Sportsbooks Versus Tribes: Who Will Control California Sports Betting?

May, 26, 2022 4 months ago

Sportsbooks Versus Tribes: Who Will Control California Sports Betting?

All eyes are on the November ballot, which could see the Golden State join 34 other U.S. states with legal sports betting. Currently, four different initiatives are looking for a spot on the ballots, two of which have already secured their place. The two initiatives are the Tribal Proposal and the Sportsbook Proposal. The other two initiatives include a second tribal proposal that accommodates online sports betting and a Card Room Initiative devised by local card rooms and sports franchises in California.

Tribes Retail-Only Proposal

The Tribal Initiative proposes a retail-only industry, where tribal casinos, racetracks, and select card rooms will have the opportunity to offer sports betting within their establishments. Under the Tribal Proposal, online or mobile betting will be delayed for five years. The proposal has already garnered enough signatures to secure its spot in the November elections. However, its exclusion of online sports betting received criticism, and the tribes submitted a second proposal that awaits clearance from the Attorney's office. The second proposal accommodates online betting provided exclusively by the tribes, with no space for card rooms and other sportsbooks.

Sportsbooks Want In on the Action

Sportsbooks don’t want to be left out when sports betting becomes legal in California. With revenues estimated at $3 billion per year, major sportsbooks were quick to draft a proposal that gives them a chance to offer sports bets to Californians. The Sportsbook Initiative is led by a coalition of major online bookmarkers, including DraftKings, BetMGM, and FanDuel. Other members of the alliance include Bally's Interactive, Fanatics Betting, WynBET, and Penn National Gaming. Although online bookies designed the initiative, it more than suits the tribes. The proposal reserves the sports betting market to tribes and a few leading sportsbooks that must partner with one of the tribes.

Who Will Control The Market?

The tribes have always sought to preserve control of the sports betting market in California and several other U.S. states. Cardrooms and other sports franchises are left out of the Tribal Proposal and also look from the outside on the Sportsbook Initiative. The Tribal Proposal seems like the most viable choice as far as the tribes are concerned. However, their initiative has a major flaw because it excludes online betting. The tribes have realized this flaw and submitted a second proposal that allows them to offer sports betting apps for mobile uses to accommodate online betting. However, the second proposal is still in the process of finding its way to the ballot. Meanwhile, the Sportsbook Initiative garnered 1.6 million signatures, more than the 1 million needed as a prerequisite for appearing on the November ballot. As it stands, the Tribal and Sportsbook proposals are headed for a face-off, and Californians will get to decide what form of sports betting they need.

Jeopardy for Both Sides

The Tribal Initiative isn't the only one with issues. Some sects, like local card rooms, have aired their discontent with the Sportsbook Proposal, which, if voted, will put them out of business. Local card rooms have their initiative, but it's highly unlikely they'll gather enough signatures to make it to the ballot, even though it promises the most open market. The Card Room Initiative allows tribes, sportsbooks, and other sports franchises to offer sports betting opportunities in the state. However, the tribes may never accept such a proposal as they claim card rooms and other smaller franchises lack the resources to sustain and commit to the effort. In addition, the Sportsbook Initiative requires operators to pay a license fee of $100 million and $10 million every five years for renewal. Such a condition effectively limits the market to the seven members of the coalition.

What the Future Holds For California Sports Betting

The Tribal Initiative originally sought exclusive control over the market without the possibility of online betting. However, the tribes recognized the allure of online betting, even more now that the Sportsbook Initiative has collected over 1.6 million signatures and made it onto the ballot. The tribes will have to speed up their second proposal in order to stand a chance against the Sportsbook Initiative, which seems like the likely choice for Californians. It also allows tribes to acquire a license for $10 million and renew it for $1 million, and eligible sportsbooks must partner with the tribes to offer sports betting. The deal appeals to tribes, even though it accommodates sharing the spoils with a few more brands. However, the tribes will want to preserve their control over the market and are focused on getting their second proposal signed and ready for the November elections.

Expensive Battles for Market Control

Whatever develops over the coming months, the future of California sports betting promises to concoct one of the “most expensive political battles” in 2022. The tribes already had a $100 million budget to counter online sports betting, while the Sportsbook unveiled their $100 million budget to get their proposal approved for the ballot, which they've now achieved. Californians can expect the intense battle for market control with spoils as big as $3 billion and a market that could be unrolled as early as January 2023. The tribes are unwilling to open doors to sportsbooks and are heavily backed by existing laws, but sportsbooks also have a valid claim to participate in the prospective sports betting scene. The card rooms and smaller franchises have a fair deal, but one that Californians may not have the final say on whether it becomes the legal form of sports betting. As things stand, California is headed for legal sports betting, including online betting, unless, of course, the tribe's initial proposal is voted.