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Why Sports Betting Regulation is Such a Big Deal for California

— July 27, 2020

It seems inevitable that regulated sports betting will come to California sooner rather than later.

The 2018 ruling by the Supreme Court that the door should be opened to legal sports betting in the United States was expected to lead to a period of rapid change for the gambling industry.

But that has not been the case. Instead, progress has been surprisingly slow with less than half of states so far making changes to the law to give the green light to sports betting companies.

Even California, widely regarded as one of the most liberal states, is yet to welcome legal sports betting following the overturning of the Professional and Amateur Sports Protection Act by the Supreme Court ruling, despite the many advantages of doing so.

The coronavirus crisis, however, appears to have focused minds in California with the state needing to find a way to plug a gaping gap in its finances as a result of the pandemic’s impact.

But why is the regulation of sports betting in California such a big deal anyway?

California yet to welcome legal sports betting

The largest state in America by population is home to more than 37 million people, but any Californians who want to bet legally on sports still have to cross the border into Nevada.

Those who live outside of America find it strange that states can have such different laws and regulations in various areas such as gambling, but the picture remains unchanged as of yet.

A pair of local lawmakers, though, are bidding to bring California in line with those states that have given the green light to regulated sports betting over the course of the last few years.

Assemblyman Adam Gray and State Senator Bill Dodd are hoping to push through legislation that would permit sports betting at horse racetracks and casinos across California.

It is estimated that at least $200 million could be raised in the first year through taxation as a result of the change. Gross revenue from mobile or online wagering would be taxed at 15 per cent under the terms of the plan while onsite gambling would be charged at a rate of 10 per cent.

California is said to be facing a budget shortfall of around $54 billion as a result of COVID-19, with Dodd and Gray estimating that giving the green light to sports betting could raise as much as $700 million each year.

Sports Betting at a Las Vegas Casino; image courtesy of Baishampayan Ghose, via Flickr, CC BY-SA 2.0, no changes.
Sports Betting at a Las Vegas Casino; image courtesy of Baishampayan Ghose, via Flickr, CC BY-SA 2.0, no changes.

“Revenue from sports wagering will help us avoid teacher layoffs and painful cuts. At the same time, it will allow us to regulate a practice that happens anyway,” Dodd said in a statement.

Dodd’s acknowledgement is key. Sports betting may not be regulated, but it happens anyway.

What would be the impact of regulated sports betting in California?

The gambling industry has been patiently waiting to see what happens with the proposal that has been tabled by Dodd and Gray. Some companies that already operate in the sector have already been lining up plans to launch sports betting operations as quickly as possible.

Currently active unregulated US online casinos would be wise to get a license or miss out. No longer would they need to worry about bank accounts getting frozen, masking transactions, not being able to advertise freely and not being able to offer the best games available.

California is home to a large number of professional sports teams, such as NBA powerhouses the Los Angeles Lakers and the Golden State Warriors and various MLB teams, which leads many experts to believe gambling on sports would thrive quickly in the state. 

In the first year after the state welcomed sports wagering, New Jersey saw almost $3 billion worth of bets, with more than 80 per cent of these wagers placed through the Internet. California could place even more bets, helping to raise larger amounts of cash for the state’s budget.

History could also show the impact of regulated sports betting in California. The state’s cannabis excise tax brings in around $500 million a year – vital money for the local economy.

Would regulated sports betting in California have disadvantages?

There could be downsides for parts of the gambling sector, though. California is home to a thriving card room scene, which could be affected if more gambling were to be regulated. 

There are more than 70 card rooms running in the state but they have not yet been included in the proposals to permit sports betting across the state despite lobbying for this change.

Tribal leaders have also provided some opposition to the plan to permit sports betting. “Voters have very real and serious concerns about mobile sports betting and would be highly likely to oppose a measure that allows online betting,” said spokesperson Jacob Mejia in January.

It seems inevitable that regulated sports betting will come to California sooner rather than later, however. Research and consulting firm Eilers and Krejcik Gaming estimates that as much as $2.5 billion could come from sports betting in gross revenue annually in California.

With the ongoing coronavirus crisis still wreaking havoc on state budgets across America, those numbers are going to be hard to ignore for too much longer. 

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