California may be the land of sun, surf, celebrity, tech giants and avocado toast, but to the iGaming industry, it is seen as something entirely different, a shiny, golden goose just waiting to lay the biggest egg that US gambling has ever seen.
Should the most populous state in the Union ever crack the code on legalising iGaming, the potential jackpots for all involved, including the state’s treasury, could be astronomical.
The American Gaming Association (AGA) tells us that California’s gaming sector already generates $34.6 BILLION in economic impact annually. The industry supports over 184,000 jobs and adds $5.8bn in tax and tribal revenue to the state’s coffers every year. And this is without iGaming!
Add in further billions from sports betting and casino games, and you are building a lot of homes, schools and highways. This is undoubtedly a money train that the state would love to jump aboard, if it wasn’t for all the other passengers who are demanding a seat.
The tribes have to be onboard
The California tribes are the state’s original casino moguls, with exclusive rights to operate certain types of gambling under compacts signed with the state. They have been running the show for decades and are in no hurry to hand over the dice to everyone else. Of California’s 87 legal gaming establishments, the vast majority are tribal casinos
The tribes recently took the Card Rooms to court, accusing them of encroaching on their exclusive gaming rights
In the game of California legislation, it seems that all the many stakeholders have very different ideas about what is fair in gaming. The tribes control gaming on their own lands, unhelpful when it comes to digital gaming, as the current laws predate the geographically non-specific internet era.
Navigating a complex timeline
Thus far, all efforts to open up the gold mine that is sports betting in the state have come to nothing. Stakeholders say it could be at least another couple of years before California is close to legalising sports betting, and the launch process can only begin once criteria are established. The first step toward legalisation is another vote on a Proposition brought forward by the California Legislature or the people of California.
Those close to the situation believe that a constitutional amendment will be required to bring sports betting to the state’s residents, meaning another trip to the polls for voters. All we know for sure is that the resounding failure of the November 2022 Proposition, with less than 20% of Californians voting in favour of online sports betting, only confirmed the power wielded by tribal entities and other lobby groups in the process.
Clearly, the state government will also have a powerful voice. Sacramento legislators have no incentive to allow expansion to go ahead unless they receive a sizeable piece of the action. But again, the influence of the tribal groups makes their outright support of sports betting legislation a political hot potato.
The DFS and sweepstakes dilemma
Daily Fantasy Sports apps (DFS) and social sportsbooks are in an intriguing spot in California. Its DFS market is the largest in the country, with over $200m in annual entry fees. California has never legalised DFS or social sportsbooks, leaving them with what is effectively unregulated status.
Other states have acted with cease-and-desists, and State Attorney General, Rob Bonta, is currently reviewing whether the state’s gambling laws permit DFS, but as yet, limbo lives on.
Furthermore, the American Gaming Association supports those states that are addressing the fact that DFS mirrors sports betting parlays, and as recently as last August also urged regulators to examine sweepstakes operators.
The mainstream media lobby
Opposition from the mainstream print media is also profound. Pointing at collusion between the sportsbooks, the leagues and the states that collect taxes, they voice fear for the risks posed to the young and the vulnerable. They argue that faced with fragmented audiences with more options than ever for discretionary spending, sports have become increasingly dependent on gambling to make up their shortfall through partnership and sponsorship. Even acknowledging their own industry’s culpability as traditional newspapers fight to survive, they condemn the arrival of betting content and partnerships such as that between the Associated Press and FanDuel as exclusive odds provider for its sports coverage.
The reality is that life and society never stop moving on and we must all learn to live with change, and frequently whether we like it or not. And those who worry that gambling is becoming the beating heart of the new sports economy might be advised to consider the alternative, that this new heart stops beating…
Praising positive progress
For the industry, there is no hiding from the fact that this combination of powerful lobby groups, a strong coalition of tribes and a lot of money at stake makes the legalisation process in California the most complex of any state, and the economic jackpot that is waiting to be claimed will have to wait a while longer. But it is not all doom and gloom.
In 2024, we have heard Victor Rocha, Chair of the Indian Gaming Association Conference, state that “Sports betting is going to happen.” The IGA have made clear their intention to organise a coordinated push for regulation around DFS and sweepstakes, and the AGA has indicated that it is open to working with tribes, who welcome more commercial allies.
On this final point, James Siva, Chair of the California branch of the National Indian Gaming Association (NIGA), has opened a door for those same commercial operators that the tribes fought against in the 2022 California sports betting ballot, saying: “If you want to go into California, you have to go through the tribes. It is the same thing we told the big sports betting companies, and I think they are finally hearing it.”
Embracing the new normal
Millions of people all around the world enjoy the experience of sports betting. Traditionally, this has been an in-person or retail experience. But, as we have said, society moves on and today, an ever-growing number of bettors prefer being able to engage via their mobile devices. The applications are increasingly user-friendly and deliver instant access to multiple markets, features and bonuses.
Like in so many other areas of life, the convenience of being able to participate whilst at home, or traveling, or on vacation or even during work breaks has become expected, the new normal, with journeying to spend our money so much less so.
Creativity and innovation in abundance
With an initial license projected to cost at least $100m, and a renewal fee every five years of at least $10m, the potential state revenues are enormous. And with 15% of these tax revenues said to be targeted to be allocated to non-participating tribes and homelessness initiatives, the potential social and political capital sums are equally enticing. With the projected revenues from a commercial online and retail sports betting market in the Golden State being so vast, it is easy to understand the urgency behind the search for viable solutions to the various obstacles to legalisation.
The lawmakers are anything but naïve; the entire world is still searching for ways to balance and boost its battered post-pandemic budget, and California is no exception to this unprecedented global reality. This is no easy journey and the bumps in the road will keep coming.
But California is home to both Hollywood and Silicon Valley, and if there are two resources that the state possesses in abundance, these are creativity and innovation. Maybe if any bunch of liberally-minded, outside-the-box thinkers can dream up a solution that works for all concerned, then it is probably them. And when that long-awaited day finally arrives, that age-old concept of ‘Risk & Reward’ will be there for all stakeholders to enjoy.
