They spent. And spent. And spent. But where did all that money go?
When the dust cleared on Election Night 2022, the nation’s biggest casino corporations, wealthiest Native American tribes and California cardrooms had unloaded almost a half-billion dollars. To be exact, $431,853,308.14, according to the public disclosures on file with the California Secretary of State as of Jan. 2, 2023.
And that pile of dough changed absolutely nothing. Propositions 26 and 27 were brutally rejected by California voters.
California sports betting remains illegal. If anything, public opinion may be more firmly opposed to it both in person and online after that ugly barrage.
All that coin, however, doesn’t just vanish. And while conventional wisdom holds that it mainly flooded into the coffers of TV stations from Chico to Yuma, a PlayCA analysis of each campaign’s voluminous expenditure filings show that’s not quite the whole story.
About half went for ads, so what about the rest?
More than half of that money, in fact, enriched pollsters, consultants, publicists and other campaign functionaries. Only about a third of that cash – some $143 million – went directly to buying airtime on television stations. Another roughly $105 million also went to ads on radio and websites and for direct mailings.
That leaves another $200 million or so spent on efforts that were, many insiders say, doomed from the start.
Explains GOP campaign consultant Mike Madrid, a one-time political director for the California Republican Party:
“The only race bigger than a statewide measure in California is a presidential campaign. Most people outside California totally don’t understand the sheer size and scope of campaigns that we have here. They’re freaking enormous.”
Still, this was a singularly “freaking enormous” moment, according to Steven Maviglio, a longtime Democratic campaign consultant based in Sacramento:
“I don’t know how else to describe it but for political consultants, that was the harvest moon. Everybody wanted a piece of it. You can see the number of vendors on those reports. You hire somebody to do outreach to Labor, you hire someone to reach out to Black groups, or hire someone to reach out to Hispanic groups, you hire these consultants that specialize in all these different things. And they had so much resources that they wanted to cover every base, and they did and it still didn’t matter.”
Or, as Oklahoma State University business professor and gambling industry expert John Holden put it: “It’s crazy money. In my mind, there were so many better uses for that. But I’m not trying to launch sports betting in California.”
California sports betting: A new Gold Rush
One reason why this all got so costly – and why it was such an unusual field day for consultants – was that there were essentially three sides that were represented by five different political committees.
The instigator was the Yes on 27 group, officially known as Californians For Solutions to Homelessness and Mental Health Support. This was a collaboration of major corporate casino or casino-wannabe interests including FanDuel, DraftKings, MGM Resorts, Penn National, Fanatics, Bally’s and Wynn.
Yes on 27 spent $147.9 million trying to pass Proposition 27. Prop 27 would have legalized online sports betting and allow only companies already licensed in 10 states to partake. Of that, a bit more than a third – $55 million – was spent on TV.
Yes on 27 faced stiff opposition
California’s wealthy casino-owning tribes saw this as an existential threat, and they went into battle on two fronts. They formed Californians for Community Safety, Equality and Reinvestment and spent about $20.8 million to qualify Proposition 26 for the 2022 ballot. If passed, it would have legalized sports betting in person at existing California tribal casinos and select California horse racing venues.
Once Prop 26 made the ballot, Yes on 26/No on 27: the Coalition for Safe, Responsible Gaming – funded almost entirely by tribes – sprang up to fight for the passage of Prop 26 and the defeat of Prop 27. They ended the campaign having spent $113.7 million. The TV air time portion of that came to $48 million, or 42 percent.
A second tribe-funded group, No on 27: Californians For Tribal Sovereignty and Safe Gaming, formed to specifically combat the corporate casino measure. They would spend $105.7 million, just one-fifth, or $23 million, of which went to TV air time.
Meanwhile, operators of licensed California cardrooms opposed Prop 26 as a grab by the tribes that would leave out any others wishing to get into the sports betting industry. No on 26: Taxpayers Against Special Interest Monopolies spent $44 million, of which 42 percent, or $18.5 million, was spent on TV air time. Says Maviglio:
“Television is hugely expensive in California. You need at least $5 million a week to be competitive because we’re so big. There are multiple markets – Los Angeles, San Francisco, San Diego among them – that have millions of people. It’s prohibitively expensive.”
Indeed, the public disclosures provide insight into modern campaigns, what with their endless pages of expenditures listing TV and radio stations as well as name-brand social media platforms like YouTube and Facebook.
Also mingled in all of that were ads on:
- SnapChat ($99,488 from Yes on 26/No on 27, $199,396 from Yes on 27)
- Vevo ($384,471 from Yes on 27)
- Roku ($831,910 from Yes on 26/No on 27, $945,400 from Yes on 27)
- Breitbart ($4,114 from Yes on 26/No on 27)
- Radio Korea ($6,375 from Yes on 27)
- Sirius/XM ($151,028 from Yes on 26/No on 27, $623,882 from Yes on 27)
- Hulu ($2.5 million from Yes on 26/No on 27, $115,835 from No on 27, $1.4 million from Yes on 27)
- fuboTV ($138,132 from Yes on 26/No on 27)
The disclosures show TV and media took a mammoth share of the overall spending. However, that share was not a majority.
| CAMPAIGN | TOTAL SPENDING | TV AD SPENDING (in millions) |
|---|---|---|
| Yes on 27 | $147,855,799.40 | $54.1 |
| Yes on 26 / No on 27 | $113,657,305.60 | $47.4 |
| No on 27 | $105,702,159.80 | $23.0 |
| No on 26 | $43,833,289 | $18.5 |
| Yes on 26 | $20,804,754.34 | $0 |
| TOTALS | $431,853,308.14 | $143.0 |
A jackpot for California politicos
In all, 34 firms or organizations received at least $300,000 from one of the five campaigns. This made up nearly 98 percent of the bounty, according to the disclosures.
“All those people that had something to sell, they are really the winners here,” Holden says. “And, I guess, anyone who benefits from keeping the status quo.”
The largest media-buying companies pulled down the biggest sums:
- Target Enterprises, $87.9 million from Yes on 26/No on 27
- Mentzer Media, $22.8 million for No on 26
- AKPD Media & Messaging, $89.4 million from No on 27
- Sadler Strategic Media, $96.9 million from Yes on 27
While most of that money went through the agency and on to the media outlets where they were placing ads, industry experts say the buyer’s commissions are typically between 10 and 15 percent of the spend. That implies seven-figure paydays for those firms.
None of them responded to requests for comment from PlayCA, and those contracts are closely-held secrets, Maviglio says:
“It’s always negotiated, and especially in an instance like this when the buy is so large. But that’s negotiated, and you’ll never be able to find that number.”
But beyond that, Props 26 and 27 were a bonanza for many others, too.
Who else profited from the California sports betting battle?
The process of getting petitions on the ballot in a state as populous as California – collecting the more than 620,000 required signatures, primarily – is expensive in and of itself. The group that got Proposition 26 on the ballot spent at least $16.8 million. Yes on 27 paid $10.7 million to 2022 Campaigns Inc., which appears to be a subsidiary of Progressive Campaigns Inc.
Information technology was profitable as well. One company, Unearth Campaigns, for instance, took in $8.6 million from No on 26 and No on 27. They paid $2.3 million to Uplift Campaigns, whose website says the company designs “digital-first creative to help you raise money, build a following and persuade the voters you need to win.”
Pollsters, of course, also got in on the feast. Nearly $14 million went to five firms. Most notably, Baselice & Associates got $7.3 million from No on 26 and FM3 Research received $2 million from Yes on 26, No on 27. David Binder Research received $900,000 from Yes on 27, and $800,000 from No on 27 went to the Mellman Group.
Then there are a litany of “campaign consultants” — an all-purpose term that could involve anything. More than $40 million went into these pockets, most notably – because of how poorly their advice seemed to work – the $27.2 million paid to Aisle 518 Strategies by Yes on 27.
Notable spenders and beneficiaries
A few other intriguing data points stood out in the filings:
- The California Republican Party, which came out against both propositions, received $3.1 million in contributions including $500,000 on September 7 from No on 27 and $2.5 million on September 8 from No on 26.
- The California Democratic Party, by contrast, received only a little more the $300,000. This includes $250,000 from No on 26 in May, $25,000 from Yes on 27 in June. Despite those donations, the Democrats ultimately were neutral on Prop 26 and opposed Prop 27.
- A Bethesda-based advertising placement company called Ampersand received a total of $23.2 million from every campaign but never got any of that money directly. This means the firm was hired by campaign consultants.
- The San Manuel Band of Mission Indians received $1.7 million to circulate petitions to get Prop 26 onto the ballot. That would later be offset by the tribe’s contribution of more than $104 million to Yes on 26/No on 27.
| VENDOR | CAMPAIGN(S) | AMOUNT (in millions) | SERVICE |
|---|---|---|---|
| Sadler Strategic Media | Yes on 27 | $96.9 | Media advertising buyer, production costs |
| AKPD Message & Media | No on 27 | $89.4 | Media advertising buyer, production costs |
| Target Enterprises | Yes on 26 / No on 27 | $87.9 | Media advertising buyer, production costs |
| Aisle 518 Strategies | Yes on 27 | $27.2 | Campaign consultancy |
| Mentzer Media | No on 26 | $22.8 | Media advertising buyer, production costs |
| National Political Consultants | Yes on 26 | $15.1 | Petition circulating |
| 2022 Campaigns Inc | Yes on 27 | $10.7 | Petition circulating |
| Unearth Campaigns | No on 26 | $8.6 | IT |
| Bask Digital Media | Yes on 26 / No on 27 | $8.4 | Digital advertising |
| Amplified Strategies | Yes on 26 / No on 27 | $8.1 | Campaign literature, mailings |
| The Strategy Group | No on 27 | $7.6 | Direct mail |
| Baselice & Associates | No on 26 | $7.3 | Polling |
| Swing Strategies | No on 26 | $5.2 | Campaign consultancy, direct mail |
| Winner & Mandabach | Yes on 26 / No on 27 | $4.4 | Slate cards |
| California Republican Party | No on 27, No on 26 and Yes on 27 | $3.1 | Political |
| Bearstar Strategies Inc | Yes on 27 | $2.7 | Campaign consultancy |
| Uplift | No on 27 | $2.3 | IT |
| FM3 Research | Yes on 26 / No on 27 | $2.0 | Polling |
| San Manuel Band of Mission Indians | Yes on 26 | $1.7 | Petition circulating |
| Nielsen Merksamer Parrinello Gross & Leoni | Yes on 27 | $1.3 | Legal |
| Orrick Herrington & Sutcliffe LLP | Yes on 27 | $1.3 | Legal |
| Kensington Avenue Strategies | No on 27 | $1.2 | Campaign consultancy |
| ALG Polling Inc | No on 27 | $1.1 | Polling |
| David Binder Research Inc | Yes on 27 | $0.9 | Polling |
| Bicker, Castillo & Fairbanks | Yes on 26 / No on 27 | $0.8 | Public relations |
| Mellman Group | No on 27 | $0.8 | Polling |
| COPS Voter Guide | Yes on 27 and No on 26 | $0.8 | Non-partisan voter guide |
| Grace Public Affairs | Yes on 27 | $0.7 | Public relations |
| Russo McGarty & Associates | No on 26 | $0.6 | Campaign consultancy |
| New River Strategies | Yes on 27 | $0.6 | Polling |
| Olson Remcho | Yes on 26 / No on 27 | $0.5 | Legal |
| MLV Strategies LLC | Yes on 27 | $0.4 | Campaign consultancy |
| Click Strategies | Yes on 27 | $0.3 | Campaign consultancy |
| Strait Advocacy | Yes on 27 | $0.3 | Campaign consultancy |
| TOTAL | $423.0 |
Note: This table only includes vendors that earned $300,000 or more from the 2022 California sports betting campaigns.
Did California casinos get fleeced?
Given the money spent, the results were damning. More than 82 percent of California voters rejected Prop 27 – among the worst electoral defeats in the state’s history. Prop 26 did somewhat better, but still horribly, losing 67 percent to 33 percent.
Madrid is more charitable to the minds behind Prop 26 as part of a strategy to defeat Prop 27 by “creating enough noise that people just vote no on all of that.” And, in fact, it seems clear that tribes who backed it were indifferent to whether it passed as long as Prop 27 died, too.
The non-tribal casino conglomerates, though, really wanted Prop 27 to pass. The humiliation is as much in the outcome as it is that they were told they could win.
Says Madrid:
“The bad advice was beginning the process in the first place because the consultants who developed these measures should have known that there was a very low likelihood of passage. … Whoever was advising them to go forward probably made a fortune on the race, but they didn’t serve the client very well by advising them to proceed in the first place.”
No on 27 campaign consultant Rob Stutzman was just as brutal in his assessment:
“It’s Hall of Fame political miscalculation on the part of the online companies to have spent what they spent. … It’s one of the most colossal waste of money on their part probably in the history of politics. Not only did they not get what they were looking for, but the defeat is so resounding it should be clear to anyone observing that they cannot come back and succeed at this. It would be crazy to try again.”
California’s economy didn’t help, either
Maviglio is more empathetic, saying that both the Yes on 27 advisers and the out-of-state casino companies merely underestimated how much the tribes were willing to spend to thwart them. He says:
“All the advice was poll-tested. I just don’t think they anticipated – and I guess that’s a fault on them – the resources the tribes have put into this and the ferociousness in which they went after them. The lesson to me is that for most initiatives, don’t try to make an end run around a very powerful, well-resourced special interest, particularly like the tribes. ”
Maviglio, however, says he thinks the climate was wrong for a gambling-expansion ballot measure anyway. Typically, those succeed – be it for new casinos or lotteries – when states are struggling financially. In 2022, however, California had a massive surplus, so “it’s really hard to make the case that you need sports betting for revenue when we’re awash in it. If there is a big recession that turns the state upside down and programs start getting cut, the atmosphere changes considerably.”
Yes on 27 went on TV with advertising throughout the summer – another questionable choice because voters weren’t focused yet. The hope was that they could imprint public opinion early enough to blunt the tribal response or force the tribes to spend money too quickly. Instead, the tribes kept refilling the campaign coffers.
Early CA sports betting polling didn’t hold up
Nathan Click, a former spokesman for Gov. Gavin Newsom whose firm, Click Strategies, earned more than $330,000 working for Yes on 27, insisted that, as Maviglio surmises, there was polling that suggested the initiative could pass and would be bolstered if billed as a windfall to fund homelessness programs. Click insists:
“We still had a shot in July, and then by the middle of August, the polling had flipped on us. Then we stopped spending, but the other side continued to spend. I think they spent over $50 million even after polling that basically showed neither 26 or 27 would win. So we were not surprised by the end result.”
Click points to polling showing how important the homelessness issue was for California voters. But what Yes on 27 overlooked, Holden says, is that the public is unlikely to trust out-of-state operators, who are clearly seeking domination of a new sector of gambling, to provide the panacea.
“Consumer perception of casinos has certainly improved over the years. But I don’t think, if you found 10 random people, there’s a single one of them that would be like, ‘Oh yeah, we should turn to the casino industry to solve this problem.’”
Holden, too, is stunned by how badly the casino industry was misled by its well-paid advisers:
“I can’t come up with how they came up with this strategy. … Maybe they’re like, ‘well, this is kind of our best shot. We’ve committed to going out to California, we’ve got to do it now.’”
Closing the book on Props 26 and 27
If you talk to insiders who benefited from this downpour of dollars – and it’s not easy to reach them because talking smack about your last big paycheck is a good way to ensure you won’t get any in the future – they admit they knew the propositions were losers from the start.
One executive with a firm that raked in more than $5 million from Yes on 27 admitted this to PlayCA on condition of anonymity:
“We knew this thing had terrible odds, but the casinos wanted to play and we were happy to oblige. In a way, we turned the tables on the casinos. They’re usually the ones getting everyone to blow their money on bad odds.”
Madrid, meanwhile, says those closely associated with Props 26 and 27 will get a pass:
“If you do a poor job or make a mistake or handle it incompetently, that would be a problem. But that’s not the case here. There’s nobody in California saying, ‘wow, if that race had been done differently, they would have won.’”
