Efforts to Expand Gambling in California Already Look Doomed

California

CaliforniaA proposal to amend California’s constitution in order to allow regulated sports betting has met with opposition from the state’s tribal gaming interests.

Last Thursday, Assemblyman Adam Gray and Senator Bill Dodd introduced proposals into California’s legislature that would give voters the option of approving regulated sports betting in next year’s ballot. A couple of years ago, Adam Gray was a leading proponent of regulated online poker in California; so the hope exists that, should the expansion of gambling be approved by voters, online poker will eventually be added to whatever sports betting legislation is passed.

However, before voters get the chance to express their opinions, the proposal to place the sports betting question on the ballot paper has to be passed by a two-thirds majority in both the Assembly and the Senate. A no-brainer you would think considering that the state badly needs the tax revenues and that industry experts believe a fully mature market could raise more than $2 billion per year. Apparently not due to the political influence of California´s tribal gaming interests.

How Powerful are California´s Tribal Gaming Interests?

In 2017, the American Gaming Association released data relating to the Economic and Fiscal Impact of Indian Gaming in the United States (PDF). According to the AGA´s figures, tribal gaming in California contributes more than $3 billion per year to the state directly, while the fiscal impact of supporting more than 110,000 jobs means the positive impact on the state´s economy is more than $17 billion. That kind of money gets you noticed in Sacramento´s corridors of power.

Furthermore, many Assemblymen and Senators receive “campaign contributions” in return for supporting tribal interests, while others rely on tribal voters to maintain their positions in California´s legislature. So, if California´s tribal gaming interests want regulated sports betting, it will happen. If they don´t want regulated sports betting, it won´t. The problem is, although they want it, they only want it under their terms; and, if they can´t get it under their terms, they will stop anybody else from getting it.

What are the Tribal Interests´ Terms?

There are two terms the legislature will have to agree to if it wants to get the proposed expansion of gambling onto the ballot paper next year. The first is exclusivity. Tribal interests believe they should have the exclusive right to offer sports betting under their compacts with the state. As I wrote last year, this term will face opposition from the horse racing industry and commercial operators (i.e. William Hill, DraftKings, etc.) who themselves have some fairly powerful allies in Sacramento.

The second term is the demand that the state steps in to stop commercial card rooms hosting house-banked games. The tribal interests claim commercial card rooms are circumnavigating the law by allowing players to act as the house in games of Blackjack and Baccarat, and then taking a cut from the player acting as the house. Unfortunately a case brought by three tribes against the state of California for failing to act on this alleged violation of their tribal compacts was dismissed last week by a US District Court judge, making it much harder for regulators to comply with this term.

Is It Possible to Find a Compromise?

Probably not. When Assemblyman Gray (and others) tried for years to pass legislation to regulate online poker in California, every time a concession was offered to tribal interests, they simply asked for more. There are public hearings scheduled to drum up support for regulated sports betting, but until tribal interests are involved, they are going to be meaningless. Tribal involvement is not going to happen until the state steps in to stop the house-banked games according to Steve Stallings – Chairman of the California Nations Indian Gaming Association (CNIGA). Speaking with Forbes, he said:

In short, CNIGA does not support any expansion of gaming in California, including sports betting, until the for-profit, commercial card rooms stop their illegal practices, including constitutionally prohibited banked games. A legitimate discussion on sports betting could then proceed as long as tribal exclusivity is maintained.

As the headline states, efforts to expand gambling in California already look doomed.

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