The Election Day Guide To California Sports Betting

Written By Steven Schult on November 8, 2022
An election day guide to California sports betting

Election Day is upon us. Voters around the country will head to the ballot box today to make decisions about the future of their state.

In California, residents will get to decide whether they get to bet on sports in the Golden State. There are two separate sports betting initiatives on the ballot.

Based on recent polling data, neither is likely to pass. But that shouldn’t stop you from casting your vote. Here’s everything you need to know to help decide the fate of California sports betting.

Finding your local polling station

If you’re hoping to vote on the two propositions, the first thing you need to do is register to vote. However, the registration deadline was Oct. 24. It already passed.

This is more of a reminder to register before the 2024 election cycle if you want to vote in two years.

But if you are eligible to vote, you must find the nearest polling station. Each district has numerous locations to cast your ballot. Therefore, it shouldn’t take much effort to get to one.

The California Secretary of State allows you to enter your zip code to find the nearest ballot box. Conversely, you can call the California voter hotline at (800)-345-VOTE.

The two sports betting initiatives to choose from

Now that you are registered to vote and found your nearest polling place, it’s time to dig into the competing initiatives.

In their most basic terms, Proposition 26 would allow in-person betting at California tribal casinos and select California horse racing venues. On the other hand, Proposition 27 would legalize online sports betting in California.

Regardless of the outcomes, the two sports betting initiatives were historic in one regard – their funding. The supporters and opponents of the two propositions have spent $458 million on advertising.

Not surprisingly, most California tribes support Prop 26. While Prop 27 was backed by major online sportsbooks like FanDuel and DraftKings.

Prop 26 and Prop 27 would legalize sports betting, albeit in very different forms. Furthermore, both would amend the state constitution to allow the previously banned activity.

A ‘Yes’ vote on either initiative would be a vote in favor of California sports betting. But that’s where the similarities end.

Tax revenue

If either of these proposals passed, the state coffers would receive an influx of new tax revenue. But of the two, Prop 27 is projected to generate a substantially larger amount to the state.

According to the California Legislative Analyst’s Office, Prop 27 would increase state revenues between $200 million and $500 million. PlayCA’s internal analysis is on the more conservative end of that spectrum.

The California LAO projects just a fraction of that would be in the hands of the state if Prop 26 passed.

“The size of this increase is uncertain, but could reach tens of millions of dollars annually,” read its report.

While the state might not be better off, local governments could see outsized increases under Prop 26.

The online sports betting measure lays out a 10% tax rate on revenue. But since tribes negotiate revenue-sharing payments with local governments through gaming compacts, there is no set tribal tax rate in Prop 26.

In addition to sports betting, Prop 26 legalizes craps and roulette at California tribal casinos. This should also add to tribal gaming revenue and thus, more tax revenue to the corresponding locales.

The proposal does dictate the tax rates for sports betting revenue at the California horse tracks, which is also 10%.

Where does the tax revenue go?

Under the tribal initiative, there is no specific direction for the new tax dollars from the tribal casinos. Most of that would go to local governments, anyway.

But the revenue from the horse tracks’ sportsbooks would go into a new California Sports Wagering Fund. The state would use funds from the CSWF to help meet its required education spending. The remainder would be used in three ways:

  • 70 percent to the state General Fund.
  • 15 percent for gambling addiction and mental health programs.
  • 15 percent for sports betting and gambling enforcement costs.

The online operators touted Prop 27 as a way to help fight the homelessness problem in California. To get approved for an online sports betting license in the Golden State, sportsbooks would fork over $100 million to get approved for a five-year license. And another $10 million each time it renews it.

If a California tribe wants to enter the online betting market, it could get approved for $10 million and a $1 million renewal fee.

That money, along with the additional tax revenue would go into the California Online Sports Betting Trust Fund. Here’s how that fund is used:

  • 85 percent to address homelessness and gambling addiction programs. Homelessness funds will be divvied up and given to local governments.
  • 15 percent to tribes that are not involved in online sports betting.

Regulatory Structures

Tribal entities already have an existing regulatory structure for their gambling operations. Therefore, Prop 26 doesn’t specify much regarding a regulatory body.

Instead, the tribal initiative lays out strict rules about what is allowed to be wagered on. For example, betting on California colleges and universities would be prohibited under this initiative.

As a result, the tribes and the tracks would operate under its current regulatory bodies. The California Department of Justice would enforce any mishaps with the tracks.

On the other hand, Prop 27 would create an entirely new regulatory board within the California DOJ. Within the DOJ, there would be an entirely new 17-member oversight committee to regulate online betting.

Common Criticisms

Prop 26 includes language that would allow tribes to sue California cardrooms. The cardrooms found a legal loophole to offer house-backed card games previously exclusive to casinos.

These games are a point of contention for the tribes. This carveout could allow them to sue local cardrooms out of business, which may jeopardize local programs and services.

Prop 27 creates an artificially high barrier to entry to the California market. Aside from the exorbitant licensing fees, operators must already operate in 10 other states.

Just from the 10-state minimum alone, there are only eight companies that could meet the requirement. And only a handful of those would be willing to pay the initial $100 million fee.

New York’s licensing process is the most expensive in the country. Prop 27’s proposed fee structure is four times as expensive as the Empire State. The restrictions could create an environment in which just a few major players dominate the country’s largest betting market.

If the polling numbers are accurate, it won’t matter. We’ll have this same conversation again in two years.

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Written by
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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