The California State Constitution clearly forbids the establishment of commercial casinos without a laborious process that includes requiring approval of a ballot initiative by voters to amend the state’s guiding document.
But must legalization of sports betting face those same hurdles?
A recent 61-page analysis of the issue by prominent sports law attorney and University of New Hampshire law professor Daniel Wallach offers a deep dive into a clause in that constitution that is at the core of the question.
And while Wallach concludes that a referendum is not necessary, a tribal-sponsored sports betting initiative — which would allow only in–person wagering at tribal casinos and privately owned, state–licensed horse racetracks — already is headed for a spot on the November 2022 general election ballot.
In other words, Wallach’s “academic” paper seems to be, well, just that — academic — at this point.
Expert offers reality check
“This is the same, tired pitch that we saw over a year ago when the same concept was shopped before the California Legislature and ceremoniously dismissed,” Brendan Bussmann, the director of government affairs for the Global Market Advisors gaming industry research firm, told US Bets.
“It either shows political naïveté or blatant ignorance of the fact that all roads in California lead through the tribes,” added Bussmann, fresh off attending the National Indian Gaming Association conference in Las Vegas this week. “While I know everyone is anxious to get sports betting started in California, people need to understand history as we move forward with this potential expansion of gaming. I point to the [lack of] iGaming revenue from the last 10 years in California. If you think this is an easy fix to just work this through the legislature and ignore the constitutional and political arguments, then show me the promise of iGaming revenue from the last 10 years.
“The tribes have put forward a solid proposal to move forward with sports betting in California. While it is not necessarily the desired timeline by some, this [paper by Wallach] does nothing to advance sports betting in California.”
Bussmann added that trying to “circumvent the voters” is both bad politics and seemingly unnecessary.
“We are just coming off of 2020 where voters overwhelmingly approved gaming,” Bussmann said, referring to various ballot measures in states such as Nebraska, Colorado, Virginia, Maryland, Louisiana, and South Dakota. “With the right approach and the right message, I see this trend continuing in the future.”
The modern history of California gambling law
With that substantial disclaimer in mind, this is the gist of Wallach’s case:
Article IV, Section 19(e) of Proposition 37, which Californians approved in 1984 mainly so that the state could establish a lottery, is at the heart of the matter.
That subsection authorized the lottery to be instituted as part of a legal gambling category that already included horse race wagering, bingo games for charitable purposes, and “casino-style games” on tribal lands. But it also prohibits other gambling, such as private lotteries or “casinos of the type currently operating in Nevada and New Jersey.”
(Why those two states? It’s not well-remembered now, but through the 1980s, those were the only two states that featured legal casinos.)
Only one state Supreme Court case has ever tackled the relevant clause, Wallach wrote — Hotel Employees & Restaurant Employees Int’l Union v. Davis in 1999 (that union represents thousands of employees at racetracks, hotels, and licensed card rooms). That court identified two somewhat contradictory ways to interpret that phrase banning “casinos of the type currently operating in Nevada and New Jersey.”
Two interpretations muddy the waters
“First, the Court consulted the legislative history of section 19(e) and determined that what the drafters and voters intended to prohibit in 1984 — when that constitutional amendment was enacted — was ‘a type of gambling house unique to or particularly associated with Nevada and New Jersey,'” Wallach wrote.
“The Court added that this is what the 1984 constitutional amenders ‘must have had in mind’ when they enacted section 19(e) ‘since they chose to define the prohibited institution by reference to those states.’ Under this interpretation, sports betting is beyond the scope of section 19(e)’s coverage, since it was a type of gambling that was not available — or even permitted — in New Jersey casinos at that time.”
But the alternative offered by the court — that perhaps the law prohibits any gambling not in place in California in 1984 — has fueled the belief that voter approval was needed for sports betting.
Wallach offers a solution: “When a constitutional provision is capable of two or more interpretations, the Legislature’s adoption of one of those alternatives is to be accorded substantial deference, if not controlling weight, under longstanding [state] Supreme Court precedent.”
Therefore, Wallach posits, if the California Legislature passed a sports betting bill into law that asserted the first definition, then such a bill would be safe from legal challenges.
Sports betting, casinos not quite the same
There are other ways, Wallach points out, in which sports betting is not at all like casino gaming.
“Casino–style games are primarily games of chance,” Wallach writes, “where the outcomes are determined largely or wholly by chance … whereas wagering on sporting events is widely considered to be predominantly ‘skill–based.'”
Casino games also take place within four walls, whereas sports betting results may be decided thousands of miles away.
“For these reasons, among others, ‘casino–style’ games and sports betting are treated as separate and distinct categories of gambling by the California Penal Code, federal law, gambling studies commissioned by both Congress and the State of California, and public opinion polls and surveys conducted by leading polling companies,” Wallach adds.
In the case of California sports betting, the tribes gathered enough signatures as of late May 2021 — aided by an extended deadline granted the tribes due to the COVID-19 pandemic — to gain an official place on the 2022 ballot. The million signatures were achieved with the aid of an $11 million campaign.
Wallach acknowledges that “a coalition of Native American tribes is on the precipice of setting the statewide public policy for sports wagering without any input from the Legislature.
“As a result,” concludes Wallach, “important public policy considerations — such as establishing eligibility criteria for determining which entities are entitled to operate sports betting; whether to allow online sports betting; the taxation structure or other methodology for determining the allocation of revenues to the state; problem gambling safeguards; integrity protections; advertising restrictions; and myriad other consumer protections — are left entirely to the discretion of the initiative proponents.”
Next year, California voters will get to decide if they have any objections to that path.