What’s Next for California Sports Betting?

written by I. Nelson Rose

Some of the richest, most powerful political players in the world of legal gambling just spent the most money ever on ballot propositions, nearly half a billion dollars, and won… nothing.

Well, not exactly nothing.  It’s important to not only see what proponents of a measure want, but also what happens if they lose.

The tribes behind Prop. 26 would have gotten all sorts of goodies besides a monopoly on in-person sports betting, including the right to offer roulette and craps and a way to destroy their hated competitors, California’s cardclubs.  But their losses mean the status quo continues.  Tribes still have their monopoly on casinos with banking card games and slot machines.  And no one else can offer legal sports betting.

They also completely stomped the major online sportsbooks behind Prop. 27.  If you think the midterm elections make Donald Trump look like a loser, imagine spending hundreds of millions of dollars and getting only 17% of the vote.

Anyone with political experience with gaming in California would have told them you don’t ever directly take on casino tribes.  In the prior most expensive initiative election, the 1998 $100 million fight over Prop. 5, Nevada casinos were outspent three to one by California’s gaming tribes.  After the State Supreme Court ruled that Prop. 5 was unconstitutional, Las Vegas refused to waste any money on the do-over fight two years later.

Incidentally, the Supreme Court’s opinion, H.E.R.E. v. Davis (1999), was based on my book, Gambling and the Law.  The State Constitution prohibits “casinos of the type currently operating in Nevada and New Jersey.”  The tribes tried to get around this prohibition in Prop. 5 by legalizing slot machines and blackjack as “lotteries.”  The Court ruled that “currently” means 1986, which, fortunately for me as a gambling consultant, was the year my book was published.  The High Court said my book defined what casinos were in 1986, and that in Nevada and New Jersey, and therefore in California, casino games are not lotteries.

Prop. 1A then amended the Constitution to allow true tribal casinos.  The case is still important, though, because it shows that no amendment is needed for sports betting.  The Legislature could simply pass a bill, without a vote of the people, as long as they did not include other casino games.

But a Constitutional amendment is safer both politically and legally.  Putting it on the ballot gives cover to Legislators and the Governor.  And it makes it less likely the Court will somehow find it unconstitutional.

California has four major political players, each with the political power to kill, but not pass, an expansion of legal gambling.  The most powerful, of course, are the gaming tribes, who do not always agree among themselves on what forms gambling should take.  Second are the state’s declining racetracks, which still create tens of thousands of jobs.  Third are cardclubs, the lifeblood of many small cities and vital to government programs in larger ones, like San Jose.  Last are politicians, who really don’t care about any of this, but would love to get the hundreds of millions of dollars a year a tax on sports betting would bring in.

In 2023, and probably 2024, we will see more initiatives and bills introduced in the Legislature.  But all will fail unless a political compromise is worked out with all four political factions.

California has a population greater than Canada, and sports betting will be a multi-billion-dollar business, probably the largest in the world.  Having so much money at stake, and greed, make a compromise more difficult.

California has been unable to legalize Internet poker for more than ten years.

I don’t see why legalizing sports betting will be any easier.

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