On November 8, Californians will vote on two key ballot measures. Each of these seeks to legalize sports betting. However, they also have the potential to impact the broader gaming industry in the state.
Proposition 26 would legalize sports betting at American Indian gaming casinos and licensed racetracks in the state.
Proposition 27 would allow licensed tribes and gambling companies like FanDuel and DraftKings to offer online sports betting.
Prop 26: Tribal Casinos Over Cardrooms
While most of the conversation about the measures revolves around their terms for sports betting, Prop 26 would also have major ramifications for cardrooms. Additionally, it would allow tribal casinos to begin offering roulette and dice games, including craps.
Prop 26 is proving particularly contentious with the cardrooms. That’s because of a clause allowing anyone to sue cardrooms for violating the state’s gambling laws. Under current regulations, only the regulator can take action against a cardroom. The relevant portion of Prop 26 reads:
Adds New Enforcement Method. Proposition 26 adds a new way to enforce certain state gambling laws, such as laws banning certain types of card games. Specifically, it allows people or entities that believe someone is breaking these laws to file a civil lawsuit in state trial courts. This lawsuit can ask for penalties of up to $10,000 per violation. It can also ask for the court to stop the behavior.
In principle, California cardrooms are only allowed to offer player-versus-player games like poker. Over the years, they’ve added more casino-type games by allowing players to take turns acting as the house. Recently, even that requirement has been relaxed by the state regulator, with bankers employed by the cardrooms taking over when the players decline.
The more casino-like the experience becomes, the more directly the cardrooms compete with the tribal casinos. That’s why tribal gaming operators support Prop 26, as it expands their own offerings while offering the ability to fight back against encroachment from the cardrooms.
The Eternal Legislative Quagmire of California
Cardrooms oppose Prop 26 because they fear a barrage of lawsuits could bury them. That would put 32,000 jobs at risk and $100 million in annual tax revenue, according to Harriet Rowan of the Vallejo Times-Herald.
Proponents of Prop 26, led by gaming tribes, insist that they merely want to ensure that cardrooms abide by the law.
Cardrooms and gaming tribes have continually clashed over gaming issues. Those disagreements aren’t just making sports betting legalization difficult. They also have much to do with why similar online poker legislation efforts never got off the ground. The cardrooms and the tribes would both like to see it legalized, but each opposes any proposal supported by the other.
Add racetracks and big online operators to the mix of competing interests, making the situation even stickier. All parties are spending big to sway the upcoming vote in favor of the propositions they support and against those they don’t. According to L.A.’s KTLA, a total of more than $150 million had been raised as of Tuesday — $109.5 million in support and $41.9 million in opposition — to sway voters on Prop 26 alone.
Unless the dynamic changes, any hypothetical online casino legislation in California would become an even bigger mess. Despite the amount of money on the table, such a possibility is many years away at best.
Opponents of Prop 26 argue that the provision regarding legal action against cardrooms is an attempt by gaming tribes to inflict damage on rival cardrooms.
“No on 26” campaign spokesperson Becky Warren criticized tribal casinos, telling the Vallejo Times-Herald that they “still have this belief that they should have exclusivity on games, even though no one else agrees with it.”
Conversely, Prop 26 advocates claim it would improve the state’s enforcement of gaming laws.
How Would Prop 26 passing affect the California gaming industry?
Legalizing in-person sports betting would likely generate tens of millions of dollars for the state. That much is obvious.
What’s less predictable is the fallout of the clause about cardroom enforcement. There’s no telling who, aside from the tribes, might want to attack the cardrooms and on what basis. Opponents of Prop 26 argue – as Veronica Gunn wrote in the San Diego Union-Tribune on August 19 – that:
the sole purpose of proponents including the poison-pill provision is to eliminate their competition, as they have a long history of unsuccessfully challenging the legality of certain games played in card rooms.
Sadly, these controversies risk putting voters off the idea of sports betting altogether. Analysts currently suggest that it’s likely both measures will fail.
The biggest downside is that California would continue to miss out on the massive revenue sports betting generates for other states. However, it’s also damaging to California consumers, many of whom will turn to illegal offshore sportsbooks without a locally regulated option.