Hope abounded earlier this year for the possibility of legal sports betting in California, with two propositions on the ballot.
Now, the pathway to California sports betting is in doubt after Prop 26 and Prop 27 suffered lopsided losses on Election Day.
With animosity between California tribes and several commercial sports betting operators at an all-time high, many now wonder about the short-term future of online gambling expansion in the state. While sportsbooks are still at least trying to put a positive spin that sports betting could happen in the next couple of years, tribal interests and industry observers question that timeline.
Prop 27 crushed by voters
Prop 27, which would have legalized online sports betting, got crushed. It received just 16% support.
“The 16% was a surprise. I knew it was not gonna win. I didn’t think 16% was possible. It was quite a beating,” Caesars CEO Tom Reeg told LSR and PlayCA at the Indian Gaming Association Mid-Year Conference in Arizona.
He later added: “Do I recognize that this put us in a more favorable light than those who pushed it? Sure. But that was not part of the calculus at the time.”
Asked how he envisions Caesars’ role in the state in terms of trying to legalize online sports betting and then being either a tech provider or a platform provider, Reeg responded to LSR: “The short answer is I don’t know. We want to participate in sports betting in California. But we’ve always recognized that it only makes sense if the tribes are on board. So if there’s a place for us in that, we’d love to participate.”
Other leaders of US sportsbook operations had been optimistic about the future, at least publicly, leading up to the election.
“We absolutely live to fight another day,” FanDuel CEO Amy Howe said of CA sports betting at G2E in Las Vegas. “We believe there is a path to get there. Whether we get there in 2022, or, hopefully, we get there in 2024, we believe it is the right path.”
“I think the more time people in California get exposed to the messages, and the more that they’re able to sift through what’s true and what’s not, I think you’ll see more momentum towards hopefully in 2024,” DraftKings CEO Jason Robins said. “Hopefully even in 2022, but more probably more likely in 2024 that this is getting passed.”
Tribes control CA sports betting
California likely won’t be able to legalize sports betting for at least two years. A 2024 ballot measure would need to come via legislation or signatures. A legislative solution without a ballot measure succeeding in 2023 seems exceedingly unlikely.
“The key takeaway from the election is that any future gaming expansion in California must go through the tribes,” San Manuel chief intergovernmental affairs officer Dan Little told LSR.
Indian Gaming Association executive director Jason Giles said that commercial operators will need to come with a “dose of humble pie” next time they engage the tribes in sports betting conversations.
“When will California have sports betting? My gut instinct says 4-6 years. The tribes are in no hurry. They can play defense forever,” Indian Gaming Association chairman Victor Rocha tweeted.
Due to a pair of casino partnerships with CA tribes, Caesars elected to stay neutral throughout the process. FanDuel and DraftKings, however, invested millions of dollars in campaign advertising for Prop 27, which would largely have cut tribal casinos out of having a meaningful role in sports betting.
“I know the people that wrote Prop 27 well. They have confidence in themselves, and they’re in a very big hurry. I told them ‘I was around for Prop 5, and everything that’s happened ever since. The tribes are undefeated against people like yourselves in this arena. So you’re going to lose.’ I told them this,” Reeg said.
“You’ve got to get on the same page with Indian Country if anything is going to happen in California. That’s very clear. They got poor advice. Some lobbyists told them you can go this way, do an end-around and go in for football season next year. They believed what they wanted to believe, and you saw the result.”
What’s next for CA sports betting
Potential solutions could come via a tribal-led online initiative that includes in-person registration. Possibly appealing to the tribes, industry insiders opined, could be the commercial operators serving as tech providers in a B2B model where the tribes, operators and state would each receive a third of the pie.
Whether industry-leading operators like FanDuel and DraftKings would be amenable to such a scenario seems unlikely. Online gambling companies had hoped the Prop 27 gambit would allow them to keep a bigger cut of the pie; a solution where tribes are the vehicles for licensure will be far less lucrative for them.
B2B provider IGT has a strong working relationship with CA tribes.
“Tribal sovereignty cannot be challenged,” IGT CEO of digital and betting Enrico Drago said.
“Until (the tribes) get on the same page and get behind something legislatively, I think that’s what needs to happen,” Reeg told LSR.