Disruption

The most expensive political campaign of the midterm elections

In this March 19, 2019, file photo, an iPad displays the types of bets that can be placed at the Golden 1 Center’s Skyloft Predictive Gaming Lounge, in Sacramento, Calif. California lawmakers on Monday, June 22, 2020, ended their bid to put a measure on the November ballot that would legalize sports wagering in the nation’s largest market, potentially setting up a showdown with tribal casinos in 2022. (AP Photo/Rich Pedroncelli, File)

Major gaming firms and Native American tribes have poured more than half a billion dollars into a political fight over legalized sports betting in California, flooding airwaves and jamming mailboxes in a fierce competition for control of one of the largest gambling markets in the world.

The two sides are battling over dueling propositions on November’s midterm election ballot, each of which would give the sponsor a substantial advantage in gaining early market share, at the expense of the rival industry. And both could lose.

“With the size of our market, the stakes are always in the billions. So it’s always worth millions or hundreds of millions to play, to set the terms of how you can play,” said Thad Kousser, who chairs the political science department at the University of California-San Diego. “

California’s largest Native American tribes are behind Proposition 26, which would legalize most sports wagering at casinos the tribes operate and at licensed racetracks across the state. Supporters say opening sports betting inside existing casinos would create protections against illicit gambling.

“Requiring individuals to be physically present in-person to place bets is the safest and most responsible way for California to legalize sports wagering,” Bill Young, president of the Riverside Sheriff’s Association, said in a statement endorsing the measure. “It is the best way to prevent underage gambling and ensure people are not placing bets illegally, and it provides funding for enforcement against illegal gambling and problem gambling programs.”

On the other side is Proposition 27, a measure backed by some of the nation’s largest gambling companies. That proposition would allow tribes, online sports betting platforms and gaming companies to offer online sports betting.

The parent companies of FanDuel and DraftKings have each contributed more than $33 million to the online wagering campaign. Three other major casino operators, including MGM and Penn Entertainment, have donated $25 million each.

Both measures are trying to win over voters with promises of millions in tax revenues for state programs. Proposition 26 directs 15% of the revenue it would generate to problem gaming prevention programs, and another 15% to the state Bureau of Gambling Control for enforcement. Proposition 27 directs 85% of the revenue it would create to a program combatting homelessness and supporting mental health.

“Only Prop. 27 will dedicate hundreds of millions of permanent funding that can be used for solutions like tiny homes, permanent supportive housing and mental health treatment to help get people off the street,” said Nathan Click, the spokesman for the campaign committee backing the online gaming companies’ proposition. “When Californians legalize sports betting, all Californians should benefit — and that only happens with a real tax rate on operators who facilitate those bets.”

California already has about 100 casinos and 80 card clubs, said Timothy Fong, a psychiatrist and co-director of UCLA’s Gambling Studies Program. And though it borders Nevada, America’s gaming mecca, California’s sheer size means it still generates more gambling revenue than any other state.

Fong said straight-forward sports wagering is not a huge moneymaker for casinos that operate sports books. Casinos have to pay out a winner; they make money only on the margins between the two sets of odds. But the development of in-game parlays, made possible by the growth of online sports betting, has proven much more profitable.

“That’s much more random, that’s much more lottery-style kind of stuff. That’s a much higher return for the gambling industry than a single bet,” Fong said. “Mobile sports betting, what we’re learning from other states, it’s a really mixed bag. You get a ton of revenue but you also get a ton of problems.”

So far, the two sides have combined to spend more than $540 million, making the campaign for sports betting — either in-person or online — the most expensive political contest of the year.

By contrast, two runoff elections in Georgia that flipped control of the U.S. Senate to Democrats in 2020 and 2021 cost a combined $506 million, according to the Center for Responsive Politics. Supporters and opponents of the two propositions have raised more money than have candidates running for U.S. Senate seats this year in Pennsylvania, Georgia, Florida, Arizona, Ohio, Wisconsin, South Carolina and New York, combined.

Though each side stands to make billions in new wagering revenue if their measure passes, the level of spending so far has not swayed the public. A recent poll conducted by the University of California-Berkeley’s Institute of Governmental Studies found just 31% of voters backed Proposition 26, allowing in-person sports betting, and only 27% supported Proposition 27, allowing online wagering.

“It certainly has hurt both propositions that they have a competitor on their ballot that they’re spending most of their time bashing and being bashed by,” Kousser said. “When you have two candidates going negative on each other, at the end of the day, voters still have to hold their nose and vote for one of them.”

In this case, Kousser said, voters have a different option — voting against both measures.