The Future of Gambling in California: Prop 26 v. Prop 27
Two competing ballot measures this November offer Californians the choice to legalize sports gambling
October 18, 2022
Propositions 26 and 27 are only two of California’s seven new initiatives being put up for this year’s election. Sports gambling in California is currently illegal; these two propositions aim to legalize certain forms of sports gambling. Other forms of gambling in California, however, are legal, such as playing the lottery, betting on horse races, and playing in cardrooms—where games such as poker are offered. Also under state law, Native American tribes have certain self-governing rights that enable them to gamble on designated lands (only when in contract with the state).
Proposition 26 would allow in-person sports betting at licensed racetracks and tribal casinos, as well as additional gambling games at tribal casinos. The proposal would require racetracks to pay the state 10% back of the monetary value made on sports bets, and this revenue would go to the California Sports Wagering Fund (CSWF).
The money that goes into this fund would be considered state tax revenue. While the majority of this tax revenue would go into the general state tax fund, about 15% would go towards prevention programs for gambling addiction, and another 15% for funding the costs of enforcement of the new gambling laws. Proponents of the bill argue that the general fund money would better assist California-wide services, such as the public education system, mental health programs, wildfire prevention, and affordable housing.
Should Prop 26 be voted into California law, new laws to enforce safe gambling would be put into place. Such measures would strictly limit the participation of gambling to adults twenty-one and older, with photo identification required when the bet is placed. Illegal and dangerous gambling incidents would decrease, and new resources to assist with gambling addictions would become available on a greater scale.
Native American tribes argue that an increase in tribal casinos would allow new job opportunities to open up. Local spending alongside other economic opportunities, like businesses, would increase in the regions where tribe-operated casinos with sports betting are located. According to the Nonpartisan Legislative Analyst, this would also result in “increased state revenues, potentially tens of millions of dollars annually” that could go towards the same functions as regular taxpayer dollars.
Proposition 27 would legalize online sports betting for those 21 and older. The proposal would require 10% of revenues made from this new betting to be paid to the state and stored in a new California Online Sports Betting Trust Fund (COSBTF). Revenues would first be spent on regulatory costs.
Out of the remaining revenue, 85% would be spent addressing homelessness issues, and 15% of the money would be sent to tribes not engaged in the gambling industry. To oversee this new form of gambling, Prop 27 would create a new branch of the California Department of Justice to regulate sports betting. This unit would be able to set the requirements for obtaining a license, as well as determining the type of events allowed to be wagered on.
According to the Legislative Analyst, Prop 27 would increase state revenues by “hundreds of millions of dollars,” though “likely not more than $500 million annually.” The state will begin receiving new revenue when people—previously making bets illegally— start making them legally. Such revenues would go into the COSBTF. Prop 27 would also create new work within the state through the creation of the new regulatory office.