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California Proposition 27: Sports Betting Online
Proposition 27 would legalize online sports betting in California, including on mobile phones. Gambling companies would have to partner with tribes in order to acquire a license.
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Proposition 27, which would legalize online sports betting in California, is already breaking fundraising records. So is the related Proposition 26, which focuses on in-person sports betting.

Proposition 27 was submitted by Kurt Oneto and John Moffatt, both lawyers at a political firm that often represents large corporations.

Here’s everything you need to know about the proposition.

The official title on the ballot: Allows Online And Mobile Sports Wagering Outside Tribal Lands. Initiative Constitutional Amendment And Statute.

WHAT YOUR VOTE MEANS
  • A "yes" vote means that you'd be voting to:

      • Legalize online sports betting with licensed gaming tribes and companies.
      • Establish a fund to collect taxes and other payments to go toward homelessness services and tribes that don't do sports betting.
      • Allow the California Department of Justice to oversee regulation, including implementing penalties for illegal online sports betting that can accrue daily if left unpaid.
    • A "no" vote means that you'd be voting to:

      • Keep online sports betting illegal in California. Enforcement laws would stay the same.

    What The Measure Would Do

    State laws currently limit certain types of gambling, including a total ban on sports betting, which is wagering on a predicted outcome in a sport, like a particular team’s win. If passed, Proposition 27 would legalize online sports gambling in California under most circumstances.

    The measure would make five key changes. Stay with us, it's a little complicated but we're going to unpack them one at a time:

    • Legalize online sports betting with Native American gaming tribes and licensed gambling companies. 

    Sports betting is currently illegal everywhere in California and in all circumstances. If the proposition passes, people 21 years and older would be able to place bets online, including through mobile phones.

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    Bets would be allowed on athletic events and some non-athletic events, like esports and award shows, but youth sports wouldn’t be eligible. Sports betting would remain illegal for people under 21.

    Gaming companies would only be able to offer online sports betting in California if they strike a deal with a tribe. They would have to renew their license every five years.

    Only gambling companies with licenses in at least 10 other states (or five states and also running 12 casinos) would be eligible to apply for a license in conjunction with a tribe. Coupled with the $100 million initial cost of a license, these regulations make it so that only large gambling companies can actually get a license in California.

    Supporters of the proposition say that the high licensing fees are key to the state generating funds to help support homelessness and gambling addiction programs (more on that below).

    • Require specific payments from tribes and gambling companies to the state.

    All tribes and gambling companies would have to pay California a 10% tax on monthly sports bets profits. Any costs they incur could be used to offset what they have to pay in taxes.
    In addition to paying taxes, gambling companies will have to pay $100 million to obtain their initial five-year license and $10 million every five years to renew it. All payments would go into a new California Online Sports Betting Trust Fund (COSBTF).

    Tribes’ license fees are much lower at $10 million initially and $1 million at renewal. It’s possible a tribe could negotiate lower licensing fees in one of their compacts with the state, but there’s been no discussion of that so far.

    • Require COSBTF funds to be used in specific ways.

    COSBTF stands for the California Online Sports Betting Trust Fund, and that is where all revenue from online sports betting would go. Revenue from taxes and licenses would go toward covering state regulatory costs first. If there are funds left after that, 85% of the remaining funds would go toward homelessness and gambling addiction programs.
    The state’s Homeless Housing, Assistance, and Prevention Program (HHAPP) — which can be used on rental assistance, job programs, and even permanent housing — would give out the funds to local governments. The state controller would audit these programs every four years.

    The remaining 15% would go to tribal governments that don’t do online sports betting. They could use the funds to cover almost any community need, like health or economic development.

    Unlike Proposition 26, officials wouldn’t be able to put any revenue from this measure in the state’s general fund, which is used to cover a wide range of expenses in California.

    • Establish online sports betting regulators in the California Department of Justice.

    If passed, the online sports betting regulatory unit, which would be part of the California Department of Justice, would set the rules for who could get a license, what types of online sports betting events are allowed, how bets are made, and how enforcement of violations works.
    One thing the regulatory unit couldn’t regulate: how many promotional credits a gambling company offers in an app. (If you’ve ever played a mobile app game, you’ve likely seen plenty of deals pop up on your screen.)

    • Create penalties for anyone who places online sports bets with unlicensed groups.

    If someone tries to place a bet with a gambling company other than one of those licensed by California, they would pay a penalty of 15% of the bet amount, and $1,000 would be added to that penalty each day it goes unpaid. Those funds would go into the COSBTF.

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    Arguments For

    Supporting groups argue that this ballot measure would provide a permanent source of funding to help end homelessness and increase mental health and addiction services for people experiencing homelessness. San Diego’s Regional Task Force on Homelessness says a consistent funding source will help organizations scale solutions as more people experience homelessness.

    Supporters also say the proposition helps all California tribes, but especially ones without casinos that are presently locked out of the economic benefits of in-person gambling on federally recognized tribal lands.

    Who supports Proposition 27? 

    Proposition 27 has one committee in support, according to Cal-Access, the YES on 27 - Californians for Solutions to Homelessness and Mental Health Support committee.

    Major League Baseball, big betting companies like FanDuel Sportsbook and DraftKings, and some homelessness groups support that committee, as well as a couple tribal leaders (but not most of them).

    See the full list of supporters.

    Arguments Against

    Opposing groups argue that Proposition 27 turns every online device into a source of gambling. Mental health experts are concerned it makes repeated betting too accessible, risking more people developing problem gambling and addiction. Data from other states back up the concerns. The National Problem Gambling Helpline Network saw a 45% increase in inquiries after 11 states started sports betting.

    The L.A. Times Editorial Board is against Proposition 27 because of how ever-present a “legal casino” could become in our pockets, and how the promises of permanent funding for homelessness could be a drop in the bucket compared to the state’s $13.5 billion budget surplus commitment.

    They also say the measure gives out-of-state companies control over California’s betting industry and will ultimately hurt both the state and tribes because of lost casino revenue. (FanDuel is New York-based, while DraftKings is headquartered in Boston.)

    The groups don’t agree that betting should be used as a way to improve homelessness because it could lead people into financial hardship.

    Some argue that the proposition should do more to help veterans, and that the homelessness funding aspect lacks substance because only 13 cities (those with populations of 300,000 or more) would be eligible for the HHAPP funding.

    Who's against Proposition 27?

    Most tribal leaders oppose Proposition 27, as well as both of the state parties for Republicans and Democrats.

    Proposition 27 has two active committees against it, according to Cal-Access:

    See the full list of opposing groups at Californians for Tribal Sovereignty and at the Coalition for Safe, Responsible Gambling.

    Follow The Money

    The biggest backers of Proposition 27 are big sports betting companies.

    Fiscally, the highest contributions are coming in from companies that do online sports betting in other states.

    Potential Financial Impact

    The ballot measure’s official fiscal impact statement:

    Increased state revenues, possibly in the hundreds of millions of dollars but likely not more than $500 million annually, from sports betting payments and penalties. Some of these revenues would be a shift from existing state revenues.

    Increased state costs to regulate online sports betting, possibly reaching the mid-tens of millions of dollars annually. Some or all of these costs would be offset by the increased revenues.

    What that means: If passed, the measure is likely to generate more revenue than costs for a few reasons:

    • California doesn’t currently get any portion of illegal online sports bets made
    • Out-of-state visitors could travel to spend money 
    • New forms of betting overall can draw plenty of interest 

    However, while the measure puts a 10% tax on profits, it’s still unclear if that’s what tribes will pay. Tribes will have to negotiate new contracts with the state, so they could ask to pay less.

    The costs of Proposition 27 could vary. For example, authorities could have to spend a lot on processing the new licenses. Some of those costs will be offset by payments into the COSBTF, the state’s online sports betting fund.

    And of course, extra money doesn’t just appear out of thin air. If people throw dollars at one type of service, that means they’ll have less to spend on another. It’s possible some revenue streams will only shift from one category to another, leading to less substantive increases overall.

    What Happens If Propositions 26 And 27 Pass?

    Voters will decide the outcomes of two sports betting propositions this year: Proposition 27 and Proposition 26, which would legalize in-person sports betting.

    Usually, the competing measure with more votes goes into effect, but proponents of Proposition 27 believe the measures can run concurrently. It’s likely a judge will make the final call.

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