Behind the $400M California Sports Betting Battle – Annenberg Media

You’d think hundreds of millions of dollars could buy you just about anything.

But apparently even nine-digit numbers aren’t enough to legalize sports betting in California. Despite a record amount spent on the two gambling-related state election measures this campaign season, both Propositions 26 and 27 are trending towards defeat in the polls just before the election.

Of course, for an industry estimated to rake in over $2.8 billion a year from California bettors, the stakes are pretty high.

With so much money potentially on the table for big betting companies, and it’s the costliest campaign in state history (more than $400 million total pros and cons), skeptics have concerns about what’s behind all the claims .

The problem of California’s homelessness

Prop. 26 would legalize in-person sports betting in tribal casinos and allow dice and roulette games there. Prop. 27 would legalize online betting in California and is primarily supported by gambling sites such as FanDuel, DraftKings and BetMGM, which together have contributed $95 million. In all, the industry spent $150 million on political advertising.

Prop. 27 promises to help fight homelessness, mental illness and addiction in the state by taxing betting companies and diverting those funds to the cause. Organizations supporting the legislation have focused heavily on it in their marketing.

But it wasn’t exactly a lack of funding that has kept California from finally making progress in its fight against homelessness.

Billions of dollars have been spent fighting homelessness over the past five years, but things have only gotten worse. A recent report by the independent state auditor says California’s spending on homelessness is “disjointed” and “has failed to meet its core responsibilities.”

In Los Angeles, for example, there is a $1.2 billion bond operation that is currently falling short of its promise to create up to 10,000 housing units for the homeless over the course of a decade. Projects drag on as costs continue to increase. This emerges from a February 23 audit by the city.

A 2021 state audit criticized the California Interagency Council on Homelessness for not tracking spending statewide, which was a major reason for its creation in 2017.

All of this is meant to show that the main problem of the lack of progress in California’s fight against homelessness isn’t due to a lack of funding (the main thing Prop 27 promises to provide) — it’s due, at least in part, to the failings of the state government.

“We have a very challenging system and we’re trying to make it work,” Molly Rysman, chief program officer at the Los Angeles Homeless Services Authority, told NBC. The LAHSA coordinates spending and oversees housing and social services for sprawling Los Angeles County. “We don’t have a well-oiled machine and this has become a real crisis in this county when it comes to housing homeless people.”

Opponents of Prop. 27 say fixing this system should be a priority before throwing more taxpayer dollars into it.

Examine the fine print

Any company wishing to participate in California’s sports betting market would have to pay the state a $100 million license fee to open a business — four times the current highest $25 million license fee in New York.

“Remember that it was designed by attorneys hired by the seven companies that are funding it,” said Kathy Fairbanks, spokeswoman for No on 27. “So that’s not something that lawmakers put to a vote. This is a voting measure they wrote to benefit themselves.”

While the regulation is ostensibly designed to protect consumers, it clearly benefits big bookmakers by raising incredibly high barriers to entry that smaller companies can’t afford.

Alex Kane, CEO of Sporttrade, a small Philadelphia-based betting company, said he thinks the larger companies writing the initiative don’t want to face the competition. “They ask, ‘What would we be willing to pay to eliminate competition altogether?'” he said. “You can see that it’s worth a lot of money to them.”

“The way Prop 27 is written … the ballot measure establishes a 10 percent tax rate for the online businesses that participate in the California market,” Fairbanks said. “So obviously 90 percent doesn’t go to California … 90 percent automatically goes straight back to the companies and into their pockets from the start.”

How it is going

The latest Berkeley Institute of Governmental Studies (IGS) poll released last month showed Prop. 26 down 11 percentage points and Prop. 27 failing 26 percentage points.

“These results suggest that sports betting initiatives are failing in the face of opposition advertising campaigns,” IGS co-director Eric Schickler said in a statement. “The lack of support among key demographics makes the passage an uphill one at best.”

In the past three years, nearly 40 states have passed legislation legalizing sports betting, and 30 – most recently Arizona and Arkansas – have already passed the initiatives.

But in California, voters just aren’t buying what bookmakers are trying to sell.

“They’re promoting it as a solution to homelessness, but voters don’t believe that,” Fairbanks said. “Voters don’t think funding for homelessness programs is the only problem [with the fight against homelessness]. It’s government bureaucracy, it’s bureaucracy, it’s all of that, none of that is accounted for in Prop. 27.”

Nathan Click, spokesman for Yes on 27, told the Los Angeles Times that Prop. 27 faced “over $100 million in deceptive and false attacks — $45 million before we even qualified to vote.” .

Due to the uncertainty and lack of understanding about the proposals themselves, many voters simply vote no.

“I think I’m just going to say no,” said Brian Mercado, a Los Angeles resident who was watching soccer at a local sports bar. “I don’t really understand the whole problem of homelessness… and I honestly feel like people still can [bet on sports] anyway. I do it sometimes.”

Given the sheer size of the untapped California betting market, it’s probably a matter of if, not if any form of legalized sports betting makes its way into the state. Betting providers will probably not do without billions in profits. One DraftKings executive has even called California one of the industry’s “holy grails.”

According to I. Nelson Rose, author and professor emeritus of gambling law at Whittier College, voters could even see sports betting proposals in the 2024 vote, and likely will will if these do not exist.

“The reality is that if it doesn’t work out, they will definitely try again,” Rose said. “A group will quickly start writing an initiative again.”

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