LAS VEGAS – After failing to pass Prop 27 by a wide margin, industry insiders say operators must take a vastly different approach with tribes if they want to legalize online CA sports betting.
Prop 27 received just 18% of the vote, meaning the earliest the state could legalize CA sports betting would be 2024. However, given the increasingly frosty relationship between the sides, a path to legalization two years from now remains murky at best.
“I am not about looking in the past, but in order to stop repeating that behavior, we as an industry have to sit down as co-equals with the tribes, and work out a solution,” lawyer and lobbyist Bill Pascrell III told LSR at the NCLGS conference in Las Vegas.
“If that doesn’t happen, they could bring back sports betting on the ballot two years from now, four years from now, it’s going to fail again. The tribes need to be respected.”
Tribes have leverage
After scoring a resounding victory in maintaining the status quo, and preventing the likes of FanDuel, DraftKings and BetMGM from entering the market, tribes gained significant leverage.
“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 in November.
The tribes also do not want to be viewed as co-equals with the operators.
“Inviting the DraftKings, the FanDuels, etc., as subservient partners — subservience isn’t the issue,” Pechanga chairman Mark Macarro said in October. “It’s that they would be sitting essentially in parity with tribes in figuring out legalization. That’s not our goal, how do we bring these folks in so that we can legalize together? No.”
CA sports betting on tribal agenda
While sports betting has been an agenda item in recent CA tribal meetings, the conversations will expand during the all-tribes meeting in February.
CA has 110 tribes, many of whom have different interests when it comes to gaming. It will be tough attempting to get everyone on the same page.
“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.
Why Prop 27 failed
San Manuel contributed over $100 million in opposition of Prop 27. On a tribal panel, Little provided the tribal perspective of why it failed so miserably:
- Prop 27 was poorly crafted
- Thinly veiled attempt to convince voters that the measure would provide a “solution to homelessness”
- Commercial operators failed to understand the strong partnerships tribes have with Californians
- Very favorable tax rate (with generous deductions) which would have resulted in 90% of the profits sent out of California
“I thought the approach to California by the industry was a fool’s errand,” Pascrell said. “I’m a big proponent of the industry, but my counsel to many of the major operators was don’t proceed in California — and this was advice I gave them 2-3 years ago — without sitting down, locking the door, and working with the tribes for a solution.”
Tribes concerned over iGaming
Ttribes are most concerned about the expansion of online casino gaming, which could cut into their retail casino revenues. The operators would have to show them data to defuse those cannibalization concerns.
“Some in the industry are saying, ‘Well, the tribe’s ballot referendum (Prop 26) lost too. The tribes didn’t care,’” Pascrell said.
“How do you justify some of these companies that still aren’t turning a profit spending $400-$500 million and starting out at 32% of the poll, and ending up at 16%? What politician is going to stick their neck out to provide other solutions?”
Potential CA sports betting solutions
A potential solution could come via a tribal-led online initiative that includes in-person registration. Tribes or operators could look to file a 2024 initiative by the end of summer 2023, where they would not begin gathering signatures until fall.
CA tribes would also be enthused, industry insiders believe, by commercial operators serving as tech providers. That would be a B2B model where tribes, operators and state would each receive a third of the pie. Yet it is not clear if sportsbooks would be amenable to that scenario.
At this point, it is hard to envision a legislative compromise. Yet one casino executive believes that is the most likely endgame.
“Until (the tribes) get on the same page and get behind something legislatively, I think that’s what needs to happen,” Caesars CEO Tom Reeg told LSR in November.
Operators must make better case
Pascrell believes preliminary conversations with the tribes — which could even be 1-on-1 — should begin around the start of the new year. Regardless, whenever those talks take place, the approach needs to be different.
Tribes, operators and legislators need to be pulling in the same direction.
“The gaming industry still doesn’t understand politics. There’s (110) federally-recognized tribes in California — (60) of which opposed the ballot referendum,” Pascrell said.
“Those (60) tribes have a large number of constituents that listen to the tribal chief in terms of who to vote for. That’s a built-in base. Who does the industry have? Major League Baseball was the best we could do?
“We have a good case to make to the tribes,” Pascrell added. “We just haven’t made it properly.”
