journalist Grace Gedye moderated the discussion of the California sports betting propositions.
Video of the full 45-minute debate, held Sept. 7, is available on the Sacramento Press Club Facebook page. Here are some of the highlights.
Why most California Indian tribes oppose Prop 27
Since Prop 27 came out, many have wondered why California Indian tribes were so adamant against it. After all, sportsbook operators backing Prop 27 propose to partner with tribes to offer online sports betting.
Fairbanks provided a couple of reasons why about 60 tribes oppose Prop 27:
“One is it undercuts tribal sovereignty. For tribes that want to partner with any of the out-of-state corporations, the FanDuels of the world, the DraftKings, whomever, tribes have to give up all their rights to the operation of the app. Secondly, it undercuts the tribal casinos in the state, and that’s a problem.”
On if operators are misleading with tribal support
Prop 27 kicked off its advertising campaign with Middletown Rancheria of Pomo Indians Chairman Jose “Moke” Simon pledging tribal support for the measure. Subsequent campaigns stated that tribes support Prop 27.
But two no campaigns backed by tribes indicated they opposed the initiative. California voters were left confused.
Only three tribes have come out in support of Prop 27. But Click argued it wasn’t misleading to claim this as tribal support. He added that more tribes support Prop 27 but haven’t done so publicly.
“We’ve also heard from a number of tribes who are publicly not supporting any initiative but they tell us behind the scenes that they support us,” Click said. “… There’s more than 100 California tribes. More than half of them are sitting on the sidelines and we’re talking to those tribes every single day.”
Argument on online sports betting as a danger to kids
The most animated argument between proposition spokespersons came on the claim online sports betting poses a danger to kids.
Much of the Yes on 26/No on 27 campaign has focused on this area. A recent commercial features a mom talking about her fears of online sports betting and her kids.
Fairbanks opened the debate calling the in-person sports betting in Prop 26 a more responsible approach. She stressed having people there to check identification in person as opposed to not knowing who is behind a computer or phone.
Click responded that Fairbanks was on the other end of the argument in 2014 when she represented tribal interests looking to legalize online poker. And he pointed out that some in her coalition support a tribal online sports betting measure under consideration for 2024.
Here’s a little of their back-and-forth discussion:
Click: “You’re critiquing online sports betting when half of the tribal measures in your coalition are supporting a 2024 measure that does what? It puts online sports betting on the ballot.”
Fairbanks: “I think the difference is it’s not being funded and sponsored by out-of-state gambling corporations. Ninety percent of the revenue isn’t immediately going to go out of California to fund companies that aren’t based here.”
Click: “So it’s not an argument about age verification.”
Fairbanks: “It’s both, but the difference too is that tribes have upheld the promise. Tribes have done what they said they were going to do ever since they’ve been given exclusive rights to casino gambling. We can’t say the same for companies that aren’t even based in California that have drafted a measure that benefits them that doesn’t benefit the state of California.”
Later, Fairbanks admitted that tribal opposition to online sports betting under Prop 27 related more to sovereignty than issues with know-your-customer technology.
More on the out-of-state corporation attacks
Calling Prop 27’s sponsors out-of-state corporations has been a big part of both no campaigns.
Click responded to these attacks:
“As we talk about out-of-state corporations, 87% of businesses that do business in California are from places other than California. So are we going to tell Toyota and Ford, ‘no, thank you, sorry, you can’t sell cars here because you’re based in Michigan and elsewhere?'”
Tax rate another hot topic
No campaigns also regularly mention that out-of-state companies want to keep 90% of sports betting revenue for themselves. This refers to the 10% tax rate in Prop 27.
Fairbanks: “That is very low compared to what is going on in some other states where the corporate operators have established and where they authorized sports betting.”
Click: “On the 90%, what we’re talking about is a tax rate that would be the highest corporate tax rate in California.”
Fairbanks: “Of the 10% that’s left, they drafted an initiative full of loopholes. … So that 10% that’s left over is going to be whittled down to very little when all is said and done and California citizens will be left with next to nothing.”
Click: “Eleven states have a 10% tax rate or lower but no state has the $100 million initial buy-in fee, and that’s one of the reasons the LAO [Legislative Analyst’s Office], the independent referee in all these matters, said ours would raise hundreds of millions of dollars each year and theirs would raise up to 20 times less.”
Fairbanks: “But, again, that $100 million fee gets to be deducted from the 10% the companies are giving to the state of California. And they get to deduct federal taxes, and promotional play and free bets. And, by the way, there’s no limit on the number of free bets and promotional play they can offer. Which means there is a way to game the system by offering all of these free bets to undercut and lower the taxes paid to the state.”
Click: “A 0% tax rate for almost every sports bet in the state of California in Prop 26 versus the 10% plus $100 million buy-in fee? There’s a clear difference.”
Money to address problem gambling
Prop 26 earmarks 15% of sports betting tax revenue toward addressing problem gambling. Prop 27 doesn’t earmark any money toward problem gambling. It gives 85% to homelessness and mental health programs and the other 15% tribes that don’t participate in sports betting.
Click tried to argue that the legislature could change this revenue dispersal to include problem gambling. The initiative requires a two-thirds vote of the legislature to alter the sports betting revenue disbursement.
“There’s unlimited new money if the state needs it for problem gaming programs in the state,” Click said. “Under 26, it raises very little revenue for the state, so it takes just a fraction of that and caps it at 15%. We have an unlimited amount of money for the legislature to advocate if it so chooses for problem gaming. Your initiative is capped at 15%. The LAO says your measure will raise very little, tens of millions of dollars each year. It will be just a fraction of that.”
Fairbanks countered that she could also play the imaginary problem gambling revenue game. Prop 26 provides 70% of revenue to the general fund, which the legislature could redirect to problem gambling.
“But just like your measure relies on the legislature, 70% of the revenue from our measure goes to the general fund, where the legislature could decide to appropriate money toward problem gambling, toward mental health. Toward whatever it wants and whatever the state priorities are at the time.”
Betting on award shows, esports but not iCasino
Moderators brought up concerns that a clause in Prop 27 opens the door for betting on non-athletic events.
Click made clear that this isn’t a backdoor attempt at offering online casino games.
“Ours is squarely focused on sports and other non-athletic events,” Click said. “That’s for things like award shows. It’s not for any other type of betting. Video games are event-based.”
Fairbanks warned that operators do want to offer more than sports betting online.
“It starts with sports betting and, as you pointed out, the CEO of DraftKings, and I’m not sure he’s the only one, they want iGaming — I-everything, iCasinos on your phone, on your laptop, on your tablet,” Fairbanks said. “That’s where this is all going, and that’s why I think voters need to be very careful to evaluate both measures. Prop 26, this is the responsible, incremental approach to introduce sports betting.”
Click responded that no type of wager could be made under Prop 27 without approval of the California Attorney General.
“The attorney general is in charge of every bet that’s made,” Click said. “And every type of bet has to get his approval. The measure says there may be some non-sporting events that you can bet on, something like the Golden Globes or the Academy Awards. But the attorney general would have to approve each one of those.”
Prop 26 clause to stop cardrooms from having blackjack
California cardrooms oppose Prop 26 because of a clause allowing tribes to sue them directly over alleged California gambling violations.
Prop 26 proponents have framed it as cardrooms would only be at risk if they repeatedly violate California gambling laws.
Fairbanks admitted the clause is for tribes to go after cardrooms for the way they offer blackjack.
“I know that the cardrooms have focused a lot on this,” Fairbanks said. “This is a very narrow provision crafted to settle the house-banked games law that governs cardrooms. It was carefully written to ensure that it wouldn’t result in frivolous lawsuits against cardrooms. Attorneys can’t collect attorneys’ fees. Attorneys cannot collect any settlements. The settlements by the way, if there are any, go to the state of California. Not the attorneys, not the plaintiffs, but the state of California for gambling control issues.”
Tribes have exclusivity over house-banked games in California. But cardrooms use third-party vendors to offer the traditionally house-banked game. The state recognizes and regulates the games. Tribes have unsuccessfully tried to sue the state to stop the games. Now they want to sue the cardrooms directly.
“It’s in there because there’s disagreement on the house-banked game rules,” Fairbanks said. “It’s very insider baseball as it relates to cardrooms, but it’s something that has never been resolved and the tribes don’t have standing to challenge it in court. They want to take this case to court and get a ruling.”
Could future legislative solution be possible?
Moderators asked why this issue wasn’t handled in the legislature.
Click said operators would have much preferred a legislative solution.
“There have been many attempts in the legislature to do this. At each time, members of the coalition supporting 26 blocked any debate even on that. They put forward their own measure. Another group put forward another measure. So by the time it got to us, we looked at it and said hey, it looks like this conversation is going to be happening on the ballot. We might as well be part of the conversation on the ballot than not. So that’s how we got here.”
If both sports betting measures lose, Fairbanks could see handling the issue in the legislature.
“Maybe there will be some sort of legislative compromise. Certainly if both go down in November, then that opens the door for everyone to get together again and try to work something out. It may take a while to get to a happy medium for everybody, but we’ll see what happens.”
Despite the no campaigns to Prop 27, Fairbanks believes her tribal clients are open to reaching a future compromise on online sports betting.
“I’ve heard them say that they recognize that things are going this way,” Fairbanks said. “Mobile sports betting is something that people want. We want to start slowly and responsibly, but they have an incentive I would think to come to the table because this is the way people are going. Now, they want to make sure they maintain their sovereignty, they want to maintain control, and certainly that’s not what they get in Prop 27, which is why they’re so vehemently opposed. But maybe there’s an opening. Maybe the door will open and there can be some sort of compromise.”