Propositions 26 and 27 on California’s November ballot both endeavor to make sports betting legal in California. As usual, the proponents of the measures accentuate the positive consequences of generating revenue for feel-good causes such as Indian tribes, the homeless and education while downplaying the negative consequences of gambling addiction.
Below the surface, the two measures are quite different.
Proposition 26 would legalize in-person sports betting at tribal casinos and horse-racing tracks. It would also allow casinos to offer roulette and games using dice.
The casinos and tracks would garner 90% of the profits. The remaining 10% would go the state. The state’s proceeds would be dedicated first to education with 15% of whatever is left going to regulatory enforcement, 15% to treat problem gambling and 70% to the state’s general fund.
The Legislative Analyst forecasts tens of millions of dollars in additional revenue to the state.
Proposition 27 goes farther. It would legalize online betting for athletic events and non-athletic events such as awards shows and video game competitions. Tribes could offer gambling services on their own or partner with “licensed gambling companies.” These companies would presumably include the likes of Draft Kings and FanDuel.
The state’s profits would go into a new California Online Sports Betting Trust Fund. Again, the state would receive 10% of the profits plus some licensing fees. After paying regulatory expenses, 85% of the balance would address homelessness and gambling addiction programs. 15% would go to tribes not involved in online betting. Zero would go to education.
The Legislative Analyst estimates that revenue to the state would likely be less than $500 million per year. This is barely more than 1% of the State’s $308 billion budget.
It will come as no surprise that interested parties have spent $424 million to date promoting the proposition that benefits them most and dissing the proposition that benefits them least.
But is there any benefit for California as a whole? Absolutely not.
Gambling addiction is a serious problem. Even with limited access to legal gambling through the lottery, card rooms and casinos, a 2006 study found that an estimated 4% of the population can be classified as either lifetime problem gamblers or lifetime pathological gamblers. Another 9% could be classified as lifetime at-risk gamblers. The problem is particularly acute among African Americans, the disabled and the unemployed.
It is beyond ironic that both Props. 26 and 27 set aside money to treat the very gambling problems they will undoubtedly exacerbate.
As for social benefits, recent ads for Prop. 27 drop the “let’s put lipstick on the pig” pretense of “help the homeless” in favor of showing happy sports fans placing bets while watching games. It’s football season and gambling is fun!
The California Lottery is bad enough with its exaggerated promises of instant riches preying on those who can afford to gamble least. We do not need new or high-tech ways to lead gamblers into temptation.
Jeffrey Scharf is the Founder of Act Two Investors LLC, a registered investment adviser. Contact him at jeffrey@acttwoinvestors.com.
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