Dissecting the Ways CA Tribes, Sportsbooks Could Compromise in 2024
A legislative compromise could be the next incarnation of California’s attempt to legalize sports betting.
That does not mean that the gambling tribes and private sportsbook companies will harmoniously come together. Instead, a California legislator — or a group of them — could act as go-betweens to forge a compromise initiative that both groups can support and therefore promote to the California public.
Even if gambling tribes and private sportsbook companies still feel animosity toward each other, allowing legal sports betting in California would open up the country’s largest sports betting market to date.
Together, the gambling tribes and private companies spent over $450 million on the Prop 26 and Prop 27 campaigns. This expensive, self-inflicted mistake is wasted revenue that could be made back in a new large market.
Legislative Compromise Doesn’t Imply Harmony
Some industry analysts are pessimistic about the prospect of tribes and sportsbooks working together after the failed midterm campaigns. Prop 26 spokesperson Kathy Fairbanks told California Casinos she even doubts that all tribes would come together to support one legislative solution.
However, they don’t have to come together for a legislator to act as a mediator — between sportsbooks and tribes, and among the tribes themselves.
Senator Lyndon Johnson navigated a more difficult compromise between more hostile factions in 1957. Southern Democrats in the Senate who opposed civil rights for Black Americans formed an alliance with State’s Rights Republicans.
Southern Democrats also dominated the committee chairmanships, which allowed them to kill bills in committee. Civil rights legislation wouldn’t move forward unless the Southern Democrats allowed it. This was the stage of a seemingly impossible standoff between liberal Democrats and the Southerners and their allies.
In the House of Representatives, liberal Democrats and Republicans courting the northern Black vote sent the Civil Rights Act of 1957 to the Senate. The original version included provisions that would’ve desegregated schools and public places. It would’ve also empowered the Attorney General to pursue cases on behalf of Black Americans whose voting rights were violated.
Neither side would budge on compromises to the bill. Southern Democrats were adamant about maintaining segregation. Liberals wouldn’t budge on granting civil rights to Black Americans. Compromise seemed impossible.
To pass the bill in the Senate, Johnson gutted the bill down to only protect voting rights and to allow jury trials in the South for infractions of the new law. This was far weaker than desegregating the South and made voting rights protections unenforceable in the South.
As the jury that acquitted Emmitt Till’s murderers showed, a white jury would not convict a white man for crimes against a Black American in the South.
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The Use of Passing a Weak Legislative Compromise
Even though it was unenforcible in the South, the bill that became the Voting Rights Act of 1957 was the first civil rights bill the Senate passed since 1875.
Robert Caro concludes in Master of the Senate that passing this weakened bill set the stage for the meaningful and enforceable civil rights legislation that Johnson signed as president. Critically, it showed that Black America had white allies in the Senate, which had kept protections for Black Americans from passing since the Supreme Court struck down the protections of the Civil Rights Act of 1875. (This took several years and separate rulings.)
It’s cheesy to say if LBJ could forge an impossible compromise, then Californian gambling stakeholders can, too.
That doesn’t make it less true.
Possible Terms of a California Sports Betting Compromise
California gambling tribes and private sportsbook companies both have strong interests in a legal sports betting market. Tribes could expand into new areas of gambling. Sportsbook companies could get at least a part of the revenue of California’s sports betting market.
Although they have common economic interests, California gambling tribes have a political advantage. They emphatically showed that by destroying Prop 27 in the 2022 election. Tribal interests are critical to Democratic politics in California. So, the tribes can demand concessions to legalized sports betting.
Possible terms include:
- Online casinos provision
- Tax revenue distribution
If California tribal casinos could offer online sports betting either on-reservation or across California, then they could partner with private sportsbook companies to draw popular brands to tribal casinos. This way, tribes wouldn’t have to invest in developing their own sportsbooks with their own expensive tech stacks.
They’d also be able to take advantage of the legal teams that sportsbook brands have worked with to get licensed across the US.
Alternatively, tribal gambling interests could push to have the sports betting market to themselves. Then the only remaining issues would be standard questions about tax rates, operational scope, and revenue sharing with the state rather than corporate partners.
Online Casinos Provision
California gambling tribes could push for a provision addressing the possibility of future online casinos in California in any sports betting initiative that makes the 2024 ballot. The state isn’t ready to consider online casinos. But having slots and table games at bettors’ fingertips would threaten to reduce foot traffic at tribal casinos.
In fact, at the Global Gaming Expo in October, Victor Rocha, editor of Pechanga.net and Conference Chairman of the Indian Gaming Association, said California tribes’ fervent opposition to Prop 27 all came down to keeping private companies from dominating the online casino industry in the future.
“They’re trying to steal our future. This isn’t about sports betting — it’s about online gaming,” Rocha said. “That’s why we’re fighting like this could be our last fight. Because it could be.”
A sports betting agreement would be an opportune time for California tribes to secure protections against such an encroachment on their gambling interests. Even if online casinos never come to California, tribal casino interests would be protected from a future wave of online gambling legalization.
Tax Revenue Distribution
Deciding how tax revenue is distributed should be less contentious than the previous two possible terms. Both California sports betting initiatives allocated money to responsible gambling programs. That’s already an important similarity.
Compared to New York’s 51% and Colorado’s 10% sports betting tax rates, 20% is a moderate tax rate. That amount could reappear in a future draft of sports betting legislation or change based on how legislators hope to use tax revenue. These are standard negotiating terms in every sports betting market, so there’s little reason to think these issues would derail negotiations.
Prop 27 exempted itself from sending any of its tax revenue to California’s public K-12 schools and community colleges. That certainly contributed to staunch opposition from state education organizations. Would a future, compromise sports betting ballot measure not include that exemption?
Sports Betting Compromises in Other States
Each state has approached sports betting differently.
Some, like Wyoming and Tennessee, are online only. Others are retail-only, like Washington.
Louisiana’s approach to sports betting is unique in the US. It allows both retail and online sports betting. However, online sports betting was legalized parish by parish. So, there are nine parishes — counties — of Louisiana where online sports betting doesn’t work.
(Sportsbook apps use KML files from the Louisiana Department of Transportation to set geofences between parishes where sports wagers are accepted or rejected.)
Perhaps California could adopt a similar approach. In counties where there’s an Indian casino, or perhaps more than two Indian casinos, make it retail-only. Everywhere else, online would be allowed.
There are many ways that California could launch sports betting, but only one fully optimizes revenue potential. Statewide online sports betting would maximize sports betting handle but would introduce a formidable competitor into a gambling industry that tribal casinos safely dominate.
A compromise forged by state legislators could weigh tribal, commercial, and responsible gambling interests. A legislative compromise would be a more productive effort than another multi-million dollar duel of doomed ballot propositions.
Coming together after a long conflict is a little cheesy, too. But after the failures of Prop 26 and Prop 27, it also appears to be the most productive path toward a sports betting launch in California.