Igaming Focus: No online betting in California bill leaves a big unregulated hole By Jake Pollard, CDC Gaming Reports July 30, 2020 at 2:30 pm As California’s 18-strong coalition of Native American tribes seeks to garner enough signatories to get the California Sports Wagering Regulation and Unlawful Gambling Enforcement Act onto the 2022 ballot, the long and winding road that could see the biggest state economy in the U.S. regulate sports betting might be approaching (something like) its final stages. First announced in November 2019, the tribes’ efforts have been hampered by the pandemic and they are hoping the 90-day deadline extension announced in early July will enable them to gather the numbers required to get the Act on the ballot. The Act is the state’s latest attempt to regulate offline in-person sports betting. Dodd bill defeated The tribes defeated a proposal put forward by Assemblyman Adam Gray and Senator Bill Dodd to regulate sports betting that would have allowed tribal casinos and racetracks to offer retail and online betting at a tax rate of 10% and 15% of gross win, respectively, and permit each licensee to offer one online skin. California card rooms would have been permitted to offer card games such as blackjack as part of the proposal (but not sports wagering). Tribal casinos would have been able to expand their casino offering to include roulette and craps. A number of attempts to get igaming bills passed in California, such as online poker in 2015, have been abandoned due to lack of consensus and opposition from the state’s card rooms. The longstanding antagonism between the tribes and card rooms stems from the latter wanting to offer games like blackjack and the tribes being allowed to offer games like roulette or craps. This latest proposed Act would amend the state constitution to legalize sports betting at tribal casinos and licensed racetracks, with a tax set at 10% of gross gaming revenues. The drive behind the regulatory effort owes much to the advances of regulated sports betting across the U.S. ever since the repeal of PASPA two years ago. Since then, nearly 20 states have regulated the vertical (along with online casino gaming in many cases) across a variety of channels: online, mobile, and in-person only. More look set to take that approach once they have managed to come out of COVID-19 lockdowns sustainably and it could be said that the tribes are (slowly) moving with the times. No to online betting However, the most eye-catching detail of this proposal is that it would permit only in-person betting. The reason for not supporting online betting? The tribes believe it would compromise their brick-and-mortar revenues. There is some logic to that rationale, but leaving out online from the regulation seems short-sighted. Punters in the Golden State will not stop betting on sports just because online betting isn’t available as a regulated product. Even if mobile wagering (in-person) and then full online wagering is implemented one or two years after initial regulation, offshore sportsbooks will continue targeting Californians. And once these players are betting on sports at unlicensed books, there will be cross-sell into casino. Such a scenario would compound the tribes’ losses and see them miss out on both online betting and casino action. CDC Gaming contacted the Pechanga Band of Luiseno Indians, California’s largest tribal casino operator, for comment, but had not received a reply at the time of going to press. As mentioned earlier, the version of the bill that has been produced is also a result of the longstanding antagonism between the tribes and the state’s card rooms. But it is also a sign that sports betting does not really register on the tribes’ radars when it comes to market size and revenues. Tribal focus on casino While Indian casinos generate around US$20bn in revenues annually, a regulated sports betting sector (on and offline) would bring in around $700m in revenues for the state. The betting revenue forecasts are a fraction of what casino gaming generates, but with a deficit of US$54bn and a state economy badly hit by the pandemic, and with further lockdowns likely for the next six to 12 months or longer, regulation that allows players to bet remotely seems worth considering. The figures tell their own story. A rollout of regulated sports betting across California’s casinos and racetracks from September 2023 is forecast to generate $715m in its first (partial) year of operation, says H2 Gambling Capital, making it the biggest betting state in the nation after only four months of activity. H2 adds that in its first full year of operation (2024), the market is expected to generate $1.4bn and grow to reach $2bn by 2030, at which point it would account for nearly 21% of the total U.S. sports betting market nationally. The betting figures are minimal when compared with casino volumes. But given the scale of the California market, and the economic challenges and physical constraints presented by the pandemic, not regulating online betting is counterproductive and would not channel California punters to regulated sites, one of the key aims of any newly regulated state.