The negative campaigning continues in California as a group of tribes released a new advertisement Monday contending that Proposition 27 — the commercially backed digital sports betting initiative — would benefit neither the tribes nor the state.
The new ad features text that reads “It doesn’t tell you that 90% of the profits go to out-of-state corporations” and “They didn’t write it for the tribes. They wrote it for themselves.”
Backed by a coalition of tribes including the San Manuel Band of Mission Indians, the Rincon Band of Luiseno Indians, and the Pala Casino Spa Resort, the ad is one of many that recently hit the California airwaves and appeared on billboards and in newspapers, as well as being peppered all over social media. The ad essentially points to DraftKings and FanDuel as liars.
“We will continue to explain to Californians to not be fooled by the deceptive campaign being waged by out of state corporations who wrote this measure to boost their corporate profits and take sovereign rights from Californian Indian tribes,” No on 27 spokesman Rob Stutzman said via press release.
A 10% tax rate is not all that unusual
No on 27 isn’t the only campaign trying to stop the proposition, which is funded by Bally’s, BetMGM, DraftKings, Fanatics, FanDuel, Penn National Gaming/Barstool Sportsbook, and WynnBET. All of the ads repeatedly suggest these companies will steal from Californians, although what the operators are offering isn’t all that different from what many states have already agreed to in terms of legalized wagering.
“Californians aren’t going to be fooled by these false attacks,” said Nathan Click, spokesman for those backing Proposition 27. “California’s nonpartisan budget analyst office estimated that our initiative would raise hundreds of millions in dollars each year for homelessness and mental health and addiction treatment — many times more revenue for the state than any other proposed or qualified sports betting initiative.”
While New York and a group of smaller states passed laws that implement a 51% tax rate, of the 33 U.S. states and jurisdictions that have some form of legalized wagering, 19 have tax rates of 15% or less, and 11 of those have rates of 10% or less. Nevada and Iowa both charge operators a nationwide low of 6.75% in taxes.
Taxes are paid on house winnings from customers. While the general public may be blown away when the media reports that bettors in a certain state collectively laid down hundreds of millions of dollars in bets in a month, most of that money goes back to winning bettors, leaving a much smaller number as sportsbook revenue. As an example, in Arizona in May bettors wagered $461.5 million, of which $55 million was retained as gross revenue. Operators in Arizona can deduct promotional play, so $41.4 million was taxed at 10%. In addition to paying the tax, operators must use revenue to pay for their space, labor, technology, marketing, and more.
According to the text of Proposition 27, 85% of tax dollars would be earmarked to address California’s homelessness issues and create housing, and 15% would go into a fund for non-gaming tribes. According to projections, California could take in hundreds of millions per year. Under the proposal, which does not address retail wagering, digital sports betting platforms could go live Aug. 27, 2023, and would have to be tethered to tribal casinos.
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At least three California tribes — the Big Valley Band of Pomo Indians, the Middletown Rancheria or Pomo Indians, and the Santa Rosa Rancheria Tachi Yokut Tribe — are standing with the operators, and while the anti-Proposition 27 ads contend that tribes will lose should the initiative pass, those three tribes believe they’ll be better able to support and educate their people if it passes.
“Prop. 27 will provide us with economic opportunity to fortify our Tribe’s future for generations and protect Tribal sovereignty,” Leo Sisco, chairman of the Santa Rosa Rancheria Tachi Yokut Tribe, said recently via press release. “And it is the only measure that will deliver hundreds of millions of dollars each year to help solve homelessness and address mental health in California.”
Proposition 26 under fire, too
Proposition 27 won’t be the only gambling measure on the November 2022 California ballot. Proposition 26, which would allow for only in-person wagering at tribal casinos and four horse racetracks, was the first to qualify. Backed by a broad coalition of tribes in the state, the proposition is facing its own opposition, mostly from a group of card rooms.
Late last week, the American Federation of State, County and Municipal Employees (AFSCME) District Council 36, which represents 60 local unions, also came out in opposition to Proposition 26. It did not take a position on Proposition 27.
“Proposition 26 puts $500 million in local tax revenue at risk due to the poison pill that will bankrupt community cardrooms. And when city revenue is slashed, public employee jobs like mine are on the line.” Shavon Moore-Cage, a member of the AFSCME Local 36 Management Chapter, said via press release.