What’s next for sports betting in California?

By Grace Gedye for CalMatters

After stockpiling nearly half a billion dollars in campaign cash and inundating Californians with ads, the pitched — and sometimes confusing — battle over sports betting drew to a close on Tuesday evening.

The upshot? Nothing changes.

Voters rejected two separate measures to legalize sports betting — and it wasn’t close. California appears to be the first state to block all sports betting at the ballot box.

Proposition 26, funded by about a dozen Native American tribes, would have allowed in-person sports betting at tribal casinos and four private horse race tracks. Out of the votes counted as of today, about 30% supported the measure while about 70% opposed it.

Proposition 27, which would have allowed online sports betting, appears headed for a historic and crushing defeat. With 83% against and only about 17% in support so far, it is on track to be one of the worst blowouts in the past century of California initiatives.

That measure was bankrolled by a handful of large gaming companies, including FanDuel, DraftKings and BetMGM. It drew the support of three tribes but fierce opposition from more than 50 tribes and tribal organizations.

“Everybody knows this: You don’t come and try to screw the tribes,” said Victor Rocha, conference chairperson for the national Indian Gaming Association.

“I’ve been in the industry from the jump, and I’ve never seen anything like this,” said Bill Pascrell III, a veteran gambling industry lobbyist. “The kind of money they spent and the results they got are just terrible.”

CalMatters reached out to DraftKings, FanDuel and BetMGM for interviews. All three referred CalMatters to a campaign spokesperson.

“Our coalition knew that passing Prop 27. would be an uphill climb, and we remain committed to California,” Nathan Click, a spokesperson for the campaign, said on election night. “This campaign has underscored our resolve to see California follow more than half the country in legalizing safe and responsible online sports betting.”

How did this happen?

Even before the campaigns got started in earnest, Californians weren’t that enthusiastic about sports betting. When pollsters with UC Berkeley’s Institute for Governmental Studies asked likely voters in February if they’d support a constitutional amendment to legalize sports betting, 45% said they were inclined to vote yes, while 33% said they were inclined to vote no.

As the campaign wore on, support eroded and opposition grew dramatically. By early November 53% of likely voters said they’d oppose the in-person betting measure and 64% said they’d oppose the online betting measure. In general, support for initiatives tends to decline as an election draws near.

Californians were subjected to a barrage of ads, some of which made confusing claims or didn’t mention sports betting at all. Voters who saw lots of those ads opposed the measures at higher rates than people who saw few or none, the UC Berkeley polling found.

The propositions, themselves, were complex, and weren’t singularly focused on sports betting. The in-person measure would have allowed tribes to add roulette and dice games, for example, while arguments for the online measure centered on how it would supply funding for homelessness solutions.

For tribes, whose casinos have long been the only destination in California for certain forms of gambling, defeating the online gambling measure — which would have allowed national gaming companies to offer betting in the state — was far more important than winning the in-person measure. That was reflected in how tribes spent their advertising dollars, said Jacob Mejia, vice president of public affairs for the Pechanga Band of Indians, one of the tribes that supported the in-person measure and opposed the online proposition.

“The reality is, we didn’t undertake any meaningful advertising for (the in-person measure)” Mejia said. The online sports betting measure, he said, was “the biggest threat to Indian gaming in a generation.”

Does anyone come out on top?

When two measures get voted down so decisively, after so much money spent, can anyone be truly called a winner?

Cardrooms — businesses across the state that offer a limited range of betting card games — are pleased with the outcome. They opposed the in-person sports betting measure because it contained a provision that allowed private citizens to bring lawsuits to enforce gambling laws — something they feared tribes would use to bring costly lawsuits against them.

“We’re very thankful for the voters for having seen that for what it was and for voting accordingly,” said Keith Sharp, general counsel for Gardens Casino, a card room in Los Angeles county.

Tribes, who invested so much in defeating the online sports betting measure, may also come out ahead. “It’s a huge victory,” said Rocha, with the national Indian Gaming Association.

“It wasn’t just ‘let’s stop this thing,’ it was ‘let’s stomp this thing into the ground,’ he said. “And that’s what they did.”

The defeat of Prop. 27 and the national betting companies also strengthens tribes’ hand in any future negotiations by demonstrating their ability to block things they oppose, said Becca Giden, a director of policy at research firm Eilers & Krejcik Gaming. Their attitude, she said, can be, “‘Nothing gets by that we don’t approve of. So, come to the table willing to hear us out,’ and, most likely, ‘come to the table willing to accept the terms that we are proposing.’”

What comes next?

Nothing about what comes next on sports betting in California is certain. Just because voters say “no” to an idea one year doesn’t prevent it from popping up on their ballot the next election — or the one after that. Case in point: This week Californians voted down an initiative adding regulations for dialysis clinics for a third time since 2018.

The gaming companies backing the online betting measure aren’t going to walk away from California, it appears.

“Dozens of states and countless local governments are benefitting from the significant tax revenue that online sports betting provides, and as California faces tax revenue declines and uncertain economic headwinds, online sports betting can provide substantial solutions to fill future budget gaps,” Click, the spokesperson for the supporters of Prop. 27, said in a Tuesday evening statement.

“Californians are currently placing billions in bets each year on illicit offshore sport betting websites — unsafe and unregulated enterprises that offer no protections for minors or consumers and generate no support for state priorities. Californians deserve the benefits of a safe, responsible, regulated, and taxed online sports betting market, and we are resolved to bringing it to fruition here,” he said.

Some tribal leaders also aren’t foreclosing the possibility that they’ll make another bid in the future. “As tribes, we will analyze these results, and collectively have discussions about what the future of sports wagering might look like in California,” Mark Macarro, tribal chairman of the Pechanga Band of Indians, said in an election night statement.

There are two ways either group — or anyone else — could try again to legalize sports betting. One is to go through the whole ballot measure process, drafting an initiative, gathering signatures, and, if everything goes well, getting it onto the ballot.

Another option is to work with the state Legislature. It could pass a law allowing the new form of gambling, said I. Nelson Rose, a gambling law expert and professor emeritus at Whittier Law School. Or legislators could pass a constitutional amendment that would then be put on the ballot for voters to decide.

In 2019 and 2020, state legislators considered amendments to legalize sports betting, but complex negotiations between different gambling interests weren’t resolved in time and the effort died. Bill Dodd, a Democratic state senator from Napa who authored the 2019 legislative effort, said in a statement that “if stakeholders are interested in addressing this issue again, I stand ready to help broker any agreement that could be reached.”

Did this year’s blowout pave a smoother path? “I don’t think the dynamics have changed,” said Adam Gray, a Democratic state Assemblymember from Merced who co-authored the 2019 amendment, but is running for Congress and won’t be returning to the legislature next year.

The only thing that’s changed, he said, is “there’s $450 million that used to be in somebody’s bank account. Now it’s in the pocket of some consultants.”

Will there be another ballot measure?

Votes for this year’s election are still being counted, so any campaign for the 2024 election may not start for a while.

And it’s not clear that tribes — if they were to advance another proposal — agree on the approach.

“Our perspective continues to be that whatever proposal might emerge from tribes, it has got to be one that will be supported by the voters,” said Mejia, of the Pechanga Band of Indians, which supported this year’s in-person tribal sports betting measure.

After Tuesday night’s result, he said, “it should be clear that most California voters are saying ‘no’ to legalizing online gaming.”

But there’s another group of tribes, including the San Manuel Band of Mission Indians and the Rincon Band of Luiseño Indians, that had proposed a third sports betting legalization measure. Their measure would have allowed tribes to offer in person and online sports betting exclusively. It didn’t make it on to the 2022 ballot and recently failed to gather enough signatures to make it onto the 2024 ballot as well — but that doesn’t mean the idea is off the table.

“Our group feels that [measure] is the best path forward for online sports wagering in California,” said Roger Salazar, a spokesperson for a coalition that campaigned against Prop. 27 and includes those tribes.

But the tribes may not be in a rush. “The tribes can wait forever. They don’t need sports betting. California doesn’t need sports betting,” said Rocha, with the Indian Gaming Association. “The industry needs it, but do the people need it?”

Sports betting companies could decide to fund another ballot proposal, too. But in the short term, that may not be the wisest move. “If we go through this again in two years, it’s gonna be the same result,” said Pascrell, the gambling lobbyist. 

“Maybe take a step back on California for a moment, allow things to settle, so you can reset,” he added. In the meantime, companies could focus on other states where they might be able to launch online casino poker, which is more profitable than sports betting, he said.

“You have to respect the tribes, who have immense resources and immense political support in the state,” said Pascrell.

In the wake of a 2018 U.S. Supreme Court decision that allowed states to legalize sports betting, 31 states plus Washington, D.C., have launched operations, and another five states have legalized the new form of gambling but have yet to start taking bets, according to an American Gaming Association tracker. Twenty six states plus D.C. have legalized mobile betting, while other states require people to make their sports bets in person.

In most of the states that have legalized sports betting, it happened in state legislatures, said a gaming association spokesperson. But seven states have legalized sports betting via ballot measures placed by legislatures: Arkansas, Colorado, Louisiana, Maryland, Nebraska, New Jersey and South Dakota. California is the only state where voters said no to any sports betting. In New Jersey — which has allowed sports betting since 2018 — voters recently shot down a ballot measure that would have allowed betting on college sports in the state.

The gaming companies that invested tens of millions in Prop. 27 also have investors to think about. This year’s measure lost so badly, said Giden, “I don’t know how many investors would be lining up to do that again.”

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