“Vote NO on Prop 26, Vote YES on Prop 26:” Like many of you, I have been endlessly barraged by ads for this proposition over the past few months. My understanding was completely surface level — I knew it had something to do with gambling, but that was it.
So when state ballots were sent out, I decided to take a deep dive into the text of Proposition 26 to figure out what it says, and — crucially — should I vote yes or no?
The barebones of the proposition is that it will legalize in-person sports betting, roulette and dice games on tribal lands in California. It will also legalize sports betting at four horse racing tracks; in return, 10% of the profits generated by these tracks will be placed into the California Sports Wagering Fund (CSWF). 40% of the CSWF will likely go to increased spending on K-12 schools and community colleges. The remaining 60% is to be used for sports betting and gambling-related costs.
So the question arises — why is this on the ballot anyway? In 1992, the federal government passed the Bradley Act, which effectively prohibited sports betting in states (bar a few — Nevada incl.). However, in May 2018, the Supreme Court struck down this provision in Murphy v. NCAA. This effectively allowed individual states to make their own laws regarding sports betting at state gambling centers, which are mainly racetracks and casinos.
California’s gambling laws are unique both due to its constitution and the state’s constituents. California’s constitution prohibits Nevada and New Jersey-style casinos, slot machines, roulettes and banked/percentage types of card games where the house/casino has a stake. California also has a significant Indigenous population — according to the 2010 national census, 12% of all individuals who identify as Native American reside in California. This is relevant because, in 1988, the federal government passed the Indian Gaming Regulatory Act, which stated that gambling can take place on tribal lands, subject to the classification of the type of gambling. For certain gambling classes such as slot machines and lottery games, a tribal-state compact is needed for legality. California, in 2000, passed Proposition 1A, which allowed compacts to be signed with 79 tribes in California, establishing the current status quo with regards to California gambling. Horse racing is the other form of legal gambling in California not tied to tribal lands. This is mainly due to historical precedent, having existed since 1933 when voters in California voted to legalize pari-mutuel betting, the type of betting used in horse racing.
Allowing gambling on tribal lands has had success in generating revenue for crucial tribal services such as healthcare, fire services, law enforcement services, schools, scholarships and others. Furthermore, the direct impact to the California GDP is significant: 124,300 jobs, $20 billion directly and $1 billion in taxes to the state of California in 2016. Horse racing, the other form of legal gambling in California, is also very lucrative; it has generated $18 million in fee revenue for the state.
Between 1992 to 2018, during the years of effect of the Bradley Act, unregulated and untaxed sports betting still took place nationwide, with the federal government in 1999 estimating that up to $80 billion of sports bets were placed yearly. These illegal bets — unlicensed, untaxed and unregulated — made it prone to criminal influences such as money laundering, drug financing and organized crime. Hence, the idea behind legalizing Prop 26 is to shift money out of the black market and allow for regulation and safe betting practices.
The pure numbers indicate that legalizing sports betting at these tribal lands and horse tracks will not only help the tribes continue to operate comfortably, but also generate more revenue for the state and local governments. This time around, revenue earned through sports betting at horse tracks (CWSF) will be earmarked for public education related measures. Spending more on education has been shown to not only raise graduation rates but also boosts adult income. Using gambling money to fund education is not a new idea. In fact, in Georgia, the state lottery entirely funds the HOPE and Zell Miller Scholarships. These scholarships, established in 1993, are available to any Georgia resident graduating from high school with a certain GPA to use to pay up to 100% of tuition costs in in-state public colleges and has helped more than 1.8 million college students.
However, will benefits from increased revenue go as far as the text of the proposition suggests? I don’t think so; the increased costs of regulation are non-significant (low millions of dollars as estimated by the Legislative Analyst Office), and usage of 60% of the CWSF fund for regulation costs may be too optimistic, in that costs may be higher. There will be an influx of civil suits that the state courts will have to handle arising from disputes of gambling laws, and particularly new procedural overhead costs for review of accusations of breaking such laws.
There is also an inherent vice, virtue trade-off. Gambling can be addictive and its addiction affects about 4% of all adult Americans and causes about $7 billion worth of social cost (bankruptcy, criminal justice and healthcare costs). The personal dangers of addiction — financial ruin and poor mental health (guilt, depression, anxiety, stress) cannot be understated. Furthermore, there is an increased risk for adolescents who actively gamble, as it has been shown that those who engage in gambling report significant psychological, social and financial consequences, including but not limited to, undertaking high-risk behaviors (drinking, smoking), mental health issues (depression and antisocial behaviors) and high risk of combined addiction (alcohol or other drugs).
The main question I have is how effective the proposed protections are in keeping underage betters away (and a significant portion of the text of the proposed law is dedicated to prevention of underage betting, either through advertising or marketing). Underage gambling is a significant issue; California Problem Gambling Healthline 2020 Annual Report shows that about 36% of all gamblers that called were underage. The fact that the law makes it in-person helps in verification of ages, but the possibility of fake IDs cannot be ignored. I also wonder how expanded betting opportunities will affect the rates of underage gambling. Will the appearance of ads for sports betting influence more underage people to bet, or will it unduly influence their activities when they do become of-age?
My hope would be that some portion of the CWSF and/or increased taxable revenue from tribal lands be used to combat some of these negative side-effects of gambling, such as further educational outreach to at-risk individuals, public awareness and funding for treatment centers. But that’s for another day.
Also, there are some strange contradictions in the text of the proposed law itself; the law prohibits betting on California collegiate teams, yet allows betting at the NCAA March Madness tournament, which raises the question of which tournaments are considered “big enough” to warrant betting. The Big Game and USC-UCLA are also considered to be classic big rivalries — will there be sports betting allowed here?
However, despite these drawbacks, I do believe that it is worth voting yes on Prop 26 — the positives (increased revenue for services in tribal lands, increased taxable revenue for the state, earmarked money for public education) in my opinion largely outweigh the negatives (potential for more gambling addiction or underage betting, legal and social costs, ambiguity in the law). Secondarily, it will help reduce an avenue of funding for organized crime. Would I prefer to see stronger clarifications on protecting wagerers themselves? Yes. Would I prefer that a higher percentage be spent towards education rather than 4% of the total CWSF? Yes. But honestly, this proposition has the potential to monetarily help California residents both Indigenous and otherwise, and I believe in that.