Will There Be Litigation If A California Sports Betting Proposition Passes?

Written By John Holden on September 19, 2022 - Last Updated on November 3, 2022

Lawsuits? There seems to be agreement that, should Proposition 26 or Proposition 27 get enough voter support to pass, someone will attempt to stop the immediate rollout of sports betting in California.

At this point, neither ballot measure seems likely to pass. In fact, the two measures could cannibalize each other so neither will receive 50 percent of the vote.

The backers of both Prop 26 and Prop 27 have now spent months trying to convince voters to pass their California sports betting initiative. Each campaign faces steep challenges as the numbers of those voicing opposition continue to mount.

Refresher on the CA sports betting propositions 

Prop 26 would allow in-person sports betting and Prop 27 would allow online sports betting. However, there are a few additional distinctions worth highlighting.

Prop 26 has been put forward by a conglomerate of California’s most prominent gaming tribes. The initiative would not allow online wagering, but would allow sports betting at California tribal casinos and California horse racing venues.

Prop 26 is about more than sports betting, though. It would also allow tribal casinos to spread roulette and dice games at their properties.

Prop 27, meanwhile, is backed by operators such as FanDuel, DraftKings and BetMGM. The measure would allow online wagering throughout California and direct 85%of tax revenue to homeless services and mental health programs.

Visit the official PlayCA voter’s guide to learn more about the competing initiatives.

A sports betting showdown

The campaigns for and against sports betting already comprise the most expensive ballot initiative battle in U.S. history. Nearly $420 million has been spent through mid-September.

With this comes the possibility, or perhaps likelihood, of legal challenges should one or both of the measures end up passing. 

If both measures pass…

If both measures pass and there is a dispute over whether they can co-exist, it will go to the Courts. The Courts will examine the two measures and decide independently whether or not the two measures can coexist.

If they can, everything is fine and dandy. If not, California law pertaining to ballot measures dictates that the measure with the most votes wins.

A potential Prop 26 lawsuit?

Prop 26 has already resulted in at least one lawsuit, which involved the NAACP and ballot language. Should it pass, someone may take aim at a provision granting private citizens an ability to enforce certain gambling laws. However, one potential obstacle is these types of qui tam provisions have been used for a few hundred years, often in areas where the government does not have enough resources to investigate all potential violations.

While it is not immediately clear exactly what theory there may be to challenge the language, one potential angle may be to argue that it exceeds the scope of delegable responsibilities. This, however, may be an uphill battle as California appears to allow private enforcement of various claims. This includes the Private Attorneys General Act, which lets employees bring labor law violations against their employer or former employers.

Prop 26 notes that in the event any aspect of the measure should be held to be invalid, the provision should be excised from the Act and the remainder should survive. 

A potential challenge to Prop 27?

Prop 27’s filing is far more substantive than Prop 26’s. The totality of Prop 27’s filing is 65 pages, with 63 devoted to the amendment that is proposed. The sheer size of the proposition may create more opportunities for aspects to be challenged.

One potential challenge that could arise would be from tribes who do not agree to the terms of the Act. While litigation over Florida’s mobile betting scheme winds through a court of appeals, a ruling in favor of the Department of the Interior (and effectively for the Seminole Tribe) could pave the way for tribes to offer mobile wagering via the Indian Gaming Regulatory Act’s (IGRA) compacting system.

If so, the State would be required to enter good faith negotiations with those tribes. It is not clear that the terms imposed by Prop 27 would satisfy entering “good faith negotiations.”

Like Prop 26, Prop 27 contains a severability clause. This may keep the bulk of the Act in place despite a successful challenge.

A California caveat?

The result of the Seminole Tribe of Florida v. Florida case in 1996 generally has shielded states from litigation from tribes challenging IGRA’s good faith negotiation requirement by allowing them to claim that they have sovereign immunity from lawsuit. According to Professors Kathryn Rand and Steven Light, California is the only state to have waived its sovereign immunity allowing itself to be sued over tribal compact negotiations.

Potential legal challenges to sports betting in California

There are any number of challenges that may be brought against the two ballot propositions. However, there are likely to be very few that stand a chance of unraveling a proposition that passes.

In the past, many California ballot measures have been challenged based on the titles or summaries given by the Attorney General result are somehow unjust. In the case of the two sports betting measures, it does not appear that that type of challenge is likely. It is also possible that either measure could face a challenge arguing that the ballot measures were unfairly constructed.

For instance, a plaintiff may try to argue that one of the measures exceeds the single-subject rule. This states that ballot initiatives can only address a single-subject.

It would ultimately be up to a court to decide. Historically, California courts have been very reluctant to overturn ballot initiatives, which are seen as the voice of the people. However, it has occasionally happened, as we saw recently with the 2020 measure regarding the employment status of drivers on ride-sharing apps.

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