What the Supreme Court ruling on sports betting means for California
After a Supreme Court decision struck down federal restrictions on sports betting Monday, California’s gaming community gave a mixed response, with some feeling lucky and others urging caution.
The Supreme Court on May 14 ruled in favor of New Jersey in the state’s challenge to the Professional and Amateur Sports Protection Act (PASPA), a 25-year-old law that banned most states from regulating and taxing sports betting.
The ruling paves the way for the legalization of a multibillion-dollar industry, but California will still need to change the state constitution before residents will be allowed to bet on sports legally.
Research firm Eilers & Krejcik Gaming estimated last year that the legal sports betting market booked $270 million in revenue in 2017, but was dwarfed by a $2.5 to $3 billion black market.
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The firm projected that striking down PASPA could generate as much as $7.1 billion in annual revenue if the entire nation enacted regulated sports betting at places like casinos and racetracks. Revenue could be more than double that estimate if states also allowed online sports betting.
David Klein, a gaming attorney and managing partner of New York-based Klein Moynihan Turco LLP, anticipates state laws legalizing sports betting will likely benefit existing casinos, which might be the only entities eligible to hold a sports betting license right away.
“I can’t imagine why a casino would not be all for this,” he said, “because it’s an additional pool of money that they would not otherwise have an opportunity to receive.”
Some local casinos agreed.
“I think today’s SCOTUS decision represents a significant opportunity for California tribal gaming, and will benefit all California tribes,” said Michael Frawley, Chief Operating Officer and General Manager of Spotlight 29 and Tortoise Rock Casinos, in a statement.
Mark Macarro, Tribal Chairman of the Pechanga Band of Luiseño Indians, was also optimistic. The tribe operates the Pechanga Resort & Casino in Temecula.
“We view sports betting as a potential amenity that would complement our numerous offerings,” he said in a statement. “Now that the Court has ruled, we look forward to engaging in a conversation with fellow tribal leaders, policymakers, and industry stakeholders to see if there is a path forward for sports betting in California.”
If states like California take another look at sports betting, it could have ripple effects for other corners of the gaming industry, said Steve Miller, California state director of the Poker Players Alliance, a nonprofit advocacy group. His sense is that the ruling is good news for online poker, too, setting a precedent states can use to regulate internet gambling.
“It can only be seen as a positive action,” Miller said.
Other gaming industry voices were more cautious.
In a statement, California Nations Indian Gaming Association Chairman Steve Stallings said California should “move slowly” on sports betting policy and urged the state to give tribes “a place at the table” in those discussions. The association’s 34 member tribes include the Soboba Band of Luiseño Indians in San Jacinto and the Morongo Band of Missions Indians in Banning.
“We also want to make very clear that California voters have, on numerous occasions, confirmed the exclusive right of California tribal governments to operate casino-style games,” he said. “Legalization of sports betting should not become a backdoor way to infringe upon that exclusivity.”
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Outside the gaming industry, the ruling was a disappointment to Rev. James Butler, Director of California Coalition Against Gambling Expansion.
“Gambling problems in our state are increasing, and with the legalization for sports wagering, one can expect that the number of pathological and problem gamblers will go up,” he said. “Even though the Supreme Court ruling allows states to pursue sports gambling, I am hopeful that our state legislators will recognize that it is not in the best interest of Californians.”
Butler argues that the economic cost of problem gambling in California outweighs the revenue the industry generates for the government.
“Unfortunately, when gambling makes a promise, those promises are often unfulfilled,” he said.
Sports betting is illegal in California, and oversight of legal gambling is split between the Bureau of Gambling Control, which investigates and enforces game legality issues as part of the California Department of Justice, and the California Gambling Control Commission, which issues licenses and sets policies.
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California Gambling Control Commission spokesperson Fred Castano wrote in a statement that the Commission “has been following the repeal of PASPA, will continue to monitor State legislation, and is evaluating the potential impact it may have on controlled gambling in California.”
Last year, Assemblymember Adam Gray, a Merced Democrat, introduced a constitutional amendment that would have allowed sports wagering in California, pending the repeal of PASPA and approval by California voters.
Following the Supreme Court ruling, Gray said it’s ultimately up to California voters to amend the state’s Constitution if they want to make sports gambling legal.
“Whether we like it or not, Californians are already betting on sports through illegal and often unscrupulous websites in foreign countries,” Gray said in a press release. “It is time to bring this multibillion-dollar industry out of the shadows.”
“All other gaming activities in California are subject to regulations that ensure the safety of consumers,” he added. “Sports wagering should be treated no differently."
Amy DiPierro covers business and real estate at The Desert Sun. Reach her at amy.dipierro@desertsun.com.