Through Aug. 20, more than three weeks ago now, $357 million has been spent—that’s already $133 million more than went into the successful campaign to upend AB 5 for Lyft, Uber and Door Dash drivers two years ago. And there’s still two months to go until election day—Monday’s Labor Day holiday marked the “official” start to campaigns that ramped up months ago.
The competing propositions came about after the Supreme Court ruled in 2018 that states could not ban online betting and left it to the states for their own regulation or licensing. With the varied gaming interests in Sacramento all exerting plenty of money and elbow twisting the Legislature has been unable to agree on a law for California.
For an example of just what’s at stake, consider that the PGA Tour now has embraced gaming and is listing odds on its leaderboard to prepare for real time betting. Proponents see bettors wagering real time on individual shots, not just which player may win the tournament or lead after the round. The National Football League now has an official online betting sponsor and you routinely hear and see sports talk shows describing the spread and the over-under bets. Fox Sports devotes a Monday-Friday afternoon show to gaming—expect more not less. The NFL for decades had shunned gaming, but the move of the Raiders to Las Vegas, approved by the league, signaled the end of that era.
Just too much money available.
With Proposition 26 you have the four privately owned horse racing tracks in California aligned with most of the Indian casinos. There are 69 licensed tribal casinos in the state. The casinos experienced a hit as would be expected in 2020, but roared back with a record year for receipts in 2021. The sports betting would be limited to the casino sites and the tracks.
If you haven’t ever seen a tribal casino, they rival or outdo the best that the gaming industry has to offer in Reno (they’ve largely killed the Reno business) and they’re competitive with what Vegas has to offer. This proposition leaves both off-tracking betting facilities and the five county fair horse racing meets out of the money pot.
The Proposition 27 is taking a page out of the book written by campaign strategist who convinced California voters to approve the lottery back in 1984. It devoted less than 3% of its proceeds to schools yet that was the dominant selling point in the campaign. It also greatly frustrated school officials when they went looking for additional funds because taxpayers argued that the lottery took care of them.
You can say the same for the tax increase that was passed in 2004 that established a 1% surcharge on incomes over $1 million with receipts going to fund mental health services. You would be justified in questioning just how well that money has been spent in changing outcomes—witness the governor’s successful legislation this session to establish a special court system to place mentally ill people into treatment because of the ongoing failure to deal effectively with the challenges.
Prop. 27’s primary backers are the online betting companies, Draft Kings, BetMGM and Fanduel, which would be allowed to reach arrangements with the casinos to allow online sports betting. Tribes could also offer sports betting under their own brands.
If either one or both pass, then expect potentially hundreds of millions of additional taxes to flow to the state. That tax revenue is why other states sued the online companies a few years ago—to tap that revenue stream.
As always in politics, follow the money.
