California Sports Betting Approval Could Shake Up Nevada, Arizona Markets

California Sports Betting Approval Could Shake Up Nevada, Arizona Markets
By Christopher Boan
Fact Checked by Michael Peters

The largest state in the country by population is approaching a monumental decision over whether or not it should allow sports betting within its boundaries.

California will have no fewer than two ballot initiatives in November trying to legalize wagering, which would allow the Golden State to join the 33 states and District of Columbia that have already legalized sports betting in some form.

One initiative has already gathered enough signatures to qualify for the ballot (California Legalize Sports Betting on American Indian Lands Initiative), with another closing in on the required number of signatures (California Legalize Sports Betting Initiative).

The first initiative would allow sports betting on tribal land only and would limit the state’s future market to retail-only, while the second measure would allow tribes, licensed racing associations, licensed gaming establishments and professional sports teams to offer sports betting — with a tax rate of 25% and funds going toward ending homelessness in the state.

Either way, the adoption of California sports betting would be a game-changer for the U.S. market and provide additional competition in the Western part of the country, according to multiple industry experts that talked to BetCalifornia.com.

What California Sports Betting Means to U.S. Market

The adoption of sports betting in California would be a historic shot in the arm for operators, given the state’s more than 40 million residents and ample professional sports teams.

Jeff Ifrah, who serves as a founding member of Ifrah Law, which specializes in online gambling law, said California’s sports betting rollout could be a turning point for the industry.

Ifrah agreed with estimates that pin California’s sports betting market potential at around $3 billion per month by the time it reaches maturity — which would nearly double the national handle record of $1.6 billion set by New York in February.

“I think everything from Day 1, when (the American sports betting) market went live, everything was focused on California,” Ifrah said. “I think that the reason why operators have been willing to essentially bet that and gamble on this vertical is because of California.

“Another way to say that is that I think without California, operators really must review what they're spending on customer acquisition and what they're offering their customers because all these operators eventually do need to become profitable.”

Others, such as Brendan Bussmann, who has served as a partner and director of government affairs for gaming and hospitality consulting firm Global Market Advisors since 2015, see a future California market as one with ample opportunity for revenue, but also a fair share of risk.

“There’s a push by the industry to get (sports betting) across the finish line in every state, not just California,” Bussmann told BetCalifornia.com. “But I think what we’ve learned from states like New York is that you don’t always get what you want. You’ve got to make sure that it’s a good market where you can do what you need to do to survive.

“You’re talking about needing to placate, not only the biggest operators in the space, not just DraftKings or FanDuel, but obviously, also the state-based tribes.”

Bussmann sees both the tribal-only and the industry-backed initiatives having a fair shot at passage in November, depending on the political climate in the state.

But he cited a survey from the Berkley Institute of Governmental Studies in late February — which found 45% of respondents said they were initially inclined to vote yes on either sports betting initiative versus 33% that said they wouldn’t — as proof California’s population isn’t a surefire bet to pass either initiative.

“I don't want to sound like I'm giving the political answer, but it depends on the race,” Bussmann said. “I think it depends on where voters are at, what they want to see, how much they support mobile or support the tribes, which is basically what that comes down to.”

Bussmann said he could see a scenario where both initiatives pass. In that case, the initiative receiving the most votes would go into law.

Either way, Bussmann expects California’s sports betting ballot process to be a closely contested one, with lots of money and effort poured in on all sides in the months leading up to the election.

“It depends on the campaigns that are being run. I mean, I can see effective campaigns run that not only one wins, but both win,” Bussmann said. “And when I say one wins, it could be one or the other. ... And, as we've seen with other elections around the world, it can come down to one vote.”

One group mounting a campaign on the issue is Taxpayers Against Special Interest Monopolies, a committee sponsored by licensed card clubs in the state. The group issued a press release in late March stating its opposition to the tribal initiative.

The press release claims the initiative, if passed, would give tribal casinos a near-monopoly on all gaming in California.

"The California Contract Cities Association overwhelmingly voted to oppose the qualified tribal gaming initiative as it will not benefit our residents or communities," Marcel Rodarte, the executive director of the California Contract Cities Association, said in a press release. The CCCA represents 74 cities in the state, including Los Angeles.

What Impact Would California Betting Have on Nevada, Arizona?

While the 2022 ballot initiative process moves forward in California, the Golden State is surrounded by others that have already legalized wagering.

Whether it’s Arizona, which launched sports betting in September, or Washington and Oregon, which legalized it in 2020 and 2019, respectively, or the original sports betting mecca of Nevada, California is on an island in not having sports betting within its boundaries.

Both Bussmann and Ifrah can see scenarios where California’s market could shed some market share from Las Vegas or various parts of Arizona, though not necessarily enough to make a night-and-day difference.

“I think everybody thought the death of Nevada would happen time and time again, when it came to sports betting,” Bussmann said. “But we've seen record revenue off sports betting this fall. And I don't see a dropoff per se. Because those visitors from California are still going to come here on weekends for events, they're still going to come here to escape California. They're just going to have the convenience of sports betting either on their mobile device or at their local tribal casino.”

Ifrah added that very little of Las Vegas’ revenue comes from sports betting, with big-ticket items like conventions and other forms of entertainment driving much more traffic to the Strip.

That’s why he believes California’s entrance into the fray will have very little detrimental impact on the Silver State, given the plethora of entertainment options at visitors’ fingertips that go far beyond sports betting.

“I think you have to remember that 80% of the revenue in Las Vegas is from entertainment, it's not from betting, betting is really an amenity in Las Vegas,” Ifrah said. “I think that there’s going to be a huge return of travel to Las Vegas for all those things, whether it’s just huge groups of tourists and conventions, for a lot of different reasons and from a lot of different places. And I think it will continue to do that.”

The prospects of legalized sports betting in California rest on proponents’ ability to win the support of people who may never wager on an event in their lifetime.

If they can do that, then this November could be a golden one for whichever camp brings in the most votes, Bussmann said.

“You've got to survive the death of 1,000 cuts, as I always like to say,” Bussmann said. “If you're successful at the end, you win.”

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Contributors

Christopher Boan
Reporter / Journalist

Christopher Boan is the lead writer at BetCalifornia.com, specializing in sports betting issues in the western United States. He's covered sports and sports betting in Arizona for more than seven years, including stops at ArizonaSports.com, the Tucson Weekly and the Green Valley News.

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