The two gambling measures, Propositions 26 and 27, during the first week of October, spent $441 million on each side. That’s nearly double the previous record of $226 million in 2020. It will likely prove to be all for naught, as polls show Californians aren’t favoring either measure. Lost in the fight over the two measures is the fact that both represent an expansion of Native American gaming. The two propositions on the November ballot do this by legalizing sports gambling on Native American reservations both in person and online.
As it stands, the California Constitution and state law limit gambling in the state such as sports betting, roulette and games with dice. However, it allows some gambling — in the form of the state lottery, cardrooms, horse race betting and tribal casinos.
Proponents assert that the initiative contains provisions to enforce state gambling laws and prevent illegal activity. This is stated in reference to “cardroom casinos” and house-backed card games like those in Nevada. However, opponents noted that licensed cardrooms in California can operate legally so long as those operating them didn’t take a percentage of the winnings and the community in which they operated approved of them. The measure, opponents argue, only expands the tribal casinos’ hold on gaming at the expense of municipalities whose budgets rely on cardroom tax revenue. Also, the regulatory changes prompted by Prop. 26 would initiate an expansion of California’s Private Attorneys General Act. This would allow anyone — including tribal casinos — to sue cardrooms they believe are breaking the law if the Attorney General either fails to bring charges within 90 days or chooses to dismiss the charges without prejudice. Proposition 27 would legalize online sports betting outside of tribal lands, for anyone over the age of 21. It requires tribes and gambling companies offering online sports betting to ensure payments to the state for specific purposes: first to support state regulatory costs and the remainder to address homelessness and a mental health support account for permanent and interim housing (85%) and nonparticipating tribes (15%) for a tribal economic development account, established by the initiative to provide funds to Native American tribes for expanding tribal government, public health, education, infrastructure and economic development. The proposition would create a new unit within the California Department of Justice to regulate online sports-betting and investigate illegal sports-betting activities. The amendment would take effect on Jan. 1, 2023. The proposition also changes the California Constitution and state law to allow sports-betting over the internet and mobile devices. The initiative would see California join 30 other states in allowing bets on athletic events such as football games and non-athletic events like award shows and video game competitions. However, bans will remain on bets on other events such as high school games and municipal elections. Prop. 27 requires various sports betting payments to go to the state. Tribes and gambling companies with sports-betting licenses must pay 10% of bets made each month to the state, after expenses. These payments would go into a new California Online Sports Betting Trust Fund or COSBTF. COSBTF revenues would first be required to go toward state regulatory costs. The rest would be used for addressing homelessness and gambling addiction programs and for tribes that are not involved in online sports betting. Those in support of Prop. 27 say this initiative will provide “hundreds of millions” of dollars in permanent solutions to homelessness, mental health and addiction in California. Yet, its opponents say that Prop. 27 caps revenues for homeless programs at “pennies on the dollar” of what online gambling corporations will make. Opponents claim Prop. 27 contains a “promotional bets” loophole. They contend, states that allow this same loophole have seen revenues fall well below what was promised. Why is this an issue now? The other issue complicating sports betting in California is that tribal groups and cardrooms are opposed to one another. Based on their compacts with the state, tribes assert that cardrooms’ operations are in violation of the tribes’ exclusivity over gambling in the state. Indeed, tribes do have exclusivity over house-banked games, and cardrooms have avoided the issue by theoretically offering only player-banked games. This has led to ongoing litigation between the two groups. In a 2019 case, three tribal operators sued the state and Gov. Gavin Newsom for failing to prevent card rooms’ offering house-banked games. They argued that this was a violation of the gaming compacts between the state and the tribes, but also the state constitution, which grants exclusivity to the tribes through an amendment approved by voters in 2000. Further, California is home to some of the most beautiful and historical horse racing tracks in America. Owners of these tracks are powerful stakeholders who do not want to be left behind if an influx of new revenue is going to become available.
Prop. 26 changes the California Constitution and state law to allow California’s privately operated race tracks and tribal casinos to offer sports betting. But it bans bets on certain sports, like high school games and games in which college teams participate.
Sports betting is an issue now because the U.S. Supreme Court, in a pair of decisions in 2018, struck down a 1992 court decision that outlawed sports betting nationwide with the exception of four states. Long considered a kissing cousin in sin with alcohol and organized crime, gambling has been a target.