Prop 27: Online Sports Betting
Should California allow online and mobile sports betting for people 21 years of age or older?
The California Constitution and California statutes define what types of gambling are allowed in the State. Currently the California Lottery, card rooms, betting on horse racing, and gambling in American Indian owned casinos are allowed. The casinos are allowed to operate slot machines, lottery games, and certain types of card games. The rules governing American Indian owned casinos are set by compacts that are agreements between the owner tribe(s) and the State. Betting on sports events is not legal in California.
Prop 27 would:
- Allow adults 21 or older to bet on adult sports events online. No betting could occur on events such as high school sports. The bettor need not be in a casino to make a bet.
- Allow tribes to offer online sports betting under the tribe’s name and branding. Tribes would have to pay a one-time $10 million licensing fee to the State and a renewal fee every five years
- Allow gaming companies to offer online sports betting if they strike a deal with a tribe to operate in California and pay a one-time licensing fee of $100 million plus a renewal fee every five years. Create a new division within the state’s Justice Department to regulate online sports wagering
- Impose a 10% tax on all companies or tribes offering sports betting. The tax is imposed on a gross amount minus how much money is paid out to winning bets, promotional bets, and federal gambling taxes.
- After paying the State’s regulatory costs, revenue from the tax and the licensing fees would go into a new fund. Of the money in the fund 85% would be used for homelessness and related mental health programs. Fifteen percent of the fund would go to American Indian tribes that are not involved in sports betting.
- None of the revenue or licensing fees would be included in the state’s General Fund for purposes of allocating money to programs such as public education.
Prop 26 and Prop 27 both legalize sports betting in some way. If both pass it is possible that both will take effect. If a court finds that parts of the propositions are in conflict, the one that received the most yes votes will be law.
The size of Prop 27’s fiscal impacts depends on variables such as the number of entities that offer online betting, the renegotiation (if any) of compacts caused by offering online betting, and the number of people that engage in online betting.
There is a potential for increases in state revenue reaching from hundreds of millions up to $500 million each year. There will be increased regulatory costs estimated to be in the mid tens of millions of dollars each year. Some or all of these costs would be offset by the payments sports betting operators must pay to the State for regulation.