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The Race Is On

Two sports betting referendums will be in front of California voters in November, and backers on each side have deep pockets

The Race Is On

The biggest electoral battle since Indian gaming was legalized by California’s voters back in 1999 is under way in the Golden State. It is between the gaming tribes, who want to hang onto their turf, and expand it a little, and out-of-state sports betting operators, who want a piece of the action.

At one time there were four possible ballot initiatives that were related to sports betting. That has been winnowed down to two.

Since Indian gaming became legal in the Golden State, the tribes have successfully defended their monopoly on casino games in several electoral campaigns. The one in November is proving to be the most expensive ever, if only because the tribes and the online operators have huge war chests and can compete on roughly equal terms. We are talking hundreds of millions of dollars pledged by both sides to spend on radio, TV and online.

The stakes are high. With a California sports betting industry estimated to be worth at least $3 billion, both sides have amassed at least $100 million in campaign funds. The California Legalize Sports Betting on American Indian Lands Initiative (Proposition 26) would give tribal casinos the exclusive rights to retail sports betting—except for a carve-out to the state’s four thoroughbred racetracks.

That is, only sports betting where you can place your bet in a brick-and-mortar building. Online sports betting would not be allowed. Besides sports betting, the tribes would move closer to their longtime goal of complete parity with Las Vegas-style casinos. They would get to introduce casino games they have heretofore not been allowed to have.

Racetracks would pay a $10 million fee to offer the wagering, and tribes would be permitted to add roulette and craps to their current list of approved games. The measure would also allow any citizen to file a civil suit against anyone allegedly conducting illegal gaming activity in the absence of litigation by the California attorney general.

The measure specifically excludes card clubs, which, the tribes point out, have had many high-profile violations of money laundering laws and other noncompliance violations from the state and federal governments.

This measure was qualified for the November ballot last year.

According to state financial analysts, Prop 26 would raise “potentially reaching the low tens of millions” in taxes for the state on an annual basis.

The California Solutions to Homelessness and Mental Health Act (Proposition 27) meanwhile, would charge $100 million for licenses, with tribes paying $10 million for online licenses, but with limited branding, and would generate, according to the state, revenues “potentially reaching in the mid-hundreds of millions” annually.

Tribes don’t buy the numbers, and argue that they are greatly exaggerated. They add that most of the money from sports betting will be sponged up by the “out-of-state entities,” who will absorb it as corporate profits.

Details, Details

California Secretary of State Shirley Weber recently certified the “Solutions Act,” which legalizes mobile sports betting with proceeds going to causes to help the homeless and mentally ill.

Prop 27, whose backers are seven out-of-state online sports betting operators—Bally’s, BetMGM, DraftKings, Fanatics, FanDuel, Penn National Gaming/Barstool Sportsbook, and WynnBET—doesn’t directly oppose the tribal measure.

It would allow online sports betting, which would have to be connected to a tribal casino similar to the way online sportsbooks are required to be connected to land-based casinos in states like New Jersey, Pennsylvania and Louisiana. The online measure is dubbed the “Solutions Act” because 85 percent of the revenues would be devoted to homelessness and mental health, with the remainder dedicated to economic development for non-gaming tribes.

Nathan Click, spokesman for the group, notes that the measure is backed by online operators, “and a bunch of mayors,” and “is the only one that will raise hundreds of millions a year to help solve homelessness and help fund mental treatment. It does that.”

Click says a massive voter education campaign will be waged.

“We will ensure Californians have the facts of what our measure does, and we will work to ensure that Californians understand our measure,” he says.

The tribal initiative has raised millions of dollars, and expects to bombard the public with advertising at every corner.

The tribes have taken the stance that the operators’ measure poses an existential threat to them and, in a series of gloves-off ads, to children.

Kathy Fairbanks is the spokeswoman for the Coalition for Safe Responsible Gaming—which is supporting the Tribal Sports Wagering Measure. It is also leading the “NO campaign” against the online sports betting measure.

Fairbanks has called the tribal measure “the most responsible approach to authorizing sports betting in California—all bets must be placed in person at a tribal casino with safeguards in place to prevent underage and illegal gambling.”

The measure, she says, will help create jobs and economic opportunities for tribal members and increase Indian self-reliance. It will generate tens of millions of dollars annually for public schools, wildfire prevention and other state priorities, she says.

Their website declares, “Out-of-state gambling corporations are promoting a deceptive proposition to legalize online sports gambling across California, turning virtually every cellphone, tablet and laptop into a gambling device. Their measure would escalate the risks of underage and problem gambling, hurt California’s Indian tribes and drain billions of dollars from our state.”

Sovereign Pressure

More than 50 tribes support the tribal sports wagering measure, including some of the most powerful tribes and most successful casinos, including Pechanga, Morongo (top of article), Agua Caliente and Barona.

As they have in previous gaming referendums, the tribes contend that the Solutions Act is actually a threat to tribal sovereignty.

Chairman Daniel Salgado of the lobbyist group Californians for Tribal Sovereignty and Safe Gaming says staples of tribal gaming will be at risk should the proposition pass. Salgado is also chairman of the Cahuilla Band of Indians, a small California tribe that offers “limited” gaming.

“From our tribe’s perspective, it hits on a couple of notes—tribal sovereignty and self-determination,” he says. “It takes away a tribe’s sovereign right to choose. We look at how many people are actually going to participate. There are a little over 60 tribes that offer gaming facilities, so those who don’t participate can’t be a part of this. When you look at limited gaming tribes like ours, we’re forced to make a determination.

“On the other side, on the operator perspective, they’ve made the criteria so limiting that there will likely only be a dozen.”

Often left unsaid is that tribes are leery of online sports betting, which is by far the most lucrative form. They fear that it will lure people to use their mobile devices and not visit their local casino. Another thing left unsaid is the logical and rhetorical tangle in which tribes will find themselves in a few years when they are ready to legalize mobile sports betting. Their arguments might come back to haunt them. Meanwhile, there’s an election campaign to win.

For those who are largely indifferent to tribal issues of sovereignty and self-determination, especially two decades after those issues were supposed to have been settled in the tribes’ favor, and who don’t plan to bet, Fairbanks says there is still good reason to vote for the tribal measure.

“There’s revenue,” she explains. “The state’s nonpartisan independent fiscal analyst has said the tribal measure will generate hundreds of millions in tax revenue over time. This will go into the General Fund, and be used for education or whatever. That’s hundreds of millions that benefit Californians.”

A third referendum, sponsored by the Morongo Band of Mission Indians, the Agua Caliente Band of Cahuilla Indians and several other tribes, that would have permitted only tribes to offer online sports betting was shelved in an attempt to bring unity to the tribal effort. But still some tribes that would benefit from the online bill’s stipulation that 15 percent of the revenue assist non-gaming California tribes have defected.

Last month two of those tribes, the Middletown Rancheria of Pomo Indians and the Big Valley Rancheria Band of Pomo Indians, threw their support behind the mobile betting bill.

“We’re supporting the Solutions Act because it gives us an opportunity to protect our sovereignty and also create opportunities for economic wealth for the next seven generations for our tribe,” Jose “Moke” Simon, chair of the Middletown Rancheria of Pomo Indians, told the San Francisco Chronicle.

 “It also helps the state of California deal with some of the biggest problems that it has here, that are affecting every community, which are homelessness and mental health issues,” he said.

Tribal Support, Opposition

Privately, some tribal leaders will concede that online sports betting is inevitable in California. However, they want to control it and to introduce it on their terms. They are leading the Coalition for Safe Responsible Gaming. It brings together all who oppose the online measure, including social justice groups such as the California Hawaii State Conference NAACP and La Raza Roundtable of California, and business groups such as the California Black Chamber of Commerce and American Indian Chamber of Commerce. It also includes 56 Indian tribes and tribal organizations.

But the deep pockets of the tribes are evident in the manifestation of support for the tribal proposal.

The California Democratic Party, always a recipient of tribal largesse, came out against the mobile betting bill.

“By opposing Prop 27, California Democrats rejected out-of-state corporations and reaffirmed their commitment to California’s Indian tribes,” Reid Milanovich, tribal chairman of the Agua Caliente Band of Cahuilla Indians, said in a press release. “Prop 27 is not a solution to anything. It would expose children to a massive expansion of gambling and turn every cellphone, gaming console, tablet and laptop into a gambling device. Prop 27 is a direct attack on tribal gaming and Indian self-reliance.”

In addition, the Coalition for Safe, Responsible Gaming announced that it had rallied 80 civil rights organizations, faith leaders, public safety groups, business advocates and tribes in support of the tribal effort.

“The in-person Tribal Sports Wagering Act is 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,” said Tracy Stanhoff, president of the American Indian Chamber of Commerce of California, in the press 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.”

Public safety groups have focused on the danger to children message, even though there is no documented underage gambling issues in any of the U.S. online sports betting jurisdictions.

“Requiring individuals to be physically present in person to place bets is the safest and most responsible way for California to legalize sports wagering,” says Bill Young, president of the Riverside Sheriffs’ Association. “It is the best way to prevent underage gambling and ensure people are not placing bets illegally, and it provides funding for enforcement against illegal gambling and problem gambling programs.”

The opposition to the tribal measure is just beginning to coalesce. The chastened card rooms and the cities where they are located launched the Taxpayers Against Special Interest Monopolies, and is trying to defeat Proposition 26, saying it would damage the state financially. According to a press release, “the measure puts more than 32,000 jobs, $1.6 billion in wages, and $5.5 billion in total economic impact at risk. Cities rely on this revenue for resident services such as public safety, housing and homeless programs.”

Several city mayors, whose municipalities host card rooms, point to one aspect of the tribal measure as a raw attack on the card room industry. A press release from the California Contract Cities Association declared that the tribal initiative which allows private citizens to sue online operators “exploits the Private Attorneys General Act, opening the floodgates for frivolous lawsuits that will harm city revenues that fund vital city services such as roads, schools, homelessness services, and fire protection.”

They also like the funding to fight homelessness. They cite the state’s independent fiscal analyst, which studied the measure. It found that the measure would raise hundreds of millions of dollars each year for homelessness and mental treatment. It promises to earmark 85 percent of taxes raised toward that issue. This is a powerful argument in a state where homelessness is the No. 1 political issue.

But problem gaming activists join the tribes in condemning trying to solve homelessness by increasing another societal problem. They point to figures that say online gaming is more addictive than the brick-and-mortar variety.

When it comes down to it, the backers of the tribal measure believe the voters should ride the horse that got them there.

James Siva, chairman of the California Nations Indian Gaming Association (CNIGA) and vice chairman of the Morongo Band, hopes that Golden State voters will go with those who have shown that they can be trusted to obey the rules and share the wealth.

“Having tribes in control is highly important,” he says. “We have never had gaming infractions. It is important to maintain our sovereignty and to show that we should be at the forefront for this new form of gaming in California.”

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