Thirty-three states have legalized sports betting in one way or another. But did you know that despite California’s population and economic size, sports betting (aside from horse racing) is illegal there?
A referendum from November 2022 showed that voters weren’t quite ready for sports betting yet, despite heavy advertising by operators such as DraftKings, FanDuel, and BetMGM, who are some of the best sportsbooks in the US, to convince voters. It looks like Californians won’t be taking advantage of convenient on-the-go betting and signup bonuses anytime soon. They’ll also be missing out on ways to make watching the games much more exciting since having a wager on a match really makes it more engaging and fun.
To understand how this happened, let’s examine why California’s Propositions 26 and 27 failed. We’ll also look at what the State of California is missing out on by not having the sports betting industry on its doorstep.
Why is Sports Betting Not Yet Legal in California?
Before we begin, let’s make a few clarifications. Two types of betting are currently available to California residents: horse race betting and daily fantasy sports betting. But if you’re looking to bet on actual live sports, California doesn’t allow you to do that, yet.
It’s not as if the state hasn’t done anything about it. In November 2022, California voters cast their ballots to decide the fate of Propositions 26 and 27⎯two interlinked propositions that would pave the way for sports betting in the state. However, the motions lost terribly; Prop 26 received 33 percent support, while Prop 27 only received 17 percent support.
What are Propositions 26 and 27?
At the heart of whether sports betting can finally become legal in California are two state propositions, numbered 26 and 27. Supporters and dissenters alike spent an unprecedented amount of money on TV advertising to sway or keep voters on their side. But as you can see, the dissenting voice won.
Proposition 26 would have allowed in-person sports betting at any horse racetracks in the state and at Native American tribe-owned casinos. Bettors aged 21 or over could have placed bets at racetracks, while each tribal casino could have imposed its preferred minimum age limit, as agreed upon with the state.
Proposition 27, on the other hand, would’ve opened the California online sports betting market. Online bookkeepers would have had to partner with a casino-operating Native American tribe to do business. Collected tax revenue would have been used to address the state’s growing homelessness problem, fund gambling addiction programs, and support other tribes that don’t operate a casino.
Why did Prop 26 and 27 Fail?
There’s not one specific reason as to why both propositions failed, but there are a few theories that may have worked together to stop the motion.
One theory shows that California residents weren’t enthusiastic about the sports betting market. Several polls leading up to the referendum showed dwindling support for its legalization. Of course, a poll doesn’t accurately represent the will of the state’s entire population, but it seems to be accurate this time.
Another reason may have been the uncharacteristic amount of advertising that Californians had to endure until the day of the referendum. Proponents of Prop 27, primarily the bookkeepers, spent over $169 million to try and get support. Native American tribes, most of whom own casinos and oppose online sports betting, spent $237 million in ads for their cause.
Money spent on ads isn’t enough, as the message offered must also be considered. Prop 26 and 27 supporters were unclear on the kind of message they wanted to convey. The opposing side, however, focused on convincing Californians that sports betting legalization would threaten local casinos and the livelihood they support.
California’s Lost Tax Revenue From Sports Betting
Accurately determining California’s potential tax revenue from sports betting is difficult, but we can make a few predictions based on existing models.
Let’s use New York as an example. As America’s fourth most populous state, its relatively young sports betting industry has already amassed record numbers. Since January 2022, New Yorkers have spent over $22 billion on bets, resulting in $1.8 billion in revenue for bookkeepers. New York imposes an 8.5 percent tax on betting revenue, earning the state over $932 million.
New York’s population of over 20.4 million also enjoys a wide variety of major league sports. Here’s the breakdown of major New York-based teams
- NFL: Buffalo Bills, New York Giants, New York Jets
- NBA: Brooklyn Nets, New York Knicks
- WNBA: New York Liberty
- MLB: New York Mets, New York Yankees
- NHL: Buffalo Sabres, New York Islanders, New York Rangers
- MLS: New York Red Bulls, New York City FC
That’s at least 13 teams that New Yorkers could support and bet on. There’s even more if they follow other sports, such as rugby and tennis.
With that information, let’s look at California. It’s the country’s most populous state, with twice as many residents as New York⎯40 million people. They also have more major league sports teams⎯19, compared to New York’s 14.
- NFL: Los Angeles Chargers, Los Angeles Rams, San Francisco 49ers
- NBA: Golden State Warriors, Los Angeles Clippers, Los Angeles Lakers, Sacramento Kings
- WNBA: Los Angeles Sparks
- MLB: Los Angeles Angels, Los Angeles Dodgers, Oakland Athletics, San Diego Padres, San Francisco Giants
- NHL: Anaheim Ducks, Los Angeles Kings, San Jose Sharks
- MLS: LA Galaxy, Los Angeles FC, San Jose Earthquakes
If a state with half the population of California can generate a $1.8 billion revenue in just a little over a year, there’s no doubt that California itself can easily surpass that milestone. With an excellent selection of home teams to choose from, it wouldn’t be surprising if Californians spend over $40 billion in bets just in the first year, resulting in potential revenue of about $3.6 billion. That’s $1.8 billion in tax revenue for the state if they impose the same tax rate as New York.
Will Sports Betting Ever be Legal in California?
Only time will tell, but sports betting bookkeepers are keeping a positive attitude. They’ve pledged to try again after the dust of Prop 26 and 27 settles, though this isn’t likely to happen anytime soon. For Californians wishing to bet on live sports, they have a while to wait before they can do so at home.