Analysts say lack of mobile could hinder California sports betting push, but tribes disagree

November 18, 2019 11:00 AM
  • Howard Stutz, CDC Gaming Reports
November 18, 2019 11:00 AM
  • Howard Stutz, CDC Gaming Reports

It’s a near certainty that Californians will get to vote next year on legalizing sports betting in the Golden State, which could be worth anywhere from $1.2 billion to $2.5 billion in annual gaming revenues, depending on which market study you’re reading.

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However, the omission of mobile sports betting from the ballot referendum proposed Wednesday by a coalition of 18 California Indian tribes is causing concern among some gaming industry observers.

“The proposal is far from perfect but represents a huge step forward,” said SunTrust Bank gaming analyst Barry Jonas. “At the same time, the exclusion of mobile likely limits the size of the California market and the impact to the illegal betting market.”

The statewide measure, slated for the November 2020 ballot, calls for a change to the California constitution and would allow sports wagering at Indian casinos and licensed racetracks.

Global Market Advisors Partner Brendan Bussmann said mobile wagering – the ability to place bets through a smart phone or tablet PC application – is essential for states to maximize revenue.

“If you are heading to the ballot, you might as well go for the best market instead of leading with a compromise,” Bussmann said.

Eliers Krejcik Gaming analyst Chris Grove said the proof is in the current numbers.

Between 80% to 85% of New Jersey’s sports wagers come from mobile devices. In October – just the first month Indiana allowed mobile sports wagering – sportsbook apps took in $48 million in wagers, while sportsbooks in casinos collected $43.7 million.

“The absence of mobile will definitely constrain the market,” Grove said. “California’s online sports betting market would likely be worth over five times the retail market, but it may be that retail is the only practical first step in the state’s complex and contentious political landscape.”

Jacob Mejia, Pechanga Tribe

However, Jacob Mejia, vice president of public and external affairs for the Pechanga Tribe Development Corp., hinted that Indian casinos have done their homework on the opinions of the California electorate.

Pechanga, which operates one of the largest casinos in Southern California, was out front in forming the coalition, which includes tribes of varying sizes and levels of influence from throughout the state. Mobile, Mejai said, wasn’t a major factor behind the effort.

“Voters have very real concerns and opposition to mobile sports betting,” Mejia said in an email Sunday. “Tribal leaders believe this measure represents a viable path toward voter approval of sports betting.”

During a panel discussion in April at the National Indian Gaming Association conference and trade show in San Diego, Mejia mentioned mobile wagering as an issue dividing the tribal community. Smaller tribes, he said, want to drive customers to their casinos, rather than allowing wagers to be placed via a mobile device anywhere in the state.

Mejia said at the time that less than one-third of California residents surveyed would support mobile sports wagering.

Not everyone believes  the lack of mobile hurts the California ballot initiative, however.

Las Vegas Dissemination Company, in partnership with Las Vegas’ South Point Casino, operates sportsbooks at tribal casinos in New Mexico and Oregon where mobile wagering is not offered.

Vinny Magliulo, Las Vegas Dissemination’s vice president of corporate relations, said it was important for the states to “establish bricks and mortar” sport betting facilities first. He expects both states will eventually allow mobile wagering.

“We know mobile is the fastest growing area of our business,” Magliulo said. “This is a good referendum for California, and I think (mobile) will happen down the road.”

The measure

The “California Sports Wagering Regulation and Unlawful Gambling Enforcement Act” offered nearly a dozen safeguards and protections within the 10-page proposal that would amend the state’s constitution.

Among the provisions is a 10% tax on gross gaming revenues from sports wagering that would be directed toward public safety, mental health programs, education, and regulatory costs. Another bullet point prohibits wagers on sporting events involving California universities and colleges.

Supporters need to collect 997,139 signatures from registered California voters to qualify the referendum for the November 2020 ballot, a foregone conclusion according to many observers.

If passed, the measure will still require action by the state legislature the governor.

“The was about crafting good, viable policy,” Mejia said.

Many analysts were happy that the tribes introduced the ballot initiative, given that California, which has seen several legislative proposals for sports betting go nowhere in Sacramento, wasn’t considered a potential opportunity.

Since the May 2018 Supreme Court ruling that opened the U.S. to regulated sports gambling, 13 states now offer legal sports wagering in casinos and racetracks. Six other states and the District of Columbia legalized the activity but are still considering regulations before launching.

Sara Slane, a sports wagering consultant who advises leagues and other entities on legalization and strategy efforts, said California was thought to be in the last wave of potential expansion.

“California is definitely a work in progress,” Slane said. “I guess the question is do you want 100 percent of nothing or a little bit of something? It’s only been 18 months since the Supreme Court ruling and look how quickly sports betting has expanded.”

Fractured industry

California is the largest Indian gaming state in the nation, producing more than $8.4 billion, according to Casino City’s annual Indian Gaming Industry Report. But there has never been consensus between the tribes, the state’s cardroom casino industry – which does not offer slot machine wagering – and the racetrack community.

The initiative expressly mentions “licensed racing associations” that conduct live horse racing at tracks in Northern California’s Alameda County and Southern California’s Los Angeles, Orange and San Diego counties, which includes Golden Gate, Santa Anita, Del Mar and Los Alamitos.

However, the card rooms were not included in the referendum.

Mejia said the tribes “had some informal conversations about our intentions with some in the (horse racing) industry.”

Slane said the lack of cooperation between interested parties sank California’s efforts to legalize Internet poker.

“The industry is well served by coordination,” Slane said. “It looks like the tribes worked well getting the tracks aligned.”

Jonas said the card rooms’ omission could be an issue.

“California is a complex state where varying interests create challenges for gaming expansion, both land-based and digital,” Jonas said. “The exclusion of card rooms while the tribes get exclusivity could create some challenges to reach the finish line.”

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.