California could easily be the center of the gaming industry universe.
That may sound something like sacrilege coming from a Las Vegas-based journalist. You might even think I’m showing favoritism toward my home state, the place where I spent the first 23 years of my life. I’m not.
What I do know is that numbers don’t lie. California is the largest Indian gaming state in the U.S. and provides more than one-quarter of the nation’s annual tribal gaming revenue. When compared with the commercial casino industry, California would rank No. 2 in America, trailing only Nevada.
Internal forces, however, keep the state from expanding its reach. California’s three competing gaming interests – Indian casinos, horse racetracks and card rooms (four, when you count the state’s lottery industry) – can’t find consensus on any issue. Just go back and look at the recent disagreements that have stymied the potential for Internet gaming in the state.
Now, the expansion of legal sports wagering – the matter that has gripped the nation’s casino industry since May 14 – is in the line of fire.
In July 2017, California State Assemblyman Adam Gray introduced legislation that would allow the state to permit sports wagering if a change in federal law were to occur. That event took place when the U.S. Supreme Court tossed aside the Professional and Amateur Sports Protection Act. Other states – Delaware, New Jersey, Mississippi, and West Virginia – quickly enacted legal sports betting regulations and got into the game.
California’s bill, on the other hand, languished and died when the State Legislature adjourned Aug. 31.
Why?
The state’s Indian casino leadership believes that California law gives tribes the exclusive right to manage all casino games, including sports betting.
“I think the tribes are going to stand on the principle that only we operate full casino-style gaming in the state,” Steve Stallings, chairman of the California Nations Indian Gaming Association, told the Los Angeles Times in May.
Stallings’ organization told the Times that the tribes pay $400 million in state and local taxes. In other words, the Indian casinos would look askance if the card rooms and racetracks tried to get in on the sports betting action.
“I think they would say, ‘Whoa, wait a minute. We are about to give up something,'” Stallings told the newspaper.
California’s 74 Indian casinos were reported to have generated nearly $8 billion in gaming revenue the last time economist Alan Meister released his nationwide study on tribal gaming. According to the National Indian Gaming Commission, the figure is now nearing $9 billion (that number also includes a smattering of small Northern Nevada Indian casinos).
And the state’s Indian gaming market is not slowing. In the Sacramento area, Hard Rock International, Caesars Entertainment and Boyd Gaming are in partnership with three tribes on casino projects valued at more than $1 billion. Caesars already operates Harrah’s Southern California, near San Diego, and Station Casinos oversees Graton Resort, north of San Francisco. Sports books could easily become part of the mix.
The state’s racetrack industry, however, needs an economic boost. The 2014 closing of Hollywood Park left the state with four tracks – three of which are in Southern California. New Jersey’s Monmouth Park and Meadowlands racetracks have opened sportsbooks managed by third-party operators; a similar instance could easily take place in the Golden State.
Meanwhile, some of the state’s 74 card rooms resemble small casinos, minus the slot machines, providing another potential outlet for the nation’s legal sports wagering operators. William Hill US and other sportsbooks would jump at the opportunity in California.
Just how large of an opportunity is it?
Chris Grove, managing director of sports and emerging markets for Eilers & Krejcik Gaming, said sports betting revenue in the state could easily go north of $2 billion – assuming both walk-in sports book facilities and mobile sports wagering – which would make it “the biggest in the U.S. by a comfortable margin.”
Considering that Grove predicted earlier this month that New Jersey would pass Nevada as the nation’s sports wagering leader by 2021 with $422 million in revenue, the California forecast is a stunning figure.
Given also that California state lottery sales were more than $6.2 billion in fiscal 2017 – second only to New York – it’s clear the Golden State’s legal age betting population (California has 39 million people) loves to gamble.
Things could get heated quickly in the Golden State. A political consultant is currently working with card clubs and others – including sports leagues – on a sports wagering ballot initiative for November 2020.
Once again, the game’s afoot.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
