Sports betting in California was expected to be an ugly fight, and it's now clear that it will be an all-out war between the major sportsbooks and a coalition led by more than 60 native tribes opposing legislation to legalize online sports betting in the Golden State.
In November, Californians will vote on two opposing legislative measures: the sportsbook-backed Proposition 27, which would finally open the state to mobile wagering, or the rival tribal bill — Proposition 26 — which would allow only for in-person wagering at tribal casinos and four designated horse racetracks, maintaining the tribes' control of state gaming operations.
On Monday, a 30-second ad began airing on TV stations across California that accused the operators of lying to voters about Prop 27, the bill sponsored by the likes of FanDuel, DraftKings, and BetMGM, to open up the most populous and richest state in the country to mobile betting.
The TV spot, expected to be given massive airplay in the weeks ahead, is sponsored by the "No on 27 - Californians for Tribal Sovereignty and Safe Gaming" group, which represents the states' native tribes seeking to retain their control of the lucrative California gaming market.
The attack ad began with the image of a tribal chief from a pro-Prop 27 commercial that soon gave way to a stern voice-over that accompanied the dire messages that ran on the screen simultaneously:
Subtext of tribal attacks is taxation rate
One of the key subtexts in the native tribes' No on 27 attack ad is that the sportsbooks are retaining 90% of the profits from their betting operations. In other words, the tribes are arguing that the 10% tax rate that the sportsbooks wrote into their bill is too low and effectively allows them to profit at the expense of state residents.
But a 10% tax rate is in line with the national average among states that have already gone live. Nineteen of the 32 states that have legal sports betting are imposing tax rates of 15% or less, while 11 are taxing the sportsbooks at 10% or less.
The exceptions to the nationwide 10-15% tax sweet spot are New York, which led the nation in monthly sports betting handle with $1.05 billion for June, and comes in on the high end of the taxation spectrum with a hefty 51% tax rate on operators. The Big Apple is followed by Pennsylvania at 36%, while Nevada and Iowa offer the lowest sportsbook tax rates at 6.75%.
Latest saga in a potentially record-breaking ballot box war
The launch of the attack ad is the latest escalation in an ongoing battle that could see total ad spend by the tribes and sportbooks far exceed the $224 million spent on the November 2020 bill sponsored by Uber and Lyft to exempt their drivers from state labor law — and which ultimately won voter approval.
At stake is the richest betting market in the U.S., with an estimated $3 billion in annual revenues generated from the rollout of online sports betting. If the sportsbooks' Prop 27 is successful, online wagering could become live as early as January 2023, in time for the start of the NFL playoffs, which would be a boon to operators as well as to the state treasury.
Sidestepping homeless, mental health benefits proposed with bill
One aspect of the sportsbook-sponsored legislation that the tribes are carefully sidestepping is the expected millions of dollars in revenues that will support California's burgeoning homeless population and provide mental health care funds.
Under the terms of Prop 27, 85% of the money generated from the tax on online betting revenues would go toward funding homeless and mental health care. In the coming years, this could lead to hundreds of millions in additional funding being funneled to state programs in these fields.
Nathan Click, a Democratic public affairs officer and spokesman for the proposed sportsbook legislation, notes that Prop 27 is in a unique position to help tackle this increasing societal issue.
Prop 27 is the only measure that will deliver hundreds of millions each year to help solve homelessness - all with strict audits and oversight to ensure the money is spent effectively.
— Nathan Click (@Click_CA) July 13, 2022
That’s why dozens of CA homelessness and mental health leaders and orgs back it. https://t.co/VkETXAnCuN
In statements posted on the Californians for Solutions website, the official website backing Prop 27, proponents of the bill include several mayors and homeless protection groups.
"We need to think both creatively and long-term to address California’s homelessness crisis. This initiative helps do that by generating hundreds of millions of dollars in badly needed revenue — without raising taxes on residents," said Fresno mayor Jerry Dyer on the site's page. "Here in Fresno, and in communities across the state who are looking for ways to house their most vulnerable residents, this ongoing revenue stream will help us craft the critical long-term solutions needed to end homelessness."
Meanwhile, there are also Native American tribes endorsing Prop 27 — the Big Valley Band of Pomo Indians, Middletown Rancheria of Pomo Indians, and the Santa Rosa Rancheria Tachi Yokut Tribe — that all believe the financial pros of the bill outweigh the cons.
“Prop. 27 will provide us with economic opportunity to fortify our Tribe’s future for generations and protect Tribal sovereignty,” said Leo Sisco, chairman of the Santa Rosa Rancheria Tachi Yokut Tribe, earlier this month. “And it is the only measure that will deliver hundreds of millions of dollars each year to help solve homelessness and address mental health in California.”
