Cities Take Lead In Sports Betting Initiative But How Much Can They Really Do?

Posted By Matthew Kredell on August 30, 2021

A recent California online sports betting initiative leads with support from local cities. But can cities really back ballot measures?

That’s a tricky enough question that the California Cities Gaming Authority (CCGA) sought guidance on the issue.

The CCGA’s general counsel provided legal analysis of local government authority on ballot measures that could prove key to garnering wider city support for a sports betting initiative.

Who is the California Cities Gaming Authority?

The Southern California cities of Gardena and Inglewood formed the group in November 2019. San Jose and Colma, an unincorporated town in Northern California, joined in 2020.

These are all California cities with cardrooms. Many cities with cardrooms generate a significant percentage of operating expenses from cardroom tax revenue.

With the addition of sports betting, revenues for those cities would increase. The initiative also cements the way the cardrooms offer player-dealer games, long contested by the tribes.

On the other hand, the tribal sports betting initiative already qualified for the ballot offers no new revenue for cities and gives tribes an avenue to shut down current cardroom offerings. This would take significant funds away from cities with cardrooms.

That’s why these California cities and more have such a vested interest in passing a sports betting initiative over the tribal measure.

Gardena Mayor Tasha Cerda chairs the CCGA. The other members of the board are councilmembers in their municipalities: Helen Fisicaro of Colma, Raul Peralez of San Jose, and Dionne Faulk of Inglewood.

Cities can’t file initiatives. Cerda, Fisicaro and Peralez filed the initiative with the California Attorney General as individuals.

Putting city money into sports betting initiative

While cities may support the initiative, they can’t put up the money to back it.

But while public resources can’t fund an initiative, that doesn’t mean cities can’t spend some money in support.

CCGA general counsel Jimmy Gutierrez assessed that local government entities may expend public dollars to provide factual information and analysis about the purpose, provisions, or estimated impact of ballot measures in some circumstances.

He also interpreted a 2009 California Supreme Court case of Vargas v. City of Salinas that stated a government “may not take sides in election contests.” Gutierrez takes that to mean a city can’t use public funds to mount an election campaign.

However, it doesn’t preclude a city from analytically evaluating a proposed ballot measure and publicly expressing opinions on its merits.

Current funding for initiative

So, if the city leaders who filed the initiative and the cities they represent aren’t funding the initiative, where does the money come from?

So far, the Cities for Responsible Sports Betting campaign has raised $450,000. That’s $150,000 each from Bay 101 Casino in San Jose and its owner, Tim Bumb of Bumb & Associates, Park West Casinos and its owner John Park, and Knighted Ventures with owner Roy Choi.

Park owns seven California cardrooms. Knighted Venture is the largest third-party proposition player operation in the state.

But $450,00 is just enough money to staff up the campaign. If it ends up collecting signatures to make the ballot, that will cost between $12 million and $15 million. A successful election campaign could cost nine figures.

CCGA plans to adopt resolution

The CCGA aims to adopt a resolution supporting the mobile sports betting initiative Sept. 1. That resolution will serve as a model for their cities and other cities to pass.

Ultimately, that could be the most interesting and lasting aspect of this initiative.

Gutierrez does a comparison between what he calls the cities gaming initiative and the tribal gaming initiative. In it, he highlights the potential tax revenue for an inclusive mobile initiative. Tribes don’t pay taxes, and their revenue share for sports wagering under their initiative is uncertain. Each tribe has to work that out on their own in an amended compact with the state.

Without mobile, any money to state and local services also will be less. The cities initiative requires the state legislature to appropriate all tax revenues to fund important social issues in homelessness, affordable housing, education, and mental health.

If sports betting operators introduce their own mobile sports betting initiative, this one likely falls by the wayside. But if backers of this initiative can assemble a coalition of cities beyond those with cardrooms in support of mobile sports betting, it could make a big impact in November 2022 even if this isn’t the measure on the ballot.

Photo by AP / Reed Saxon
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Matthew Kredell

Matthew has covered efforts to legalize and regulate online gambling since 2007. His reporting on the legalization of sports betting began in 2010 with an article for Playboy Magazine on how the NFL was pushing US money overseas by fighting the expansion of regulated sports betting. A USC journalism alum, Matt started his career as a sportswriter at the Los Angeles Daily News and has written on a variety of topics for Playboy, Men’s Journal, Los Angeles magazine, LA Weekly and ESPN.com.

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