Can Sports Gambling Give Taxpayers a Break?

CAN SPORTS GAMBLING GIVE TAXPAYERS A BREAK?

Voters could have several decisions to make on whether and how to expand gambling in California if initiatives legalizing sports betting qualify for the November 2022 statewide ballot.

One such measure, backed by California gambling tribes, has already collected the necessary signatures. The attorney general announced in May that it had successfully qualified.

The initiative, titled the “Sports Wagering Regulation and Unlawful Gambling Enforcement Act,ˮ would allow sports wagering at tribal casinos and horse-racing tracks only. Gaming industry analysts estimate that it could generate $1 billion in gross annual revenue. The state’s Legislative Analyst’s Office said the tax revenue that would be generated is uncertain, but could total tens of millions of dollars every year.

Twenty-six states have already legalized sports betting following a June 2018 U.S. Supreme Court decision that overturned a federal law restricting it. Between June 2018 and May 2021, an estimated $54 billion was wagered legally on sports, generating $3.2 billion in revenue and more than $530 million in taxes and revenue sharing with public agencies, according to Legal Sports Report, a news outlet covering the industry.

How much could legalized sports gambling add to California’s treasury? Pennsylvania has so far collected $134 million in tax revenue from sports wagering. New York brought in $132 million, and Nevada was third with $61 million.

Native American casinos and horse-racing tracks are not the only players in the game. Card rooms, which would be prohibited from offering sports wagering under the tribes’ initiative, have begun raising money to place a competing initiative on the ballot.

And a third initiative, this one backed by gaming companies, was filed with the attorney general in August. Proponents pledged $100 million to support the measure, which they have titled the “California Solutions to Homelessness and Mental Health Support Act.” Backers of the initiative say it will provide a permanent funding source of hundreds of millions of dollars annually to fight homelessness and expand mental health support in California.

The measure would legalize online sports betting, unlike the gambling tribes’ initiative, which would only permit on-site wagering. According to Forbes, online sports betting in the U.S. generated $1 billion in 2020 and is projected to grow to $6 billion by 2023.

The gaming companies’ initiative would require an online sports betting operator seeking to participate in the California marketplace to partner with a California tribe. Proponents say a portion of the revenue generated by the online-gaming measure would be dedicated to “uplifting Tribal communities.”

State law allows proponents to withdraw a measure even after it has qualified for the ballot, making these initiatives something of a poker game. If the rivals reach an agreement to divide the market, they could trade their separate initiatives for one proposed law or constitutional amendment passed by the Legislature. That could happen as late as next summer.

So, we don’t know whether there will be one, two or three sports-betting propositions on the November 2022 ballot, or which entities will collect the most money from them. Place your bets.