When California voters weigh in Nov. 8 on whether to legalize retail and/or online sports betting, their decision will cap what is expected to be the costliest initiative campaign in U.S. history. And if experts in politics and sports betting are right, the hundreds of millions spent may all have been for naught.
As the calendar turned this month to the final 100 days ahead of the midterm elections, the already bitter initiative campaigns turned vitriolic. And those backing “No” campaigns have been hammering voters in their ads with negative statistics, comments, and other messages on a nearly daily basis.
Last week alone, media consultants from multiple “No” campaigns issued releases announcing that homelessness advocates, teachers groups, and legislative leaders on both sides of the aisle oppose a proposition backed by commercial operators that would allow for statewide mobile wagering, and that a group of unions aligned with card rooms now opposes a tribal-backed proposal.
On Friday, Major League Baseball became the first professional sports league to back one of the California proposals when it released a statement lauding the “strong integrity provisions” of the operators’ initiative. One analyst suggested the endorsement is a potential turning point for the campaign.
“The endorsement is big for proponents that are trying to get through the noise of a messy campaign,” Las Vegas-based gaming consultant Brendan Bussmann of B Global told Sports Handle. “If used appropriately, this should be a strong opportunity to turn out baseball fans” in support of the commercial initiative.
The campaigns around sports betting are headed to a boiling point in a state where there are also five other initiatives, which deal with issues including reproductive freedom, greenhouse gas emissions, and availability of flavored tobacco.
It’s already difficult in California to watch television or log onto social media without seeing a gaming advertisement. And experts say both sides will up their advertising and marketing spends the closer it gets to election day.
“I think a big problem that anyone attacking this issue faces is that sports betting is likely not to be a top five or even top 10 issue for voters,” Chris Grove, a partner emeritus at gaming research firm Eijlers & Krejcik, told Sports Handle. “So breaking through means you need to capture the interest of the voters, and I don’t know if that is possible, especially with everything else going on.”
It’s now tribes vs. tribes vs. corporate America
At issue is whether voters will pass either Proposition 26, a tribal-backed initiative that would introduce only in-person sports betting, or Proposition 27, a commercial-backed initiative to usher in online sports betting in the state considered by stakeholders to be the holy grail of U.S. jurisdictions. With California’s population approaching 40 million, the potential revenue from legal digital wagering would be expected to dwarf the numbers seen in other states.
In the early going, the opponents were clear — California’s tribes and those who have traditionally stood with them, including the NAACP, multiple minority groups, and workers unions, were pitted against corporate America. Back in 2021, a coalition of tribes successfully got Proposition 26 on the November 2022 ballot and promised to continue to be good caretakers of California and its gaming interests.
On the other side, Bally’s, BetMGM, DraftKings, Fanatics, FanDuel, PENN Entertainment/Barstool Sportsbook, and WynnBET came together and got approval this year for consideration of more far-reaching legalization. Their Proposition 27, while requiring that platforms be tethered to tribal casinos, would allow for online/mobile wagering while Proposition 26 would not. Proposition 26 would also allow for retail sportsbooks at four horse racetracks, would legalize ball-and-dice games at tribal casinos, and would allow “people or entities that believe someone is breaking (gambling) laws to file a civil lawsuit in state trial courts.” Both campaigns met the requirement of collecting 997,139 verified signatures to get on the ballot.
I'm glad they got ahead of it that way. Now the other side is running ads with different tribes, and it's deliberately confusing. This was a good explainer: https://t.co/mCSGCCEd04
— DS Mills @[email protected] (@socalmom) August 11, 2022
But in recent weeks, it’s become more difficult to decipher whether to support one or both initiatives.
“As a veteran of political campaigns, if your goal is to confuse the voter, congratulations, you’ve done an excellent job,” Bussmann said. “But you have to differentiate yourself to the voter and make them understand why you offer a different proposition. You have to understand who is going to move the needle for them and target them. That makes it a grassroots campaign vs. grass tops campaign, which is harder to run.”
The confusion surrounding the measures starts with the numbering — 26 and 27 — and trickles into advertising. In the early going, the tribes backed Proposition 26 ads asking Californians to trust them to continue to be good stewards of gaming. The ads featured tribal leaders, some dressed in traditional garb, along with open land and a positive message about trust.
But after three tribes signed on to stand with the operators, Proposition 27 backers opted to use those tribal leaders in their own ads. The visual was similar to that of their competitors, though the message — digital gaming will help lift tribes out of poverty — was different. Add in more ads from anti-Proposition 27 groups bashing commercial operators and the occasional word from card rooms, which oppose the tribal Proposition 26, and the question of who to side with may have become muddled from a voter’s perspective.
“Nine times out of 10, John D. Voter either doesn’t vote at all because they don’t understand the issue, or they vote however they feel that day,” said an East Coast political consultant who wished to remain anonymous. “But because the messaging is convoluted, it will be tougher. People don’t care about the details, but they’re not stupid. [The ads] felt self-serving, and people don’t like that.
“I feel like as long as there is not some serious tribal love and loyalty, I just don’t think it’s going to work.”
Multiple choice often equals failed initiatives
Traditionally, according to many who are experienced with political campaigns, if there is one issue with two choices, both propositions fail. Some say that lawsuits are likely should both pass, or if only the corporate-backed Proposition 27 passes, as the state’s tribes will argue that their sovereignty has been violated by allowing commercial entities to operate wagering.
But currently, it is an open question whether Proposition 27 can and will pass. Polling shared by anti-Proposition 27 groups shows weak support for it, while the California Solutions for Homelessness and Mental Health Act campaign has not released a recent poll. Some observers are befuddled that the operators’ advertising has focused on tribes rather than on funding their initiative could deliver to address homelessness in the state.
“I think changes must be coming, because if they don’t … the polling is terrible,” Bill Pascrell III, a partner in Princeton Public Affairs, told Sports Handle. “There’s massive money being spent there and very little to show for it other than getting on the ballot, which is, what, a Pyrrhic victory? If they continue down the road they are on, I don’t see how they are going to turn a corner.”
Traditionally, initiative or candidate campaigns would want to have strong polling numbers indicating at least 40% approval or above by late summer, so the focus could turn to solidifying voter sentiment in the lead-up to an election.
Should Proposition 27 fail, it would mark the second time in a year that DraftKings and FanDuel have financed a major initiative campaign and come up empty. Earlier this year, after spending approximately $37 million in Florida, the pair abandoned an effort to get a digital wagering initiative on the ballot there.
That referendum proposal was one of two around gaming in Florida that failed to collect enough signatures to make the ballot. Florida Voters in Charge, the committee backing a failed Las Vegas Sands Casino proposal, spent $47 million on its efforts. But that $84 million won’t touch the projected $500 million that will be spent in California by those supporting and opposing legal wagering.
A look at the most recent campaign finance numbers reveals that operators have upped their contributions to $150 million. The tribes opposing Proposition 27 (and some supporting Proposition 26) have put nearly $160 million into their campaigns, and card rooms, which don’t have their own proposal, have committed $41 million to a “No on 26” campaign.
$49,999,999 —> what Penn (Barstool), Fanatics, BetMGM, FanDuel and DraftKings spent in July on "Prop 27", the California online sports betting ballot campaign.
$55,206,341 —> what Native American tribes spent in July to fight Prop 27.
— Sam McQuillan (@sam_mcquill) August 11, 2022
The Politico news site reported last week that the spend to stop Proposition 27 extends to the state Capitol. The article stated that the powerful San Manuel Band of Mission Indians (Yaamava Casino in Southern California) upped its spend on lobbyists in Sacramento from $260,000 in the first quarter of 2022 to $3.4 million in the second quarter. According to the story, San Manuel has also already spent $28 million trying to quash Proposition 27.
Days after the story appeared, “No on 27,” backed by San Manuel, the Rincon Band of Luiseno Indians, and the Pala Casino Spa Resort, released quotes from both Democratic and Republican legislators opposing Proposition 27:
I am concerned that Prop. 27 sends sports betting revenues to out-of-state corporations who wrote the measure to maximize their profits. Californians should vote No on 27 and support California tribes over out-of-state corporations. – Democratic Assembly Speaker Anthony Rendon
Prop. 27 eliminates the sovereign right of California tribes to operate gaming in California. They have proven to be excellent stewards of this responsibility. We should protect this tribal right, which has also benefitted all Californians. Vote No on 27. – Senate Republican Leader Scott Wilk
That Sacramento lawmakers are backing the tribal initiative is a special kind of irony — some lawmakers in 2019 and 2020 attempted to get their own wagering referendums on the ballot, but the pushback from Indian Country was enormous, and the tribes ultimately killed the efforts twice.
Seriously Democratic Assembly Speaker Anthony Rendon? https://t.co/ryUzeFMlsn
— david amodt (@davidamodt) August 11, 2022
How to really reach voters
Key to the campaigns surrounding the initiatives is not just how much money is being spent on them, which the East Coast political consultant said has reached a “level that most people can’t comprehend,” but how that money is being spent.
“You do it better by fine-tuning your messaging,” said Pascrell, who recommends digital, mass media, and billboard advertising. “I just think there is so much noise out there, when you get to post-Labor Day [when other campaigns also ramp up], it’s just going to get drowned out.”
Said Grove: “The rule of thumb with referendums is that the more confusing the environment is, the more likely the status quo persists. The conclusion that we’ve come to is that it’s a coin flip. There’s not a lot of data, it’s not a big issue for voters, and there’s a lot of confusion.”
Most of the available California polling has an element of bias — paid for by one of the campaigns and showing favorable numbers to that campaign. The only unbiased poll appears to be one commissioned by the Los Angeles Times and conducted by the Institute of Governmental Studies at UC Berkeley in February. That poll found that 45% of Californians favor legal wagering, but it did not ask how voters would like to see wagering legalized.
It should be a priority, the East Coast political consultant said, for campaigns on both sides to cut through that noise. Those backing Proposition 26 have a clear message — California’s tribes have long been the caretakers of gaming and should remain as such. That’s a message the campaign could embrace in lieu of negative campaigning, as an example.
For those backing Proposition 27, the initiative is built around the idea that the tax revenue it will generate will be enough to begin to tackle California’s homelessness problem. The campaign’s latest television ad focuses more on bashing the state’s “wealthy” tribes than on helping homeless people get back on their feet.
On a more grassroots level, Proposition 27 text messages focus on the homelessness issue without even mentioning sports betting.
It’s that kind of targeted advertising that could benefit both sides of the campaign. Consultants suggest changes in strategy or repurposing of revenue such as:
- The Proposition 27 campaign could benefit from leveraging the homelessness issue rather than pointing fingers at tribes.
- Both campaigns could see better results with micro-targeting. For example, if the Proposition 26 campaign wants to point out the dangers of digital wagering, it could create specific digital ads geared toward parents and focusing on how in-person wagering would be a safer way to legalize than digital, to which their kids could potentially gain access.
- Newspaper ads now generally hit an over-55 audience, meaning dollars spent there should focus on what might appeal to that age group, or campaigns could completely forgo newspapers as they don’t specifically cater to a sports betting demographic.
- Any campaign should take advantage of “over-the-top” (known as OTT) advertising, which is directly delivered to viewers through streaming services such as Netflix or Hulu and allows advertisers to better track whom they are reaching.
The numbers just don’t work
Tribal leaders have stated on the record that they would rather sacrifice their own initiative than allow the operators’ proposal to win. To that end, two different tribal coalitions have created and funded “No on 27” campaigns. The campaigns appear to be spending more trying to kill Proposition 27 than to get Proposition 26 passed.
Tribal leaders say that Proposition 27 challenges tribal sovereignty and that allowing it to pass would put the power in the hands of operators vs. the tribes. Many California tribes embrace the idea of mobile/online sports betting, but they would want to be in the driver’s seat.
That said, there is a numbers game surrounding digital wagering that doesn’t seem to have a clear winner no matter who is ultimately in the position of power.
Across the U.S., there are approximately a dozen brand-name, nationally known operators. Besides the seven backing Proposition 27, Caesars Sportsbook, BetRivers, Hard Rock Digital, PointsBet, and theScore Bet could be considered easily recognizable. Due to their Nevada presence, SuperBook Sports and Circa Sportsbook also have a fair amount of name recognition in California.
Currently, the only big-name operator with clear-cut market access in California is Caesars, which has existing partnerships with two tribes in the state. The company, which is noticeably absent from the list of Proposition 27 backers, has chosen to stay out of the political fray to protect its interests.
California, meanwhile, has more than 100 federally recognized tribes, and about 60 currently operate casinos. In simple terms, the numbers don’t jibe. There will never be enough national operators for each tribe in California — as is also the case in Oklahoma (39 tribes) or Washington state (29 tribes) or Arizona (21 tribes) — to have its own big-time national partner. No matter what legalization eventually looks like, it makes things complicated for California tribes and any future for mobile sports betting.
That’s right, under Prop. 27: The out-of-state corporations who would operate online sports betting are only required to partner with a single California tribe. That means just a small handful of California’s more than 100 tribes would be able to participate. #NoOn27 pic.twitter.com/j9QtHzVUHm
— NoOnProp27 (@NoProp27) August 11, 2022
“There are some models that could be considered a co-op model or a revenue distribution pool, but can the state support 60 independent operators?” asked Grove. “No. So there is going to have to be some creative way for everyone to derive benefit.”
Even in states like Michigan, where there are 12 gaming tribes, not all of them have brand-name partners. Some have chosen to brand their platforms with their own name — Play Gun Lake or Eagle Casino & Sports, as examples. The same happened in Arizona, where many of the major operators partnered with professional sports teams rather than tribes.
With 27 platforms, Colorado is among states with the most digital sportsbook choices. Of those 27, about half are recognizable names, and the rest are smaller operators with a different end game like MaximBet, which is using sports betting to help build awareness for its bigger lifestyle brand. Colorado was also the first state outside of Nevada in which SuperBook Sports and Circa Sportsbook expanded, and in which European-based Smarkets launched is SBK Sportsbook.
“The top 15 operators are going to go with the best deals they can get,” Pascrell said. “And tribes aren’t dumb people, they are going to negotiate. There is a tremendous opportunity here. … It may mean there is going to be a clearing of the field.”
California presents a unique situation and a bellwether for other big tribal gaming states. The resistance to legalizing digital betting now could well be that the tribes themselves have not yet figured out how to make it work.
That lack of clarity is also likely the key driver behind the three small tribes backing Proposition 27 and claiming they deserve their fair share while the “wealthy” tribes are trying to hold them down and keep profits for themselves. The ambivalence has also manufactured a split among the remaining tribes. The two “No on 27” campaigns are backed by different tribes, and it doesn’t appear they are interested in coming together with a unified voice.
Market access is, well, market access
In Michigan, one of the smallest, most remote tribes in the state, the Bay Mills Community in Sault Ste. Marie near the Canadian border, partnered with DraftKings, one of the two biggest digital sports betting companies in the U.S. It was a move that opened a window into the kind of opportunity wagering presents. In California, that opportunity could exist for the struggling Middletown Rancheria of Pomo Indians (Twin Pine Casino Hotel in rural Lake County) or for the wealthy San Manuel tribe. For a digital wagering company, getting into a state is the key driver, not the size of the entity providing the access.
“Monetizing market access can have a disproportionate impact,” Grove said. “It can be economically transformative for one group and barely a needle mover for another.”
With that and the fact that there are only so many major operators in mind, California’s tribes must begin to think outside the box. Could a consortium of half a dozen tribes agree to band together and provide market access to PointsBet? Sure. A group of three could just as easily negotiate together with Barstool Sportsbook. Tribes — each of which have their own unique personality and end game — could also weigh the value of partnering with a big operator vs. a startup or smaller name.
Should Proposition 27 pass, those kinds of ideas could be the difference between getting a meaningful slice of the pie or no slice at all. But first, that proposition will have to gain traction and secure enough votes for passage.
“This is both an air and a ground war to come out on top, and the campaign that wins is going to be able to have that ground support be the differentiator at the polls because they will have gotten through the noise that is coming from the air war,” said Bussmann, who also indicated the efforts will intensify after Labor Day.
“At that point, campaigns are going to have zero in to figure out how to articulate and potentially change direction to win in November. The question is will anybody pivot, or is this a race to the bottom?”
