Prop 26 Creates New Fund To Help Combat Problem Gambling

Written By Steven Schult on September 13, 2022
California Sports Wagering Fund

There’s a contentious battle between the two groups supporting the opposing California sports betting ballot initiatives.

Proposition 27 would legalize online sports betting and allow any licensed gaming company to operate an online sportsbook. On the other hand, Proposition 26 would only permit in-person betting. Furthermore, only California tribal casinos and the four privately-owned California horse racing venues could act as operators.

Despite the proposals creating vastly different California sports betting markets, there are media campaigns from both initiatives that set out to disparage the competition. Opposing sides have spent $419 million this year to support their initiative and trash the other.

One of the most common attacks is that the opposing initiative doesn’t do enough to help curb problem gambling. You can check out PlayCA’s voter guide to dig deeper into the differences between the proposals.

But both proposals tackle the issue head-on. Prop 26 will create a brand-new fund to address it.

Prop 26 creates the California Sports Wagering Fund

The rhetoric in the initiative leaves little doubt about how the new state coffer would be filled. The CSWF is exactly what it sounds like – a proverbial piggybank for California sports betting tax revenue.

From its inception, Prop 27 supporters touted the initiative’s language that would funnel most of the tax revenue to help the state’s homelessness problem. But Prop 26 didn’t have similar rhetoric surrounding it.

However, the initiative includes language that specifies how the tax revenue would be used.

According to California’s Legislative Analyst’s Office, Prop 26 requires that any money coming from the fund be considered state tax revenue. As a result, money in that fund would be used in the state’s calculation of the minimum amount of spending necessary for the state’s education system. That includes both K-12 education and California community colleges.

The fund will cover that amount first. The remaining money will be divvied up very specifically.

  • 15% would be allotted to help fund gambling addiction and mental health programs and grants
  • 15% is used to fund the additional regulatory costs of having a sports betting industry
  • 70% is put into the state General Fund

Only the horse racing tracks would contribute to the CSWF

Despite using the fund for important state services, only one of the two parties will pay into it. As a result, there is a very small chance that the account is low on funds if the horse tracks don’t have successful sports betting operations.

Prop 26 doesn’t require California tribes to contribute to the fund. Instead, each tribe would renegotiate its compact with the state to allow for sports betting. The tribes would pay the state through revenue sharing and not into the CSWF.

Here’s a look at the four tracks eligible to offer sports betting under Prop 26:

  • Santa Anita Park (Arcadia, in Los Angeles County)
  • Del Mar Race Track (Del Mar, in San Diego County)
  • Los Alamitos Race Course (Cypress, in Orange County)
  • Golden Gate Fields (Berkeley, in Alameda County)

The tracks shouldn’t have a problem funding the CSWF

It probably wasn’t an accident that these four tracks got a carveout to offer retail sportsbooks.

Firstly, none are near a tribal casino, so the tribes don’t have to compete with them. Additionally, all four are close to major metropolitan areas.

Del Mar is a short ride north from Downtown San Diego, and Santa Anita is on the outskirts of Los Angeles County near Pasadena. Los Alamitos isn’t far from Anaheim, and Golden Gate Fields is in Northern California’s Bay Area.

Los Angeles, San Francisco and San Diego are the three most populated cities in an already massive state. By contrast, most of the tribal casinos are in much more remote locations. By giving these tracks a sports betting license, a much higher percentage of Californians will have a nearby sportsbook.

The tracks were already popular destinations on race days. Especially at Del Mar, which opened its summer season last July to a sell-out crowd.

The added foot traffic on race days will almost certainly increase handle. But even on non-racing days, sportsbooks should get plenty of action because of the geographic factors already laid out.

When you take all of that into account, it’s more likely the Chargers go back to San Diego than these tracks post disappointing revenues.

Photo by Shutterstock / stavklem
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Steven Schult

Steve serves as managing editor for PlayCA and a handful of other sites across Catena Media. The New York native is a veteran of the gambling world. He started covering high-stakes tournaments in 2009 for some of poker's most prominent media outlets before adding the broader US gaming market to his beat in 2018.

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