The Future of Sports Betting in California

May, 26, 2022 4 months ago

The Future of Sports Betting in California

California doesn't have a legal sports betting scene, but this could soon change if the current push for legalization gets the green light. With around 40 million residents and millions more in annual tourists, the potential gambling revenue alone is enough incentive for the Golden State to join 34 other U.S. states with a legal framework for sports betting. However, California still has to sort out the differences to ensure everyone involved is safe and gets fair opportunities. Here's an overview of the current state of California's sports betting scene, legislative initiatives, and what the future holds:

Is Sports Gambling Legal in California?

Sports betting is illegal in California, meaning there’s no legal framework to license bookmarkers looking to offer such products. Any offline or online sportsbook claiming to be licensed in California is fraudulent and should be avoided. That said, California punters are free to join any online sportsbook they wish, including offshore websites. No law prohibits or punishes players for exploring offshore platforms. Currently, all eyes are on the November 2022 ballot when residents of the Golden State will determine the future of sports betting in the region. Four sports betting initiatives are headed for the November ballot, and two have already secured their spot in the elections. The other two are in the process of gathering the required number of signatures to make it to the ballots. Here’s more:

The Tribal Initiative

The tribal measure is one of the two proposals with a foothold in the November ballots. It awaits the decisions of Californians to determine whether it'll be the overruling sports betting law. From the wording of the tribal initiative, sports betting will be legal in tribal casinos, statewide race tracks, and reservation-based venues. California has many such destinations, making the tribal proposal feasible and sensible. Operators will also pay a 10% tax on all gambling revenue to the state, and in-state college teams will be prohibited from wagering vehicles. However, the initial proposal sought to delay mobile sports betting for at least five years, restricting the industry to a retail-only environment. According to the tribal spokespersons, this decision was made because there are more tribal groups than online partners eligible to offer sports betting. The tribes’ top priority is preserving and maintaining exclusivity over gambling activity in the state. As you would expect, the tribal initiative didn’t extend any space for card rooms and online partners. Eliminating online sports betting resulted in pushback from punters and other sects, forcing the tribes to offer a second proposal. The new proposal will allow the tribes and racetracks to offer sports betting but is still awaiting a title summary before gathering signatures to secure a spot on the November ballot.

The Sportsbook Initiative

This initiative is led by a coalition of seven top online bookmarkers; DraftKings, FanDuel, BetMGM, Fanatics Betting, Bally’s Interactive, Penn National Gaming, and WynnBET. Although the tribes had nothing to do with this proposal, it suits them right as it preserves the state's sports betting market to the tribes and select brands. The initiative will allow the tribes and coalition brands to serve an online-only market for sports betting. Operators must partner with one of the tribes to offer an online sportsbook or app. Cardrooms, horse tracks, and other sports franchises are left out, and all operators must pay a minimum license fee of $100 million with a $10 million renewal fee every five years. With such a high initial license fee, only the leading coalition brands are likely to raise money for the license. Tribes, on the other hand, only pay $10 million for the license and $1 million for renewal. The sports betting proposal also recommends a 10% tax on all gambling revenue, and non-participating tribes will receive 15% of the tax proceeds. The remaining 85% will go into financing homelessness projects in the state. Californians recently celebrated as the Sportsbook Proposal gathered the required signatures, earning its place on the November ballot.

The Card Room Initiative

The third initiative to legalize sports betting in California is the card room proposal. This initiative seeks the required number of signatures to be part of the November 2022 ballot, but most people don't expect it to follow through. According to the proposal, California card rooms, tribes, and racetracks will be allowed to take part, creating the most open market. The initiative also accommodates the most types of bets at online and retail sports betting locations. Unfortunately, the card room initiative will never have credibility with the tribes, and Californians likely won't have a say in the matter. According to the tribes, who always seek to maintain their exclusivity, card rooms lack the resources to commit to the effort and are illegal entities. It's unlikely the card room initiative will gather enough signatures to appear on the ballot or achieve any significant strides that would accommodate them offering sports betting in the Golden State.

How Much Money is the Industry Projected to make in the Future?

The mature sports betting industry in California is estimated to generate up to $3 billion in annual revenue. These figures might seem high considering the entire country generated $4.29 billion in the record-breaking 12 months of last year. However, if you examine the statistics in detail, California could just match such numbers. New York, which has a 19.3 million population, is among the recent launchers of a thriving sports betting sector. The state's punters had placed more than $5 billion in wagers up until early April, a trajectory that promises hundreds of millions, if not billions, in annual revenue. California has a population more than twice that of New York, and pundits estimate a potential of at least $2.5 billion in its first year.