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As the California Attorney General’s Office reviews two proposed ballot initiatives that would allow tribes to operate retail and online sports betting, analysts and tribal officials are speculating as to why proponents would try again so soon after last year’s lopsided defeat by voters of two similar proposals.
“While the industry would love to see sports betting done right in California, we think the initiative has low odds for success,” said Brendan Bussmann, managing partner with B Global, a Las Vegas-based advisory firm.
“While this is new to the sports-betting dialogue in the state, you also have to deal with voter fatigue given it didn't pass two years ago,” Bussmann said. “While California voters may have a limited memory, the 2022 ballot measure received fewer votes than qualified signatures.”
As things stand, Bussmann said, conventional wisdom says the backers of two new ballot measures to legalize sports wagering filed last Friday (October 26) are “California Dreaming.”
Proposition 26 and 27 failed spectacularly last November with California voters.
Prop. 26, which would have restricted sports betting to in-person wagers at casinos run by California tribes, got just 33 percent of the vote.
Prop. 27, which would have allowed commercial sports-betting companies such as DraftKings and FanDuel to launch online wagering in the state, got even less, with just 17 percent of Californians voting yes.
The campaign set a spending record with more than $459.6m spent to try to get a pair of ballot initiatives passed.
Steven Light and Kathryn Rand, professors with the University of Nevada, Las Vegas Boyd School of Law’s Indian Nations Gaming & Governance Program, said the two sports-betting initiatives filed late last week are generating a good deal of speculation and early controversy in California.
“The initiatives' source, intent and potential political, policy and profit implications, as well as the likelihood that they will make the ballot, are being discussed widely, as there seem to be many unknowns surrounding the proposals,” Light and Rand said in a joint email Tuesday (October 31).
“Such reactions are understandable, since the filing of these initiatives appeared to catch most folks off guard, especially the leadership of most gaming tribes in the state.”
The two initiatives' stated intent, although questioned by tribes, is keeping California tribes in control of sports betting by not allowing offshore or out-of-state interests to control the operations with branding exclusively under the tribe’s federally-recognized name.
Still, Jacob Mejia, vice president of public affairs with the Pechanga Band of Indians, said the proposals sound similar to Prop. 27 as rejected by voters less than a year ago.
“As far as we are concerned, this is a tribal measure in name only,” Mejia said in a statement. “We are not aware of any tribes having drafted or played a meaningful part in this proposal.”
Should the initiatives continue to move forward, Eagle 1 Acquisition Company LLC, which was formed by two former Pala Interactive executives, would have until April 23 to collect 874,641 valid signatures to make the November 5, 2024, ballot.
Bussmann wrote in his legislative review for Truist Securities that signature collection can only start after “the initial 65-day clock begins after submission for the attorney general to review.”
“Based upon the calendar, this would mean a January start in collection,” he added.
As for where the money would come from to pay for signature gathering, campaign advertisements and other needs to get the initiatives on the ballot and then passed, that remains unknown.
Light and Rand said there seemed to be general consensus among gaming tribes, even those that may have differed on last November's competing ballot initiatives, as well as outside commercial operators who wanted to enter the California market, that the failure of last fall's propositions was instructive.
The new campaign in California comes as two separate lawsuits challenging the exclusivity rights of tribes to offer sports betting are making their way through the courts.
The U.S. Supreme Court recently lifted a stay and allowed the Seminole Tribe of Florida to offer mobile wagering throughout the state under a 2021 compact. A separate challenge is pending before the Florida Supreme Court.
It is still unknown exactly when the Seminoles will launch sports betting through its Hard Rock Bet brand in Florida.
“The issues in Florida for its compact with the Seminole Tribe still present legal uncertainties, including under state law, that are yet to be resolved concerning some of the logistics of sports wagering outside of that state,” Light and Rand said.
Meanwhile, Maverick Gaming, which operates 24 cardrooms in Washington state, has sued to overturn tribal gaming compacts on grounds that commercial gaming operators should also participate in sports betting. The case is pending before the Ninth Circuit Court of Appeals.
Justice Brett Kavanaugh issued a statement in the Seminole case taking issue with a separate Florida statute, distinct from the state-tribal gaming compact, authorizing the tribe and only the tribe to conduct off-reservation gaming operations in Florida.
Kavanaugh wrote the state law raises serious equal protection issues.
John Holden, an associate professor with the Spears School of Business at Oklahoma State University, said he believes that California gaming interests, gaming tribes and commercial entities alike are all watching the Supreme Court.
“With that said, I think California is a whole different animal with multiple tribes versus essentially only the Seminole Tribe in Florida competing for [mobile] sports-betting customers,” Holden said.
Holden said that while the “Supreme Court case is being followed, I am not sure it provides a road map in California unless of course we see something like Indian Gaming Regulatory Act (IGRA) getting thrown out or something like that.”
Holden noted that a legal challenge against the Seminole compact could still be filed before the U.S. Supreme Court, but “assuming, as the odds would indicate, the case does not get certiorari granted, I think there probably isn’t much for California to take away.”
“If certiorari gets granted, depending on how SCOTUS frames the question presented it could be essentially a big nothing for gaming in the state or if the court frames it in some way around IGRA’s constitutionality it could be significant.”
“Certainly, if Justice Kavanaugh’s words shape a question presented, whether in West Flagler or Maverick Gaming or another case down the road, we could very well be talking about what gaming looks like without IGRA at least as it is currently constructed,” Holden said.
