As more states take steps to legalize sports betting, all eyes are on the nation’s most heavily populated state — California. Unlike many of the states where sports betting is – or will soon be – legal, California’s constitution does not give its legislature the power to authorize “lotteries,” a term that includes “games of chance” like sports betting. Accordingly, before the state can take steps to legalize sports betting, California’s constitution must be amended.
California’s constitution can only be amended through a ballot measure approved by a majority of California voters. A ballot measure can secure a place on a statewide election ballot in two ways – either by a 2/3 vote of the state legislature or via a citizen ballot initiative that secures signatures from a number of registered voters that is greater than or equal to 8% of the votes cast in the most recent gubernatorial election. In this case, roughly 997,000 signatures are needed.
Over the past few months, three sports betting-related ballot initiatives have been proposed for the November 2022 statewide election. Each initiative has until April 26, 2022 to procure enough signatures to be placed on the ballot.
The first initiative, proposed by California’s 18 Indian Tribes, has already secured enough signatures for inclusion on the November 2022 ballot. This initiative would amend the constitution to allow for retail, but not online, sports betting at tribal casinos and licensed horse racetracks. It would also enact a 10% tax on profits derived from sports betting at horse racetracks, to be divided among the state’s Department of Mental Health, Bureau for Gambling Control, and General Fund.
The second initiative, proposed by three California cities, would amend the constitution to allow the state’s Indian Tribes, licensed horse racetracks, card rooms and professional sports teams to operate retail and online sportsbooks. It would also allow sportsbook operators to partner with online betting platform providers, who would be able to conduct online sports betting operations on their behalf. The initiative would also enact a15% tax on sports betting profits, which would be deposited into a newly-established “California Sports Wagering Fund.” The initiative specifies that the state legislature would allocate the Fund to “assist the state in dealing with issues of homelessness, affordable housing, public education and mental health.”
The third initiative, filed jointly by seven leading online betting platform operators, would amend the constitution to permit retail sports betting at tribal casinos. California’s Indian Tribes could then partner with online betting platform operators authorized to conduct online betting on their behalf. The initiative would also enact a 10% tax on online betting profits, which would be deposited into a newly-established “California Online Sports Betting Trust Fund.” The initiative specifies that 85% of moneys deposited into the Fund shall be allotted to the “California Solutions to Homelessness and Mental Health Support Account.” The state legislature would appropriate this fund to support city and county “efforts to prevent and reduce homelessness, including treatment of mental health conditions and addictions that lead to homelessness.” Notably, the initiative also imposes a 15% tax, payable by the bettor, for any wagers placed through unlicensed or unauthorized betting platforms.
White and Williams will continue to monitor the progress of California’s sports betting initiatives and provide updates on significant developments.