California is the fifth largest economy on earth — if you carved it from the US — but remains at the 20th Century regarding gambling law.
With a projected first-year tax revenue of $100 million, one would think that California would wish sports betting legalized as swiftly as possible. But…it might be at least five decades, or even longer, before sports betting is headquartered in the state.
A lot of the challenge is the lack of comprehension of the territory, and how the stakeholders interact with one another and the state government. Hopefully this article will clear some of the smoke from the area.
As it is the second industry this decade which has flipped from illegal to regulated, California already has some experience in that respect. I will attempt to decode here what the issues are, in the expectation that better comprehension of those issues will help get to a win/win for all parties involved as economically as possible.
The lay of this land for California sports gambling Present-day stakeholders in CA gaming comprise these 3 entities:
Horse racing tracks
Cardrooms are legal since 1936 (draw pokerhold’em along with other poker matches were held to be legal in 1987, player-banked table games were lawful at 1988). In all three instances, the cardrooms needed to go to court, challenge the state’s gambling statutewin.
They’re subject to state regulation, that was criticized (and justly so, in my opinion) by tribal gambling interests. They’re a politically powerful enough group, but pale by comparison to the political power the tribes have in California.
Tribes initially offered bingo, then after winning the landmark Cabazon instance in 1987, which resulted in the Indian Gaming Regulatory Act, proceeded to slot machines, player-banked table games between cards (house-banked card matches in 1993), and eventually went into the electorate to get their casinos completely legal in 2000. The ballot initiative, Prop 1A, amended the California Constitution as follows:
The Legislature has no power to authorize, and shall prohibit, casinos of the type currently operating in Nevada and New Jersey. (Art. IV, Sec. 19 (e))
The tribes (or rather, their attorneys and lobbyists) have interpreted this to mean they have a monopoly on anything that might be given in a casino, which might include things like sports gambling.
While horse racing is generally regarded as a mature business, with two major paths final in the last ten years since the land has been more valuable put to housing and other uses, it is still a favorite pastime for a lot in California, and the horsemen have political clout as well.
How they intersect
As one might expect, the three stakeholders do not like each other.
The actual stakeholders, naturally, would be those of California, who would probably see tax revenues approaching $100 million from the initial year of performance, and up of this as the market matures.
On the other hand, the CA state budget is roughly $180 billion annually, so what’s relative. One would think there is enough money to go around this time, which wasn’t true with online poker, which a minority of California tribes were able to conquer in the legislature on a nine-year (and counting) period.
A brief legislative history of sports gambling in California
Sports gambling has been discussed at the legislature for nearly two years now. Early in 2016, Assemblyman Adam Gray (D-Merced), who is also chair of the Assembly’s Governmental Organizational Committee (which manages, among other items, gambling in the country ) introduced AB 1573, which could create a framework for supplying sports gambling.
The bill has been rather vanilla in terms of regulation: service suppliers licensing using a stakeholder to provide services. For a lot of reasons, including the national sports gambling ban was intract at the moment, the bill never got past a hearing, nor was there some type of informational hearing on the situation.
Assemblyman Gray returned 2017 with ACA 18, which will change the California Constitution to enable the legislature to regulate sports gambling. This also went nowhere, though it’s interesting to note that Gray may or may not have needed his timeline backwards.
Generally, with respect to gambling growth in California, you need the electorate to approve a ballot proposal , then the legislature would write and approve regulations for it. There may or may not be a suggestion here that lawmakers believed it originally would not need voter approval to promulgate sports betting regulations.
Transforming the constitution?
Finally, a group referred to as”Californians For Sports Betting” declared it would be attempting to get an initiative on the 2020 ballot that would repeal the above clause approved by the electorate in 2000.
The very first ballot proposal sought to strike down Article IV, Sec 19 (e) of the California Constitution. I initially thought this ballot proposal was sponsored by a sportsbook, because no one with understanding of how California politics functions would realize that the tribes would spend upwards of $100 million, rather than batting an eye on the checks, to defeat this step and protect their property interests.
What this accomplished was the following:
It bothered the tribes , they used their political ability to get any hearings canceled on the matter, thus effectively killing any legislation for 2018.
The measure also annoyed the cardroom industry, because it preempted whatever they had been trying to accomplish with sports gambling, and because many tribes (wrongly) would believe that the cardrooms were behind the bill (they weren’t). There is not a lot of trust at this time involving the cardrooms and the sportsbook operators.
There’s a fear among both some tribes and some cardroom operators the sportsbooks could just sweep and dominate the gambling industry, and want to learn more before deciding how to move. Whether that fear is logically based is not relevant.
A rewrite of the ballot measure
The promoters did rewrite the initiative a few months afterwards, which abandoned Art IV, Sec 19 (e) unchanged, but limiting the governor from negotiating compacts with tribes that wish to conduct off-reservation gaming (which most tribes probably would encourage ), and directly authorizing the legislature to regulate sports gambling, in the way suggested by Gray’s 2016 AB 1573.
So, the current version of the ballot initiative appears more like it had been composed by a celebration with some sophistication regarding how gaming works in California, or at least gained some help on the issue.
Finally, I’d anticipate some variant of the prior ACA 18 or AB 1573, or maybe both, to surfaced soon after the legislature reconvenes following the holidays.
Who’ll get to split the money, and when?
The stumbling block in all this is an unnecessary struggle as to who gets to own the game.
The tribes originally attempted to play the card, but realizing the tracks are simply too powerful to be excluded, enlisted them in an alliance against the cardrooms.
What’s more, it’s not a fantastic appearance to state you’re against sports betting, as a few tribes and tribal assistants have said, when you’re not only remodeling your unprofitable off-track-betting facility, you’re marketing the joys of it as well. In fairness, tribal interests are not necessarily aligned on this issue, based on the tribe. As you are going to see, there’s going to be something here for everyone who’s spent in this to hate.
The biggest difficulty, as I see California, is you have two major entities that operate gaming businesses with substantial political power, but actually do not know either gaming nor the casino enterprise.
Cardrooms and tribes stand to gain Cardrooms can not have any interest in the outcome of any arrangement in their own cardroom. Moreover, although some operators think of having the ability to bank their own matches (and hence eliminate the (Third-Party Providers of Proposition Player Services or TPPPS), the truth is that specific learning curve will be steep and probably very costly. Game protection is a totally different animal when it’s your bankroll at stake.
Tribal members receive a test, and if they’re lucky, a healthy check, each month from gambling revenues, but do not really understand how that check is created. Thus, you have two related, controlled industries that are fundamentally mom and pop businesses, regardless of the size of these, that generally rely upon other people to inform them how to run their businesses.
The tribes generally are satisfied with the status quo and leary of anything but, and that’s certainly understandable.
There are no visionary Jack Binion or Terry Lanni clones in tribal gambling or the cardroom market. What confusion that comes from that is definitely understandable. Sadly, this brings in several of celebrities that don’t always have their clients or investors best interests in mind.
No shortage of unsympathetic parties
The tribes, for the most part, rely on their corporate lawyers and lobbyists, who, for the most part, oblige them by treating them like ATM machines, selling unneeded, unnecessary, and above all, unwinnable conflict.
The latest growth is a lawsuit filed last month by two Southern California tribes against numerous cardrooms, asserting that they are running banked table games in violation of the so-called monopoly on table games.
The first issue is that if that is true, they are suing the wrong people; their beef is with the state. The next problem is that if you’re going to sue the State over violation of compact (the proper filing and cause of action here), this litigation always is observed in federal court. Since there’s a failure to join a necessary party to the litigation (the State of California) which likely will not consent to be sued in state court, the most likely result is most likely the issue will be dismissed on procedural grounds.
On the flip side, you have a range of”old school” cardroom shareholders that keep score by not how much they could make, but by how far they can get over. You have a few operators that honestly shouldn’t, in my opinion, maintain gaming licenses, along with the tribes’ complaints into the state about their inability to regulate (read”field”) these operators is a legitimate one.
It also rather begs the question whether or not the state is properly equipped to really enforce bad behaviour (instead of letting the miscreants write a check to”settle” the accusations). If they can not reverse a licensee for egregious anti-money laundering offenses, it makes you wonder if they can fairly regulate a business which manages substantially more cash.
The tribes have fought the cardrooms for a number of years on the so-called player-banked game issue. Cardrooms, because of California law, can provide table games, as long as the players bank the matches rather than the house. Services called TPPPS will charge the matches when nobody would like to. The occurrence of the companies is at root the center and spirit of the beef the tribes have with the state.
They claim that they have a”monopoly” on table games and slot machines, where the fact is that they probably have neither. They understand this, also. For many years, they have threatened all types of litigation.
The issue is, any litigation against the State of California would necessarily take place in federal court, rather than state. Why is this significant? Having a US District Court judge, which will be an appointed for life standing, the ruling will be on the legislation, and just the law, rather than the political triangulation elected state court judges frequently offer as a guise to interpreting the law.
To find past movement in federal court, you are going to have to prove you’ve been hurt; in other words, you’re going to need to prove you really have a monopoly. Hanging your hat on a richly composed part of the state constitution is a surefire method to sabotage what monopoly can exist within your own mind.
While courts have used the term”monopoly” in their remarks regarding tribal gambling in California, there’s been no explicit grant of a monopoly from the electorate. The constitutionality of Art IV Sec 19 (e) hasn’t been challenged, in my view the clause is cloudy, especially in light that the tribes might have choosen more direct language in writing the ballot proposal.
Moreover, from the litigation that has previously taken place, it’s been by individual members of tribes suing as humans, using some creative procedures for getting their grievances aired in (state) court. So, looking at things from a purely historical manner, the tribes probably know exactly where they’re at with this.
The reality for CA sports betting There are four issues that are real and static.
The convenience factor To begin with, cardroom customers are almost invariably customers of convenience. Think about the man who would rather shop at 7-Eleven (poor selection, high costs ) than the Safeway, since the 7-Eleven is across the road and he has to drive ten minutes into the Safeway.
Most gamblers just want to be in action as soon as possible. That’s the reason why a gambler who lives in Alhambra, east of downtown Los Angeles, which is maybe 45 minutes out of San Manuel, among the best locals casinos everywhere, prefer to drive the 15 minutes to Commerce Casino, though the amenities are inferior and the cost of gaming is much greater.
Therefore, even if a number of the table games went off , the cardroom customer would probably just return to enjoying with the conventional player-banked games (i.e. Pai gow tiles, Pai gow poker, etc) or poker. Yes, cardroom revenues would decrease marginally but the tribes would get very little . Certainly not any the millions they have spent with the lawyers and lobbyists with this particular issue so far, for certain.
Second, the real complaint that the tribes have with the cardrooms on sports gambling, is all about the actual estate. The cardrooms, which the larger ones are nearly exclusively in metropolitan regions, the real estate favors the cardrooms.
With any introduction of sports betting, it is possible that the path will replicate what other jurisdictions have done before: roll out the merchandise as land-based only to start. This is concerning to the tribes, but perhaps they don’t have any reason to be concerned. Let us take the man or woman who resides in West LA, would he prefer to drive 20-30 minutes to Hollywood Park (or a bit longer to Gardena or the Bicycle Casino in Bell Gardens) or at least double that time to San Manuel, Pechanga or Chumash to make a wager?
This is not really business the tribes are getting anyway, and you are almost certainly losing business because of it. Quite much like the table games difficulty, in my view.
What’s the Strategy?
Third, it’s fairly clear the sportsbooks don’t have a plan for California, at least however. Exhibit A are the first ill-advised ballot proposition, which effectively killed any chance of getting the issue to the voters in 2018, and surely did not help matters for 2020 and perhaps beyond.
Many European operators are online only; the idea of performing retail (walkup, traditional) mortifies some of them. However, they are also natural partners for the cardrooms, as in any legislation that goes through, the cardrooms probably would not have the ability to accept bets themselves, and could be consigned to charging to their operator-tenant.
Thus, some of the delay in the process is technology-driven, or the inability of several modern online operators to operate a”traditional” sportsbook. However, some operators have walkup novels in Nevada, the UK, and other authorities and can certainly use their experience to a competitive advantage when and if California opens for business.
Finally, and most importantly in my view, unlike the struggle to get online poker legalized, there’s more than enough money to go around. Pretax revenue for a mature California market, retail books simply, has been projected to approach $1 billion, or roughly 40 times what online poker has been estimated to bring in.
In a ten percent tax rate, which is a reasonable one for all parties involved, tax revenue could approach $100 million.
While the legislature has traditionally deferred to the stakeholders to hammer out their own deal and get back to these, maybe its time for the legislature to legislate more aggressively rather than defer, due to the quantity of potential tax revenue involved.
As stated in the beginning, the actual stakeholders in this are the people of the State of California, and as such they are owed a duty by the people who represent them in Sacramento to find this issue to ballot as efficiently as you can. Especially as there will be layers in this, because of the inherent previous disputes, the legislature would be well advised to be much proactive this time round.
Read more: https://newyorknews.press/basketball-odds/