Jim de Bree | Sorting the Gaming Propositions

Jim de Bree
Jim de Bree

If you are like me, you have probably seen commercials from various Indian tribes and others about gaming Propositions 26 and 27. Like most proposition-related advertising, what is said is usually incomplete and misleading. To make things more complex, there are dueling propositions. Hopefully this column will help to clarify and explain these ballot measures. 

Both measures would expand legalized gambling to include betting on professional sporting events, but each differs in terms of how the expansion of legalized gaming would be implemented. 

Proponents of each proposition generally oppose the other proposition because the extent of new revenue and who receives it differs significantly between the two propositions. 

Consequently, opponents to each measure generally do not argue that gaming is bad — just that the other proposition is unfair. What has not been widely publicized is that the National Council on Problem Gambling reports that online sports bettors are up to five times more likely to develop addictive gambling problems than other types of gamblers. 

Gaming companies and Indian tribes would potentially receive billions of dollars of gambling revenue from the propositions, which is why hundreds of millions of dollars have been spent on advertising. Some estimate that campaign spending related to the two propositions will exceed a half billion dollars. 

A “yes” vote for Proposition 26 (i) legalizes sports betting at American Indian gaming casinos and licensed racetracks in California; (ii) taxes related betting revenue at 10%; and (iii) legalizes roulette and dice games, such as craps, at tribal casinos. The proposition also modifies the state constitution as follows: 

• Except for the California State Lottery, the state Legislature will have no power to authorize lotteries, and shall prohibit the sale of lottery tickets in California. 

• The California Legislature may provide for the regulation of horse race track betting. 

• Cities and counties may be authorized by the Legislature to provide for bingo games, but only for charitable purposes. Many cities currently relying on card games and bingo as a revenue source will be adversely affected. 

• Nevada-style casinos cannot be built in California. 

According to the legislative analyst, the 10% tax will potentially raise tens of millions of revenue annually (which means hundreds of millions will be wagered). The tax proceeds will be distributed 15% to fighting mental health issues associated with gambling, 15% to regulating gambling and 70% to the California general fund. 

However, because the legislative analyst also estimates that enforcement will potentially cost tens of millions of dollars, it is unlikely that the incremental tax collections will generate much economic benefit to the state. 

A “no” vote opposes Proposition 26, thus continuing to prohibit sports betting in California and roulette and dice games at tribal casinos. 

Proposition 27 is 63 pages long. A “yes” vote (i) legalizes online and mobile sports betting for persons 21 years of age or older, (ii) establishes regulations for the mobile sports betting industry, (iii) imposes a 10% tax on all sports betting revenues and licensing fees, and (iv) imposes and additional 15% tax on unlicensed gaming operators. The measure allocates 85% of tax revenue to benefiting homelessness programs and 15% to benefitting certain Indian tribes who do not operate sports betting. The gaming companies must conduct their California operations jointly with an Indian tribe. 

According to the state legislative analyst, the 10% tax will raise hundreds of millions of revenue annually (which means billions will be wagered). Thus, the remaining 90% of the betting revenue will go to certain Indian tribes and online gaming companies like Draft Kings and Fan Duel. 

Sports betting companies must either be licensed in 10 states or licensed in five states and own 12 casinos, limiting future competition.  

A “no” vote opposes Proposition 27, thus continuing to prohibit sports betting in California.  

What happens if both propositions pass? 

The California Constitution generally provides that the proposition that passed with the higher margin of “yes” votes goes into effect and the other does not. Some legal scholars believe that this provision applies only to the extent the propositions conflict with each other. 

However, if both pass and Proposition 27 passes by a higher margin, Proposition 27 provides that Proposition 26 will be null and void. 

Conversely, if both pass and Proposition 26 passes by a higher margin, lawyers for Proposition 26 could argue in court that the two measures are in total conflict, to try and prevent Proposition 27 from going into effect. 

If both measures pass, we are likely to see the matter litigated.  

According to a recent poll by the Public Policy Institute, 54% of likely voters oppose Proposition 27 while 34% support the measure. This is consistent with various earlier polls reported by Ballotpedia.org. Not much polling information is available on Proposition 26, but the last time a California ballot had two gaming measures, voters rejected both by wide margins. 

My next column will discuss the other propositions. 

Jim de Bree is a Valencia resident.

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