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Odds are good for sequel to California sports betting effort

Election 2022 California Sports Betting
Rich Pedroncelli
/
AP
In this March 19, 2019, file photo, an iPad displays the types of free bets that could be placed at the Golden 1 Center's Skyloft Predictive Gaming Lounge in Sacramento, Calif. The campaign that could bring legalized sports betting to California has become the most expensive ballot-initiative fight in state history. Two rival proposals on the November ballot are pitting wealthy Indian tribes against FanDuel, DraftKings and other online gambling companies, in a contest over what could become the nation's most lucrative marketplace.

The effort to legalize sports betting in California ran headlong into a typical challenge for competing ballot measures as each was battered in a torrent of negative advertising that doomed both to spectacular failure in the most expensive ballot race in U.S. history.

Anytime voters face two measures at odds with each other, they tend to reject both, said professor David McCuan, chairman of the political science department at Sonoma State University.

“Whenever we have dueling ballot measures, and the competitors have an arsenal of dollars ... the competitors will go nuclear. And in a nuclear war everybody loses,” McCuan said. “The most powerful money in California politics is on the ‘No’ side of ballot measures."

The result was a pasting at the polls for both.

With about 5.5 million votes counted Thursday, more than 80% of voters rejected an effort by the gaming industry that would have allowed online and phone wagers on sports. A measure supported by Native American tribes that would have let gamblers place sports bets at tribal casinos and four horse tracks was opposed by 70% of voters.

But the result of Tuesday's election is not a doomsday scenario for sports betting in California. With what could be a multibillion dollar market in the nation's most populous state, there's simply too much at stake for supporters to give up.

More than 30 other states now allow sports betting, but Californians are limited to playing slot machines, poker and other games at Native American casinos, and wagering at horse tracks, card rooms and the state lottery.

Becky Harris, distinguished fellow at the International Gaming Institute at the University of Nevada, Las Vegas, said legalizing sports gambling is inevitable, but it's too soon to tell how it will unfold in California.

After the U.S. Supreme Court allowed sports betting in 2018, states such as West Virginia and New Jersey were quick to legalize it and establish a regulatory structure while others like Massachusetts took several years to work it out legislatively, Harris said.

“I do think sports wagering is imminent, but how involved the Legislature chooses to get is yet to be determined as the voters are clearly not liking what they’re seeing so far,” Harris said.

Supporters of both measures said they were reevaluating how to bring sports gambling to the Golden State and wouldn't discuss whether they would seek a legislative path or appeal directly to voters again.

The campaign in support of online wagering reaffirmed its commitment to expand sports betting in California.

“This campaign has underscored our resolve to see California follow more than half the country in legalizing safe and responsible online sports betting,” the Yes on 27 campaign said in a statement. “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.”

Jacob Mejia, vice president of public affairs for Pechanga, which owns a large casino and supported the initiative to allow a sportsbook at tribal gambling houses, said he thought the result was not a rejection of sports wagering, but an “epic repudiation of online gaming and online sports betting.”

The Pechanga tribe was part of the group that launched Proposition 26 after several legislative efforts to allow sports betting failed in Sacramento. But the coalition of tribes supporting that measure quickly changed its focus to kill Proposition 27, the counter proposal by online gaming interests, and didn't buy ads supporting its own proposal, Mejia said.

“Tribes viewed this as the biggest threat to their self sufficiency in a generation,” he said. “These out of state operators tried to masquerade Prop. 27 as a tribally supported solution for homelessness, when in fact, it was neither.”

Attack ads said Proposition 27 would turn every cell phone, laptop and tablet into a gambling device. They said it couldn't be adequately monitored to keep children from betting and raised fears of creating a generation of gambling addicts.

Opponents of Proposition 26, led primarily by card rooms that stood to lose out on any kind of sports betting, said the measure would increase the power of wealthy tribes and grant them a virtual monopoly on gambling in the state. The measure would also have allowed casinos to offer roulette and craps.

Both measures promised to bring benefits to the state through tax revenues. Proposition 27 supporters touted funds that would go to help the homeless, the mentally ill and and poorer tribes left out of the casino bonanza. Proposition 26 backers said a 10% tax would fund enforcement of gambling laws and support programs to help gambling addicts.

Returning to the Legislature for a solution would likely require wealthy tribes to sit down with their smaller peers, horse track operators, and foes who operate card rooms and those who want to expand betting to mobile devices.

Powerful tribes have the same concerns about online gaming as casino operators on the Las Vegas strip, said Harris, former chair of the Nevada Gaming Control Board. Casinos contribute to economic development and have big investments in operations that would be jeopardized if bettors could simply gamble on their phones or at home.

The solution in Nevada was to require sports gamblers to set up an account in person at a casino before wagering on that house's sportsbook app.

Proposition 27 would have allowed tribal casinos to also set up online wagering, but it also would have allowed the largest national sports betting operators to get a piece of the action by partnering with a tribe.

Whether the disparate groups that fought over the campaign ballot propositions can reach some consensus remains to be seen.

“There’s a lot of baggage among all of those different stakeholders,” Harris said. “If there’s going to be a form of mobile wagering in the state of California, it would have to come to the tribes.”

Of the roughly $460 million raised for and against both measures, about $170 million was in support of the online sports gambling initiative backed by DraftKings, BetMGM, FanDuel — the latter is the official odds provider for The Associated Press — as well as other national sports betting operators and a few tribes.

A coalition of tribes behind the No on 27 committee raised $116 million toward its defeat. The Yes on 26, No on 27 committee of other tribes raised $128 million, with most going to defeat the online measure, Mejia said.

Two groups funded mostly by card rooms raised $44 million to attack Proposition 26.

The massive fundraising more than doubled the previous record in 2020 that helped Uber, Lyft and other app-based ride and delivery services to prevent drivers from becoming employees eligible for benefits and job protection.

With blowout spending on television ads during sporting events, on social media and in campaign mailers, voters often sour on campaigns, McCuan said.

“What California voters object to is the vulgarity of having campaign ads thrown in their face at every turn," he said. "It has that backlash effect.”

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