Prop 26 — In-Person Sports Betting at Indian Casinos
Prop 26 would legalize retail sports betting at California tribal casinos and the state’s four horse racetracks: Santa Anita Park, Del Mar Thoroughbred Club, Golden Gate Fields, and Los Alamitos Race Course. California bettors would have to drive to Indian casinos or racetracks to place legal sports wagers. The money from sports betting would go toward tribal communities, problem gambling programs, and California’s General Fund, which funds a wide array of programs.
Indian casinos are leaning on their history of offering gambling in California to persuade Californians to vote for Prop 26. They’re also characterizing private sportsbook companies as dangers to California’s gambling market and threats to tribal sovereignty.
Recent ads from Prop 26 backers claim Prop 27 wasn’t written with Californians in mind — rather that it’s a self-serving measure from sportsbook operators on the East Coast.
Prop 27 — Mobile Sports Betting From Private Companies
Prop 27 would legalize mobile and online sports betting in California.
Private sportsbook companies would secure licenses from the state and partner with tribes in the state to offer their online sportsbooks to Californians, such as DraftKings California. Sports betting revenue would fund homelessness and addiction programs in California. It would also share some revenue with non-gaming tribes.
The private sports betting companies are looking for a stake in what could become the largest online sports betting market in the US, with California having the country’s largest population by far at just under 40 million residents. Prop 27 is the private sportsbooks’ attempt to secure the largest stake possible in California’s potential sports betting market.
Recent ads from Prop 27 backers claim their measure will help the homeless population and the non-gaming tribes that larger California gaming tribes have “left in the dust.”
What if Both Prop 26 and Prop 27 Pass?
If one ballot measure passes, it would become law in California. If both Prop 26 and Prop 27 pass, we could see a legal battle.
Here’s the deal: The California Constitution stipulates that if two ballot measures pass and they conflict in any way, the measure that got a higher percentage of votes would overrule the other measure on any conflicting provisions.
But the Prop 27 writers knew this. That’s why they specifically wrote in Prop 27 that it does not conflict with Prop 26. Would a judge agree? We would have to see.
The main disparity between Prop 26 and Prop 27 is that one legalizes in-person sports betting, and one legalizes online sports betting. Could those two co-exist if they both pass?
One would certainly think so. But, again, things could get technical in the courts.
Supporters of both measures have deep-seeded, and very opposite, interests here. California tribes want to maintain their control over the state’s gambling market, and they don’t want to lose what would amount to a huge chunk of the California sports betting market if US sportsbooks can operate in the state.
And those US sportsbooks want Prop 27 pass for the exact same reason. In states where both are legal, online sports betting is utilized much more than in-person betting.
It’s about a 70%/30% split across the US. That would translate to a whole heck of a lot of money for private sports betting companies to make in California.
The Other Two California Sports Betting Ballot Initiatives
California’s other two sports betting initiatives failed to qualify for the 2022 ballot. One was backed by three tribal casinos. It would’ve allowed mobile sports betting controlled by the tribes. That initiative’s backers have submitted it for the 2024 ballot instead.
California’s card rooms also sponsored a CA sports betting initiative that would allow them to offer sports betting. It was similar to the operator initiative, also funding homelessness programs. It failed to qualify for California’s ballot in November.
The vast majority of California card rooms are now lined up in opposition of Prop 26.
So, November will be a showdown between the private operators and California’s tribes.
California Ballot Initiative Donors
Prop 26 and Prop 27 have both generated millions of dollars in support and opposition.
Tribal Initiative Support and Opposition
According to state filings, the tribal initiative is backed by a group called the Coalition for Safe, Responsible Gaming. Its top donors include tribes with obvious stakes in California’s gambling industry.
The Federated Indians of Graton Rancheria, for instance, have donated more than $30 million in support of Prop 26; that tribe runs Graton Resort & Casino, a 534,000-square foot casino resort 9 miles south of Santa Rosa that is the fifth-largest casino in California. The Pechanga Band of Indians, who owns Pechanga Resort Casino in Temecula, has donated north of $25 million.
Overall, the coalition had donated about $111.9 million in support of Prop 26, per the California Secretary of State’s database, as of Oct. 7. The most recent contribution was $28,974 from Chumash Casino and Resort Enterprises, associated with the Santa Ynez Band of Chumash Indians who own Chumash Casino Resort.
As of October 2022, 58 tribes have endorsed Prop 26: 29 gaming tribes, 15 limited-gaming tribes, and 14 non-gaming tribes (although seven of those 14 are currently building or planning to build casinos).
The opposition is largely made up of a committee called the Taxpayers Against Special Interest Monopolies. The California Commerce Club (which owns Commerce Casino, one of California’s top card rooms) and several private card rooms and gambling companies, including Hawaiian Gardens Casino, comprise this committee. Gambling Company, PT Gaming LLC, made its own committee, No on the Gambling Power Grab, to oppose the tribal initiative.
Together, these committees had donated about $42.5 million to oppose the tribal initiative as of Oct. 7. So far, the top donors in opposition to Prop 26 are the California Commerce Club and Hawaiian Gardens Casino, at just over $10 million.
The most recent contribution was $1,008 from Napa Valley Casino, a 16-table card room in Napa.
There is a provision in Prop 26 that would allow tribes to directly sue card rooms if they feel like laws are being violated — and they do think laws are being violated with the ways card rooms offer blackjack.
Prop 26 could also hurt card rooms by providing another in-person gambling option — one that would be widely popular, and unavailable at card rooms. As a result, California card rooms oppose Prop 26.
Operator Initiative Support and Opposition
As of Oct. 7, the mobile sportsbook initiative had raised just over $169.4 million in support from a group called Californians for Solutions to Homelessness and Mental Health Support. This group is made up of some of the largest gambling companies in the US, including:
BetMGM LLCBetfair Interactive US LLC (FanDuel) Crown Gaming, Inc. (DraftKings)Bally’s Interactive LLCFBG Enterprises LLC (Fanatics, Inc.) Penn National Gaming, Inc. (PENN Gaming/Barstool) WSI US LLC (WynnBET)
The top donor in support of Prop 27 has been FanDuel, which has donated over $35 million. DraftKings has donated more than $34 million. BetMGM, PENN Gaming, and Fanatics have contributed $25 million apiece. Bally Bet and WynnBET have each donated $12.5 million.
The most recent contribution was $92,000 from DraftKings on Oct. 1.
Prop 27 recently pulled its TV ads and will instead focus on direct communication, like online ads and mailers.
Three California tribes — the Big Valley Band of Pomo Indians, Middletown Rancheria of Pomo Indians, and Santa Rosa Rancheria Tachi Yokut Tribe— publicly support Prop 27. The Santa Rosa Rancheria Tachi Yokut Tribe owns Tachi Palace Casino Resort, the seventh-largest casino in Northern California. The other two tribes are considered limited-gaming tribes, which means they own casinos with 35o or fewer slot machines.
“Prop. 27 will provide us with economic opportunity to fortify our Tribe’s future for generations and protect Tribal sovereignty,” said Leo Sisco, Chairman of the Santa Rosa Rancheria Tachi Yokut Tribe, in a press release. “And it is the only measure that will deliver hundreds of millions of dollars each year to help solve homelessness and address mental health in California.”
Prop 27 received a boost in mid-August when MLB announced it was endorsing Prop 27. MLB is the first major pro sports league to take a stance in the California sports betting battle.
Donors had raised about $116.3 million in opposition of Prop 27 by Oct. 7. The Californians for Tribal Sovereignty and Safe Gaming makes up the bulk of the No on 27 group. The San Manuel Band of Mission Indians, which owns Yaamava’ Resort & Casino, CA’s largest casino, has donated north of $100 million in opposition of Prop 27.
The most recent contribution in opposition of Prop 27 was $105.39 on Sept. 26 from the California Democratic Party. Although the state’s Democrats formally announced their opposition to Prop 27 in July, this was the party’s first financial contribution to the No on 27 campaign.
Major state education organizations, including the California Teachers Association and California Federation of Teachers, oppose Prop 27. California’s top Democrat and Republican lawmakers have also announced their opposition to Prop 27.
Prop 26 and Prop 27 Campaign Spending
Spending on Prop 26 and Prop 27 continues to shatter records.
As of Oct. 7, donors had contributed more than $440 million to both campaigns, further establishing this California sports betting debate as the most expensive California ballot measure battle ever.
What the Initiatives Do for Bettors
The sports betting initiatives do two things for bettors: Offer different sports betting frameworks and direct funding to different programs.
Prop 26 — Tribal Initiative
The tribal initiative would allow in-person betting at tribal casinos and California horse racetracks. Sports betting legislation often leaves out horse racetracks, but their inclusion allows the proposition’s fiscal note to read positive. Card rooms would be taxed while each tribe would negotiate revenue-sharing deals individually.
The tribal initiative would set a 10% tax rate on sports betting revenue. That money would be disbursed as follows:
15% to problem gambling programs15% to the state regulator to enforce industry rules70% to California’s General Fund
Its fiscal note estimates that state tax revenue could increase by the “mid-tens of millions.” Additionally, state regulatory and enforcement costs could increase by the “low tens of millions annually.” So, its fiscal note projects a smaller increase in regulatory costs than the operator initiative.
Prop 27 — Operator Initiative
The operator initiative would allow online sports betting to be offered through private gambling companies. Private companies would partner with California’s tribes to offer mobile sports betting across the state. So, bettors wouldn’t have to travel to a tribal casino to place sports wagers.
The operator initiative would tax sports betting revenue at 10%. After covering regulatory costs, those funds would be allocated as follows:
85% to homelessness programs15% to nonparticipating tribes
Its fiscal note estimates that state tax revenue could reach the “mid-hundreds of millions of dollars annually.” In contrast, new regulatory costs could increase by “mid-tens of millions.” So, the operator initiative projects a larger increase in new tax revenue than the tribal initiative. Prop 27 is the only option that specifically will mandate funding for homelessness programs. However, the General Fund, to which Prop 26 sends 70% of revenue tax, funds a wide array of programs, including some for homelessness.
An August 2022 report published by Eilers & Krejcik Gaming, an independent research and consulting firm, predicted Prop 27, if passes, would generate $2.8 billionin annual California online sports betting revenue. So, let’s do some math.
The Prop 27 tax rate is 10%, so that would mean $280 million in sports betting revenue tax funds.Under Prop 27, 85% of tax funds would go toward homelessness programs and 15% would go toward non-gaming and limited gaming tribes. So, that would be $238 million and $42 million, respectively.As of November 2021, there were 72 non-gaming and limited-gaming tribes eligible for annual Revenue Sharing Trust Fund payments of $1.1 million. So, that extra $42 million from Prop 27 would equal an extra $583,333.33 per tribe.
That same report said DraftKings, BetMGM, and FanDuel would likely own at least 70% of the California sports betting market in the early stages if Prop 27 passes.
How Do California Sports Bettors Feel About Prop 26 and Prop 27?
California Casinos conducted a survey in August 2022 of 600 Californians 18 and older who either currently bet on sports in some way (including using offshore sites) or are interested in betting on those sports.
Of those 600 respondents, 61% said they want both Prop 26 and Prop 27 to pass; 60% said they’d prefer private companies like DraftKings and FanDuel run California sportsbooks, not tribes; 57% think it’s very important to use a legal sportsbook; and 49% prefer the Prop 27 model for using revenue state tax funds, compared to 32% for Prop 26.
Another interesting result from the survey: 62% said they’re already betting on sports. That tells us three things.
First, many Californians still don’t know what sports betting actually entails, because some of the answers provided to a question about which sportsbooks they used did not make sense (e.g. Google, Amazon, NFL, etc).
Second, we know for a fact many California sports bettors are using illegal offshore sites because many listed them (e.g. Bovada, BetUS, etc.).
Third, this also likely means many Californians are using VPNs to illegally access other states’ sportsbook platforms.
What Are the Chances of Prop 26 or Prop 27 Passing?
If you believe Eilers & Krejcik Gaming, the independent research and consulting firm mentioned above, then the chances aren’t so great. In the same report in which the firm projected California sports betting revenue, it also predicted that, as of August 2022, there was a “less than 50%” chance Prop 26 or Prop 27 would pass.
Why?
“The political power and deep pockets of interests with dogs in this hunt … together with competing sports betting measures whose back-to-back presentation on the ballot is likely to confuse voters have us leaning negative on California’s sports betting legalization prospects this fall,” the report said, according to the New York Post. “We preliminarily put the odds of one or both measures passing at less than 50%.”
Chances are starting to look worse for Prop 27 than Prop 26. The Public Policy Institute of California recently released date from polling it conducted from Sept. 2-11 regarding various election topics, including Prop 27. Of the survey’s 1,060 likely voter respondents, 54% said they play to vote no on Prop 27 and 34% said they plan to vote yes. The other 12% were undecided.
Only two demographic groups had a majority say they would vote yes: likely voters age 18-44 (52%) and renters (51%).
The PPIC survey did not ask any questions about Prop 26.
Crypto users don’t like Prop 26’s chances, though. Or Prop 27’s.
Polymarket, a popular crypto prediction market, listed markets on the likelihood of Prop 26 and Prop 27 passing this week. With prices translated to percentages, as of Sept. 23, 74% of those who have participated in the market think Prop 27 will fail and 64% think Prop 26 will fail.
California Sports Betting Initiative Summary
On Nov. 8, 2022, Californians will have two sports betting initiatives on their ballot.
Prop 26 would allow sports betting only in-person at tribal casinos and California’s four horse racetracks. This measure, favored by most California tribes, would spread tax funds around to problem gambling programs, sports betting policy enforcement, and the General Fund. Prop 26’s fiscal note estimates a smaller increase in regulatory cost than the operator initiative. The tribal initiative’s full name is the California Legalize Sports Betting on American Indian Lands Initiative.
The operator initiative, Prop 27, would allow private sportsbook companies to offer mobile sports betting through partnerships with California’s tribes. This initiative would fund homelessness programs and tribal development. Its fiscal note estimates a larger increase in state tax revenue than Prop 26. Its full name is the California Legalize Sports Betting and Revenue for Homelessness Prevention Fund Initiative.
