SBC: Could $200M Be Spent On Sports Betting Measures in California?

Gaming consultant predicts 'ugly' battle among tribes, gaming companies, and card rooms
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There’s never been any doubt that the November 2022 election season in California will be preceded by a barrage of advertising regarding the four competing ballot initiatives that would legalize sports betting in the state.

But on Wednesday, a former Golden State regulator with half a century of experience in the U.S. gaming industry told an SBC North America Summit audience at the Meadowlands Exposition Center in Secaucus, N.J., that he projects the level of spending — and the fierceness of the campaigns — may exceed expectations.

“It’s going to be a bloodletting — I would guess about $200 million would be spent in this election [on sports betting issues],” said Richard Schuetz, formerly a commissioner for the California Gambling Control Commission and a consultant to Gov. Jerry Brown in that state. “California is the prize; it’s just really complicated.”

Schuetz said that longstanding tensions between California’s card rooms and many tribes will be a factor, with market leaders DraftKings and FanDuel, as well as other interested parties, reportedly already committing to spending at least $100 million to take on the state’s powerful tribal casino lobby. While the sports betting firms have met with tribal leaders on a preliminary level, Schuetz said, “I believe that discussion has stopped and it is not going anywhere. I think it’s going to be an interesting public campaign, and anybody who tells you they know the outcome is smoking something.”

Still, after the panel session ended, Schuetz was willing to offer some educated theories to US Bets on what could happen in the Golden State.

When ballot initiatives collide

“The most logical outcome, when you have a bunch of competing initiatives on the ballot, is that nobody wins,” said Schuetz, who remains a consultant in the industry. “But I believe if one [initiative] does win, it will be the tribal nation’s, just because they are so ingrained in the community. The tribes have been successful in five out of six prior initiatives, and 75% of tribe employees are non-tribal people. They have worked well within the community and they are are generally well-respected. They are a power — never underestimate the tribes.”

That’s in spite of that $100 million or more in spending by the sports betting companies.

“You’ve got the commercial interests, who have a propensity to incinerate cash that is absolutely amazing,” Schuetz said, mainly referring to DraftKings and FanDuel, which continue to struggle to be profitable.

After spending three weeks recently speaking with opposition research officials in the state, Schuetz said that he is convinced that “the advertising is going to get ugly.”

“It could wind up a mess that just turns everybody off,” he concluded. “And maybe the tribes, at this point, are better off without any of this, and just going back to square one.”

The path to legalization for remaining states

New Jersey Division of Gaming Enforcement Director David Rebuck, whose state leads the way with a record $1.3 billion gambled on sports in October, told the same audience that he believes New York regulators may achieve their goal of offering mobile sports betting by February’s Super Bowl. He added that lawmakers in Ohio — surrounded by states that already offer sports betting — may finally be making progress as well.

“I still think we’ll have a gradual progression in moving forward,” Rebuck said. “Legislators are not opposed so strongly that they’ll hold out til the bitter end. I think all but maybe one state in the U.S. has some form of gambling. There’s a social acceptance of sports betting among the general public and legislators.”

Rebuck pointed to various decisions that states late to legalization will need to make, such as selecting a tax rate (which varies widely across the U.S.), whether to tax total “handle” or amount wagered vs. gross gaming revenue, and whether a state’s lottery should run the sports betting operation.

C.J. Fisher, a partner in the Fox Rothschild law firm, which specializes in gaming law, said some states that are regulating gaming for the first time are “trying to chart their own course” — like Tennessee and its 10% minimum “hold” for sportsbooks. Fisher said such outlying rules can lead to betting operators changing odds or removing some betting options to try to remain profitable in certain states.

Andrew Winchell, FanDuel’s director of government affairs, said that traditional opposition from the right on moral grounds and on the left over concerns about gambling’s effects on poorer communities have mostly been addressed.

“We explain to them that there already is wagering going on in [illegal] offshore markets in their state already, so it’s not a question of stopping it,” Winchell said. “It’s really about bringing the gambling into the light.”

Winchell acknowledged that the abundance of sports betting advertising in the past three years “is a shock to a lot of people.” But he added that this issue might be a little “overtalked” at the moment — and reasoned that if, for example, sales of jewelry had been illegal for many years and suddenly were legalized, that new industry also would be bombarding the airwaves to seek market share.

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