California sports betting setback
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Where California Sports Betting Stands After Latest Setback

Another legislative session, another failed California sports betting bill.

The biggest prize in the U.S. sports betting race once again kicked up hopes for what would be one of the largest wagering markets in the world. Facing a rising health and budget crisis, this latest bill had backers believing that maybe this was the year online sports betting would come to the Golden State.

But the conflicting gaming interests, the political realities and legislative restrictions were once again too much to overcome.

Monday’s news that Sen. Bill Dodd was pulling the latest stab at legal sports betting wasn’t unexpected, but was nevertheless disappointing. It will likely be at least another year – in a best-case scenario – until the millions of California sports bettors will have a legal avenue to place a bet.

Here’s why California’s sports betting fell short again in 2020, and what to expect next on the long road ahead.

Background on Gaming in California

The complex relationship between the state’s gambling stakeholders, the government and each other doomed SCA-6 from the start.

Since a 2000 ballot measure expanded gaming options on federally-recognized sovereign tribal lands, California’s Native American tribes have opened more than 60 casinos across the state, generating billions of dollars for tribes and their communities. Now the largest brick-and-mortar gaming option in the state, this has led to conflict with the state’s cardroom industry, which has existed in some form in California since the Gold Rush.

In addition to the natural competition for gamblers’ dollars, the tribes have argued the cardrooms have usurped the 2000 constitutional amendment by offering certain types of “player-banked” games. The amendment gave the tribes the exclusive right to dealer-banked card games such as blackjack, but the cardrooms could still offer these games – as long as the “dealer” rotated between players.

Since card players seldom want to serve as the dealer, the cardrooms hired third-party “players” to act as a full-time dealer. This was contested by the tribes, but then-Attorney General Kamala Harris wrote in a 2016 opinion that cardrooms could continue offering a full-time third-party player at a table, as long as every player was “offered” the chance to be the dealer and there was a break in the action after every hour.

The tribes found this opinion also violated the amendment. They continue pushing their case with current Attorney General Xavier Becerra.

Meanwhile the cardrooms are still offering these types of games, which they say is critical to not just their survival, but the survival of their communities. Several local government officials from economically disadvantaged communities testified during an SCA-6 hearing that cardrooms were both the largest employer and biggest tax generator. Without their success, city and community budgets would be slashed, denying residents critical services.

With tribal casinos having a similar role in many rural communities, it has created an intense fight for the future of gaming which representatives on both sides believe is critical to their respective communities’ wellbeing.

Latest Bill Details

Sen. Dodd, along with Assemblymember Adam Gray, sought to rectify this impasse with SCA-6.

After sports betting fell short in 2018 and stagnated through 2019 and the first part of 2020, the pair renewed their efforts with a revamped sports betting proposal: the tribes, as well as certain state horse tracks, would have exclusive sports betting rights. In exchange, the cardrooms could continue offering player-banked games.

This was supported by the tracks, the cardrooms and the state’s professional sports teams (which, notably, had opposed sports betting until two years earlier when the Supreme Court struck down the federal sports wagering ban, which they had fought for in court). But it was rejected by the tribes.

Speaking in legislative testimony, media interviews and web conferences, the tribes viewed SCA-6 not only as an unfair deal for the cardrooms, which they argue have violated the law with impunity for years, but as a betrayal by the government. Tribal leaders felt excluded from the legislative process and feared such a massive change to state gaming without their input would empower the government to further encroach on their rights.

The tribes further opposed the online component. Though mobile wagering makes up the vast majority of sports betting revenues in online betting markets, the tribes sought retail-only legislation to promote more in-person foot traffic at physical sportsbooks within their casinos.

This made a difficult legislative journey to place a sports betting proposal on the 2020 ballot – which would require two thirds support from both chambers – all but impossible.

Outcome Divides Stakeholders

But facing a multi-billion-dollar budget shortfall and billions more in looming medical expenditures from the COVID-19 pandemic, sports betting backers in Sacramento again pushed their proposal forward. After at times emotional testimony from cardroom and tribal backers, the bill passed the Senate Government Organization Committee and advanced to the powerful Proportions Committee, which would determine whether or not the legislation received a vote on the full floor.

Ahead of an Appropriations Committee hearing on the bill, Dodd promised he would gain the tribes’ support before the legislation reached the Senate floor. He announced a few tweaks last week, but the cardrooms were still allowed to offer player-banked games – and the tribes remained vehemently opposed.

On Monday, Bloomberg reported Sen. Dodd pulled the bill, likely ending hopes for legal sports betting on the 2020 ballot.

“We are heartened to see that SCA 6 is being pulled from the legislative process. While we appreciate that the state was trying to find additional revenues during this time, this bill was simply bad policy,” wrote James May, Industry Relations Specialist for the California Nations Indian Gaming Association, in a statement.

“It unjustly rewards the commercial, for-profit gaming industry for their practice of conducting Nevada-style games in flagrant violation of California law. This bill would have also threatened brick-and-mortar establishments by legalizing online gaming, which would reward out-of-state commercial business entities and raise regulatory challenges.”

The cardrooms, not surprisingly, had a very different reaction.

“We appreciate the leadership of Sen. Dodd and Assemblymember Gray to do the right thing and propose legislation that was focused on a comprehensive and legal sports betting structure that would be in the best interests of every Californian,” wrote California Gaming Association President Kyle Kirkland in a statement to BettingUSA. “The legislation was widely supported by cities, non-profits, public safety, and all gaming interests with the exception of a handful of wealthy tribal casino operators.”

“The failure to pass this legislation is the loss of the opportunity for the state to generate billions in revenues that are desperately needed for housing, homeless, health care and emergency services. As representatives of the cardroom industry, we will continue to support comprehensive proposals that benefit Californians, not just one special interest.”

California Sports Betting Next Steps

The only hope for meaningful sports betting progress is a separate amendment proposal the tribes are now hoping to advance in court.

Earlier this year, a group of tribes introduced an unrelated constitutional amendment drive to allow retail sports betting at Native Americana casinos. Backers collected most of the more than 1 million signatures needed to place the amendment on the 2020 ballot by March, but the pandemic halted their signature drive.

The tribes are seeking an extension to continue gathering signatures and expect a court ruling in the coming weeks. Even If successful, it appears the referendum wouldn’t appear until the 2022 ballot, meaning sports betting wouldn’t begin until 2023 at the earliest. Mobile betting would still be illegal.

For now, that appears a best-case scenario. Lawmakers could try another sports betting proposal in a coming legislative session, but since the California constitution requires a voter-approved amendment to expand gambling, even a legislature-backed measure wouldn’t come until the 2022 ballot.

That legislative solution still seems unlikely. As the tribes and cardrooms look for a final answer to their legal battles over player-backed card games, uneasy feelings remain between the two stakeholder groups and the government.

California will remain the biggest dream for U.S. sports betting, but this latest legislative failure reminds bettors and stakeholders alike how far that is from fruition.

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