A new California sports betting bill offers a compromise to bring retail and mobile sports betting to the Golden State.
Last June, Sen. Bill Dodd and Assemblyman Adam Gray introduced California sports betting constitutional amendment bills ACA 16 and SCA 6 to put the issue in front of voters in November.
On Thursday, the lawmakers finally filled out those bills with implementation details.
The new language authorizes sports betting in California only at the state’s tribal casinos and racetracks. California’s cardrooms would not get sports betting, but the bill would ensure they can continue offering designated player games that have faced tribal challenges.
The effort comes as California faces a budget deficit of more than $50 billion as a result of the coronavirus pandemic. Lawmakers want additional revenue to limit $14 billion in proposed cuts from the governor.
“The amount of money that can be raised in benefit of the state with online wagering is estimated to be up to $700 million a year,” Dodd said. “We’re looking to get those revenues for a COVID-type budget where we need to be looking out for every opportunity to increase our revenues at a time when we have to make so many cuts.”
Details of California sports betting bill
The bill seeks to amend the state constitution to allow tribal casinos and horse racing tracks to conduct sports wagering.
Here are other key details:
- Sets a tax rate of 10% on gross revenue for onsite wagering and 15% for mobile or online wagering.
- Establishes a $5 million initial licensing fee and $1 million annual fee for online wagering platforms.
- Licensees remit 1% of revenue to fund problem gambling programs.
- To get around sovereignty issues, the taxes and fees would be paid by the platform entity.
- The four licensed horse racing tracks can also have sports betting at one satellite wagering facility.
- Each tribe, racetrack and satellite facility authorized to offer sports wagering may do so through one internet website.
- Authorizes tribal casinos to offer additional games of craps and roulette.
- Mandates that providers use official league data for in-play wagers.
“Sports betting is already being done in the state of California,” Dodd said. “It’s in the shadows, not being taxed, and not providing safeguards for problem gamblers. We solve that, bring it out, have money set aside for problem gaming, and have a regulatory framework so people aren’t taken advantage of through illegal websites.”
Stakeholders not included in discussions
Since an informational hearing in January, Dodd and Gray developed a bill but did not engage stakeholders.
Here’s what the three main California gambling stakeholders get and don’t get in the bill:
Get: Three additional and lucrative games to boost casino revenue with sports wagering, roulette, and craps.
Don’t get: Ability to go after CA cardrooms for what they see as illegal designated-player games; more time before considering online wagering.
Get: Assurance that they can continue to operate card games without the threat of tribal lawsuits.
Don’t get: Sports betting, including online wagering.
Get: A jolt to bring a new generation into racetracks with sports betting.
Don’t get: To retain their exclusivity over online wagering in California through horse betting.
CA sports betting makes Senate budget
The pending Senate budget draft discussed this week acknowledges the efforts to authorize and regulate sports wagering in California with the following language:
“While this will not have a direct near-term budget impact, tax revenues from bringing sports wagering activities into legal status will have future budget benefits and help provide resources to combat negative impacts of gaming that we know exist today.”
The mention indicates that this effort has backing from more than a few legislators. California has a budget deadline of June 15, but the bill has until June 25 to qualify for the ballot.
“Senate finance leaders are looking at this very seriously,” Dodd said. “It’s going to be pretty tough for a legislator to vote no on this bill and at the same time make cuts to education or childcare or any number of things that are going to have to happen.”
The lawmakers cite estimates that the California Sport Wagering and Consumer Protection Act could bring in $500 million to $700 million in a mature market. And expectations in the first year are $200 million to $300 million.
Dodd set a hearing for Tuesday in the Senate Governmental Organization Committee and expects a vote on the bill then.
Putting an end to tribal-cardroom dispute
The main issue tribes have with cardrooms is that tribal casinos were granted exclusivity over house-banked games like blackjack in a 2000 ballot measure.
For decades, cardrooms have contracted with companies that provide third-party players to serve as the bank. But that created a playing experience similar to the casino-style games exclusive to tribes.
“There’s this age-old conflict between the cardrooms and tribes, and we in the legislature would like to solve this once and for all by providing a framework that would end that push-pull and give the cardrooms certainty to run the games they’ve been playing the past 20-to-30 years, and at the same time give the tribes some additional games,” Dodd said.
Tribes can’t go for that
Jacob Mejia, a spokesman for the coalition of 18 tribes trying to get a sports betting initiative on the ballot, says the tribes won’t accept this trade-off.
“The bill confirms that cardrooms have been operating illegal games for years,” Mejia said. “Otherwise, this measure would not need to legalize them. The notion of authorizing cardrooms to conduct Nevada-style games is an absolute non-starter that repeals tribal gaming rights.”
A statement issued by California Nations Indian Gaming Association president James Siva echoed those sentiments:
“We urge Senator Dodd to remove the provisions relating to California Cardrooms until that industry exhibits consistent behavior that proves that they are both willing and able to operate within the confines of the laws and regulations that currently exist.”
Dodd sees that part of the bill in a different light.
“We want to treat the tribes fairly and respect their sovereignty and their place in this field,” Dodd said. “That’s why the framework has a structure that includes them at the forefront of sports betting. Cardrooms want sports betting awfully bad.”
Tribes have not given up on ballot initiative
In November, tribes filed their own ballot initiative to legalize sports betting in California. The proposal limits sports betting to land-based tribal casinos and horse racing tracks.
The tribal initiative seemed on its way to acquiring the nearly 1 million valid signatures to put it on the ballot but the coronavirus pandemic stopped signature-gathering efforts.
Mejia asserted that tribes have not given up on getting the initiative on the ballot. There is a June 25 deadline for signature verification.
“It is deeply concerning that this crisis could be used to suppress the will of 1 million Californians who signed our petition to qualify a ballot measure to responsibly authorize sports wagering,” Mejia said. “We will be continuing our efforts, and we will be filing a lawsuit to ensure voters are afforded the complete allotted time to qualify our measure so that voters can make the ultimate decision on sports wagering.”
Support for push through tribal opposition?
Bills that amend the state constitution require a two-thirds vote in both legislative chambers. It’s a high threshold to reach against tribal opposition.
Dodd indicated that the bill has support from most major sports teams throughout the state. He suspects it will get support from cities that depend on cardroom revenue. It could also get support from police and fire organizations, as well as from labor unions such as teachers. He believes smaller tribes will see the benefit of the bill.
“We feel there’s enough in this to get widespread support,” Dodd said. “We have tribal support coming our way because they’re divided on this issue.”
Funds used for relief?
The amendment specifies that all money deposited in the California Sports Wagering Fund, less regulatory costs and money earmarked for problem gambling programs:
“shall be appropriated by the legislature to assist the state in recovering from the health and economic damage caused by the COVID-19 pandemic and to fund priorities related to education, public health and public safety.”
“While there’s clearly legislators that have love and admiration and respect for the tribes, there were those that feared what the tribes could do to them if they voted against their wishes,” Dodd said. “Now you have the other side of the equation, where their constituents are looking to them and people don’t want cuts.”
The question is if budget needs will create the political will for California to move a sports betting bill that won’t make anyone happy but tries to provide for all stakeholders.
“I’m not overconfident about getting this across,” Dodd said. “It’s going to be some heavy lifting. But I think the moment is right for us. The reality is that we’re trying to find that sweet spot. We’ll find out if we did.”