California’s Prop 26 Sports Betting Ballot Initiative Explained

July 14, 2022

Gaming Today

Prop 26 would allow in-person-only sports betting at tribal casinos and four horse racing tracks in California. The ballot measure is backed by at least 80 tribal and non-tribal organizations through the Coalition for Safe, Responsible Gaming. It will appear on the California statewide ballot on November 8.

Casino sportsbooks are not unusual in the US. But in California – where tribal nations control 82 casinos, with no commercial casino competitors, according to the American Gaming Association – tribal profit from casino sportsbooks could be substantial.

Passage of Prop 26 would mean passage of the In-Person Tribal Sports Wagering Act. That legislation would allow tribal casinos to offer in-person sports betting, pending state and federal approval of amended tribal gaming compacts between California tribal nations and the state.

It would also allow retail sportsbooks at four privately-owned racetracks.

Additionally, Prop 26 would amend the California state constitution to permit California’s governor and federally-recognized tribes to negotiate gaming compacts that would allow expanded gaming – including sports betting – with state and federal approval.

Added table games like craps, now off-limits to the casinos, could also be written into the amended tribal-state gaming compacts required to offer sports betting.

Sportsbooks at Private Horse Racing Tracks

The four horse racing tracks covered by Prop 26 – Santa Anita Park, Del Mar Race Track, Los Alamitos Race Course, and Golden Gate Fields – could be licensed to offer in-person sports betting at their track facilities.

All four racetracks are privately owned, with no tribal ownership stake.

Prop 26 supporters claim tribal gaming casinos and the four tracks are best equipped to operate sports wagering in the Golden State. The claim goes back to 2019 when four tribes – the Pechanga Indian Reservation, Barona Band of Mission Indians, Yocha Dehe Wintun Nation, and Agua Caliente Band of Cahuilla Indians – filed the initiative behind Prop 26 with the Office of the California Attorney General.

“A well-supervised sports wagering system will limit sports wagering to highly regulated and safe facilities that are experienced in gambling operations and with the financial resources to responsibly operate the activity,” the tribes stated in the filing.

“The best entities to safely operate sports wagering are Indian gaming casinos and Approved Racetrack Operators.”

What Would Prop 26 Mean for California?

  • Allows betting on professional, college*, or amateur* sports and athletic events
  • Betting on in-state or out-of-state games played by California college teams would remain illegal, except during tournament play. Betting on high school sports and events would remain illegal*
  • Imposes a 10% tax on sports betting profits at horse racing tracks only
  • No sports betting by persons under the age of 21
  • Require 15% of state revenues to be earmarked for problem gambling prevention and mental health at the state and local level; 15% to be earmarked for gambling enforcement and control, and; 70 percent earmarked for the state General Fund

Possible Revenue Impact Of Prop 26

Prop 26 would give tribal nations almost total control over what is potentially the largest legal sports betting market in the US by limiting sports betting to in-person sportsbooks only.

So how would that impact overall revenue in a state with a potential estimated sports betting handle of $20 billion to $30 billion per year?

Retail-only betting would put top online sportsbooks like FanDuelDraftKings, and BetMGM at a significant disadvantage, with little room for negotiation.

Retail-only betting would also likely reduce state revenue derived from sports betting by denying Californians access to more lucrative mobile sportsbook options. Additionally, only track-based sportsbook revenue would be subject to a proposed 10% tax on operators. Betting on tribal lands would be exempt from taxation.

Online sportsbooks took notice and filed a $100 million counter initiative in Aug. 2021 that would allow online and mobile sports betting by operators tied to tribal partners. That initiative is now qualified for the November 8 ballot as Prop 27. Voters will be able to select Prop 26 or Prop 27 at the polls this fall.

The winner will be decided by which proposal receives the most “yes” votes, according to local news reports early this year —  unless a court battle gets in the way.

Support For Prop 26

Prop 26 has the support of at least 80 tribal and non-tribal organizations, according to a June 22 press release from the Yes on 26 – Stand With Indian Tribes campaign behind Prop 26.

American Indian Chamber of Commerce of California President Tracy Stanhoff called Prop 26 “the responsible approach to authorizing sports wagering because it’s modeled off the successful model that Indian tribes have used to operate gaming for more than 20 years,” according to the release.

“The revenue generated by this measure will bring tens of millions of dollars each year to our state budget and local governments alike. It will also support tens of thousands of jobs. It’s a win for tribes and all Californians,” Stanhoff was reported as saying.

Among dozens of other organizations named as supporters of Prop 26 in the June 22 press release are the California District Attorneys Association, Los Angeles Urban League, local chambers of commerce, public safety agencies, several tribal groups, and the California Young Democrats.

The California Democratic Party voted to remain neutral on Prop 26 at its Executive Board meeting earlier this month.

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