California tribes weigh the odds of sports betting measures on the November ballot

Fort McDowell Yavapai Nation opened its new sports betting venue Sept. 8, a lounge dominated by a massive 47-foot-wide LED video wall that can show up to 12 games or events. Pub-style food and drink were served at wooden tables, and sports memorabilia collected by the tribe was displayed on the walls.

But the main attraction was the sports book counter, situated in one corner of the lounge for fans eager to place bets on their favorite teams. On three huge screens, the sportsbook, developed in partnership with the United Kingdom-based betting firm Betfred, posts odds for football, baseball, soccer and other sporting events.

Fort McDowell's sports book is one of at least a dozen Arizona sports betting centers in tribal casinos, the result of recent legislation and new gaming compacts that approved onsite and online sports betting. In exchange for allowing non-tribal mobile sports betting and onsite betting counters at sports venues, the deal orchestrated by Arizona Gov. Doug Ducey and tribal leaders gave tribes expanded gambling options and continued exclusive rights to most gaming in the state.

Now, a year after the first sports bets were taken in Arizona, California voters will consider two competing measures that would affect tribal gaming. Proponents and opponents of one or both are flooding print, television, internet and radio with messages attempting to sway voters.

The slickly produced ads and social media callouts don't come cheap. The last report from the state's campaign finance site said that the four major groups for or against the measures have spent more than $350 million. That number is expected to swell to more than $400 million by Election Day.

The stakes are high for both proponents and opponents of the two California proposals. The state's treasury stands to gain up to hundreds of millions of dollars to combat homelessness and share revenue with non-gaming tribes, while opponents of one proposition say the growth of online sports betting could imperil what is arguably California tribes' largest revenue source: casinos.

Absent clear direction from Congress or the courts, at least one gaming expert expects even more expensive campaigns as tribes fight to maintain their market share in the gaming industry.

Two opposing proposals

California's Proposition 26 would add in-person sports betting at tribal casinos and four major racetracks to the state's gambling law, which currently includes tribal gaming, the state lottery, card rooms and horse racing betting. The measure would also allow dice games and roulette in casinos on tribal land.

Some tribal casinos in Arizona already offer dice games and roulette under the terms of new gaming compacts enacted in 2021.

The California racetracks would be required to pay the state 10% of bets made into a new sports wagering fund, after subtracting prize payments. The new fund would allocate 15% of the payments for gambling addiction and mental health programs and grants, 15% for sports betting and gaming enforcement costs and 70% to the state's general fund. The proposition would also enable citizens to sue illegal gambling operations.

Proposition 27 would allow tribes or gaming companies to offer online sports betting. The sports betting operators would be required to partner with a tribe that already has a gaming compact with the state.

The measure would also require tribes and gambling companies that offer online sports betting to give the state a cut. A new state regulatory agency to oversee online sports gaming would be funded with betting revenue payments. Tribes and sports gaming companies would pay the state 10% of sports bets made, after subtracting expenses such as promotional bets, prize payments and federal gambling taxes.

Of that, 85% would be directed to local homeless programs and 15% to tribes that are not involved in online sports betting. An analysis by the state Legislative Analyst's Office predicts that online sports betting revenues aren't likely to exceed $500 million annually, which in a best-case scenario means that non-gaming tribes would split just $75 million. Currently, the 67 tribal casinos operating in California make an estimated $7 billion to $9 billion a year. 

Finally, it provides new ways to reduce illegal online sports betting by penalizing operators using non-licensed betting firms.

Sports gaming companies that apply for a license would create a partnership with a tribe and pay an upfront $100 million fee. The tribe would have to pony up $10 million. Licenses would be renewed every five years at a lower rate.

Some California tribes say Proposition 27 is a sure bet

Tribes in California are split over the initiatives, with most opposing Proposition 27.

Two of the tribes that support Proposition 27, the Middletown Rancheria of Pomo Indians in Lake County north of San Francisco, and the Tachi Yokut Tribe in Kings County, about 40 miles south of Fresno, failed to win approval for their gaming compacts from the U.S. Department of the Interior. Interior officials said the state had too much regulatory power over non-gaming enterprises such as tribal gas stations and other such venues.

Supporters of Proposition 27 say the billions of dollars spent on illicit sports betting markets based overseas would instead be regulated and safe.

"Our initiative would combat the illicit marketplace, create a safe and responsible marketplace and offer better protections for all," said Nathan Click, a spokesperson for the Yes on 27 initiative. "It would also provide hundreds of millions of dollars each year to combat one of our state's biggest challenges, homelessness."

The state currently has no permanent funding source for services to deal with the estimated 180,000 unhoused people in California, he said.

Tribes could still set up their own sportsbooks through a partnership with a technology company to set up a platform to offer online sports betting or with a national sports book that operates in good standing in at least 10 other states, Click said.

"No one can access the market unless it's through a California tribe," he said.

At least 35 tribes oppose Proposition 27 and some of them also support Proposition 26.

Sara Dutschke, chairperson of the Ione Band of Miwok Indians, located about 40 miles east of Sacramento, said Proposition 27 would undermine tribal exclusivity in the gaming market the state promised tribes more than 20 years ago. Tribes have examined the proposition and learned what would happen with gaming revenues.

The non-gaming Ione Band anticipates that it would receive nothing from the shared revenue fund promised by Proposition 27's supporters, Dutschke said.

"We don't anticipate that any real percentage of profits would benefit California by way of planning for homelessness or California's non-gaming tribes," she said. "Instead, we estimate that somewhere around 97% of all profits from gambling under Prop. 27 would leave the state."

The "No On 27" group believes the proposal is bad both for tribes and for California, she said.

Chairman Daniel Salgado of the Cahuilla Band of Indians, which operates a small casino and resort on their tribal land in southern California, said Proposition 27 could devastate smaller rural tribal gaming operations because people wouldn't have to drive long distances to gamble if they can use their smartphones to bet from home. Without customers, small casinos like the Cahuilla Casino would have to scale back operations or even close.

The Cahuilla Band's community is next door to Anza, a small town in rural Riverside County. The closest city is Temecula, about a 45-minute drive southwest of the reservation. The Cahuilla tribe's small casino, 58-room hotel and a popular gas station and convenience store provide jobs and revenues to operate essential governmental services like public works and a small fire station that operates during daylight hours.

Salgado said the tribe would like to make the fire department a full-service, 24-hour operation if casino revenues rise.

"The casino plays a role in allowing the tribe to be able to provide services rather than just solely trying to rely on grants and handouts," he said. "It puts tribes in the position of exercising self-governance and self-reliance."

All that could go away if his small casino is forced to close.

"We should continue with that mutually beneficial relationship and ensuring that online sports wagering, if it comes into being, is well-regulated," Salgado said. "Tribes need to be at the forefront of doing that."

Another major player in California gambling, the card rooms, oppose Proposition 26, claiming that special interests had hijacked the gaming industry.

Tribal history: How a Native American tribe changed the gambling industry by standing up to the FBI 

Without new rules, online gaming fights will continue

Salgado said the sports gaming companies have made their intentions known that sports wagering is their first step toward full online gaming.

"Potentially this could make limited gaming operations go completely under as people use the online option rather than driving 45 minutes or two to three hours in order to get to our property," he said.

The tribes are trying to protect their gaming from encroachment, said Derrick Beetso, director of Indian gaming and self-governance programs at Arizona State University's Sandra Day O'Connor College of Law.

"It doesn't take a scientist to realize that once you figure out all the apparatus for these phones to be able to act as betting devices, it's not too far a stretch to add additional games like poker and blackjack," he said. "We don't know whether this is the proverbial camel's nose under the tent."

That camel's nose snuffling under the casino industry tent may ultimately disrupt one of the most successful tribal economic development policies of the past century, the Indian Gaming Regulatory Act, said sports gaming expert John Holden.

"IGRA's done wonders. It's incredible what happened in the tribal gaming industry and what it's done for tribal communities," said Holden, assistant professor at the Spears School of Business at Oklahoma State University. "But there's a real risk that these commercial entities moving in will sort of undo some of the benefits that we've seen since 1988 when IGRA became law."

A simple one-sentence amendment to the gaming law could modernize the nearly 35-year-old law, Holden said. In 2019, former Rep. Anthony Brindisi, D-N.Y., offered an amendment that would have clarified how tribes can engage in mobile sports betting by placing servers on tribal lands.

"And it just went nowhere," Holden said. He was surprised that nobody seems to be pushing for adding sports betting to IGRA.

The failure to update the nation's tribal gaming statute to address online and mobile sports betting has put tribes in a bad place, Holden said.

"Instead of having the bargaining position than they did pre-2018 with the launch of commercial sports betting, many tribes are on the outside looking in and have lost some of that leverage," he said.

The uncertainty over mobile betting has forced tribes to engage with commercial sports books to capture those revenues.

Beetso, a Diné and Navajo Nation citizen, agrees with Holden.

"Nobody expected this in 1988 when IGRA was passed," he said. "I think (policymakers and the courts) are wrestling with technology and a statute that didn't contemplate such technology when it was passed."

Arizona reports first-year figures from sports betting

If the first year of sports betting in Arizona is any indication, Proposition 27 opponents' assertion that online gaming is not the cash cow for the state promised by its supporters appears to hold water.

Under the terms of Arizona's sports betting compact, the state assesses a 10% privilege fee on online sports betting and 8% from onsite venues. Over the first 11 months for which reports are available, the operators reported aggregated adjusted gross revenues of $380 million.

But they're allowed to deduct promotional costs, such as free bets and credits, which meant that the companies paid $18 million in privilege fees on final calculated receipts of just over $185.5 million, less than half the adjusted gross. The promotional bet deduction will expire in five years.

Consumers: Arizona sets new national records for gambling in first months of sports betting

Tribal gaming venues, which now include onsite sports books like the one that opened at Fort McDowell, reported $2.7 billion in aggregated adjusted gross revenues in fiscal year 2022, which ended June 30. The tribes paid $123.6 million in revenue sharing to the state's Arizona Benefits Fund. The money is divided among six funds, including education, emergency services, wildlife, tourism and a problem gambling fund, and helps fund the Department of Gaming. The tribes also gave $15 million in grants to cities, towns and counties.

At Fort McDowell's sports book opening, Burnette, the tribal president, said that since 2002, Arizona tribes have given the state close to $2 billion in revenue sharing.

Odds suggest a 'no bet' vote on either proposition

In mid-September, a poll released by the nonpartisan Public Policy Institute of California found that 54% of likely voters will vote no on Proposition 27.

"If I were a betting man, I would bet that both these measures get defeated," Holden said.

A poll published on Oct. 4 by the UC Berkeley Institute of Governmental Studies said that both propositions seemed headed for defeat.

Holden predicts ever more expensive battles over sports betting in the 2024 election cycle if Congress doesn't act to amend IGRA.

"This is round one," he said. "But it's round one of maybe 15."

Debra Krol reports on Indigenous communities at the confluence of climate, culture and commerce in Arizona and the Intermountain West. Reach Krol at debra.krol@azcentral.com. Follow her on Twitter at @debkrol. 

Coverage of Indigenous issues at the intersection of climate, culture and commerce is supported by the Catena Foundation.

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This article originally appeared on Arizona Republic: California voters could open the state to legal sports betting