The campaigns for Propositions 26 and 27 on the November ballot have made a wide variety of claims, especially about how the money made from sports betting will be distributed in California.
Chances are one of the many advertisements to legalize sports betting has caught your attention, given its ubiquity on television, websites, and billboards throughout California.
However, you will be forgiven for not yet having a clear idea of what any of the initiatives do. Some of the ads don’t mention sports betting at all, which could leave Californians confused as to what exactly they are being asked to decide.
The ads are “simplified to the point of not being entirely accurate,” said Mary Beth Moylan, associate dean and professor at Pacific University’s McGeorge School of Law, who oversees a journal devoted to California initiatives.
Proposition 26 would legalize sports betting in tribal casinos and at California’s four private racetracks. It’s being paid for by a dozen Native American tribes. It would also allow tribes to start offering roulette and craps games.
Prop 27 would legalize online sports betting statewide and is being funded by a handful of large gaming companies. Under Proposition 27, both gaming companies and tribes could offer online and mobile sports betting.
But how truthful are the ads? Here’s what you need to know about some of the oft-repeated claims.
Claim: “Tribal Leaders Support the Solutions Act (Proposition 27)”
Leaders of three of California’s 110 federally recognized Native American tribes: Santa Rosa Rancheria Tachi Yokut Tribe, Middletown Rancheria of Pomo Indians, and Big Valley Band of Pomo Indians — support the online sports betting proposal.
President Jose “Moke” Simon III of the Middletown Racheria of Pomo Indians said in an interview with CalMatters that he supports Proposition 27 because it gives the tribe an opportunity to get more funding. The tribe is rural and has a casino an hour’s drive north of Napa.
“Our traditional (casino) is limited only by our area where we are located and mobile sports betting would allow us to reach a much larger audience,” said Simon III.
But more than 50 tribes and tribal organizations oppose Proposition 27. They say it would disrupt gambling that has been operating on tribal land for decades and drive business away from Indian casinos.
It is true that some tribal leaders support Proposition 27, but many more tribal leaders oppose the measure.
Claim: Proposition 27 “supports all tribes in California, including economically disadvantaged tribes that do not own large casinos”
It’s true that all tribes would see some kind of benefit from Proposition 27. Tribes that have compacts with the state of California that allow them to offer gambling could create their own mobile sports betting app or website. Or, they could partner with a gaming company that wants to offer online sports betting in California.
The initiative also taxes online sports betting and reserves 15% of the money for the tribes that are not involved in sports betting. But, because it’s hard to know exactly how many people will place bets, how many businesses and tribes will want to offer sports betting, or how many tax deductions businesses will take, it’s impossible to know exactly how much money it will be.
Every tribe has the potential to benefit from Proposition 27, yes. It is unclear to what extent each tribe would benefit.
Claim: Proposition 27 states “hundreds of millions in annual funding to finally address homelessness in California”
This one is a bit tricky. The proposal may generate hundreds of millions of dollars a year to address homelessness, but it’s not guaranteed.
Each election cycle, the nonpartisan Legislative Analyst’s Office reviews each proposal and estimates the new costs and revenue each could generate for the state. They found that Proposition 27, through taxes and fees, would increase the flow of money to the state by “possibly hundreds of millions of dollars, but probably no more than $500 million a year.” The bureau did not include a low-end estimate.
First, that money would be used to cover new costs related to sports betting regulation, which analysts estimate could reach tens of millions of dollars annually.
Of the money that remains, 15% would go to tribes not involved in sports betting and 85% would go to homeless solutions. The Legislature could also choose to earmark a portion for gambling addiction treatment.
Proposition 27 may end up generating hundreds of millions of dollars per year for the state to address homelessness. But if the taxes and fees end up bringing in $100 million or $200 million a year, instead of $500 million, then I wouldn’t do it. Also, if the Legislature decides to spend a large portion on gambling addiction treatment, that would reduce the amount spent on homeless solutions.
How does this money fit into what California is already spending to address homelessness? California spent $7.2 billion on homeless-related programs in the 2021-22 budget year, according to state analysts. If Proposition 27 added, say, $300 million, that would translate to a 4% increase.
Claim: “90% of profits [of Prop. 27] go to out-of-state corporations”
This claim is based on the fact that Proposition 27 taxes online sports betting at a rate of 10%. So the question is: Where exactly will the other 90% go? The truth is that it is impossible to know precisely.
If Proposition 27 passes, gaming companies based in other states will want to get in on the action, since they are the ones funding the measure. The companies funding the initiative have some of the most popular online sports betting platforms: FanDuel controls 31% of the US market, followed by DraftKings with 26% and BetMGM with 16%, according to Eilers & Krejcik, a game-focused research. Therefore, it is reasonable to expect that its platforms will also be popular in California.
Does that mean those companies will get all the profits? The initiative also allows California tribes to offer online and mobile sports betting on their own. If the tribes choose to do that, they would be getting some of the profits.
Gaming companies based in other states could also end up needing to spend money in California to do business here. For example, businesses will need to make a deal with a tribe to operate legally, and that deal could include some form of payment or revenue sharing. Gaming companies may also need to pay employees or contractors in California to operate their businesses here.
The companies funding the campaign are based outside of California. It is impossible to know at this point what percentage of the profits would actually go to them.
Claim: Tribes are “pushing Proposition 26 to guarantee themselves a virtual monopoly on all gaming in California by giving private trial attorneys the powers of the Attorney General to bury their licensed arcade competitors with frivolous lawsuits.”
This argument contains several assertions. It is based on a part of Proposition 26 that allows any person (or organization) who believes that another person is breaking California gambling laws, for example by offering an illegal game, to sue. However, before they could sue, they would first have to ask the state Department of Justice to act, and they could only go forward if the department takes no action, or the department does it file a case and the court rejects it but allows it to be filed again. It is a complicated legal matter. But it is not an entirely new idea; California has used a similar process to enforce labor laws.
Are the tribes trying to “guarantee themselves a virtual monopoly”? In 2000, Californians voted to allow tribes to offer certain forms of gambling, including casino-supported slot machines and card games, that no other entity in California can offer. Proposition 26 would allow tribes to begin offering craps and roulette games, which no other entity can offer, as long as they renegotiate their agreement with the state. So the initiative would expand the exclusive rights of tribes to offer certain forms of gaming.
Would the new lawsuit process give “private trial attorneys the Attorney General powers to bury their licensed gambling hall competitors with frivolous lawsuits?” It would allow private attorneys to bring cases that are currently under the control of government attorneys.. The Proposition 26 campaign has made no secret of the fact that the tribes intend to sue the gaming halls, which compete with the tribal casinos.
The lawsuit process was “designed to resolve the house bank gaming law that governs arcades,” Kathy Fairbanks, a spokeswoman for the Yes on 26 campaign, said in a recent debate. The rules for exactly how arcades are allowed to offer certain games has long been a source of disagreement between arcades and tribes. Tribes have no right to challenge them in court, Fairbanks said, so they want a way to do so.
However, the idea that this would trigger a slew of meritless lawsuits means that courts don’t yet have a process for handling frivolous lawsuits, said Moylan, the law professor. Courts can penalize lawyers who file frivolous lawsuits, for example, Moylan said.