California Sports Betting Initiative Backed by Gambling Giants Would Block Startups

Of the four sports betting initiatives competing to make November’s ballot, one, paid for by online sports betting giants FanDuel, DraftKings and BetMGM, would allow gaming companies and Native American tribes to provide sports betting online across the state. 

But embedded in the initiative are requirements that would be very difficult — if not impossible — for the companies’ smaller competitors to meet, experts say. 

If the initiative passes, gaming companies would have to pay a $100 million licensing fee to do business in the state, as well as already be licensed in 10 states, or be operating in five states and running 12 casinos.  

“I think it’s absolute nonsense,” said John Holden, a professor at Oklahoma State University who studies sports gambling policy. “I think what’s effectively happening is, basically, the 5 to 10 frontrunners in the market have decided ‘Alright, let’s ensure that there’s no one else who can compete by agreeing to pay these exorbitant license fees.’” 

The $100 million fee, Holden said, essentially ensures no startups will be able to operate in California. 

The fee is one way the measure generates “significant revenue to fund homelessness housing and mental health treatment and provide financial support for California Tribal nations,” Nathan Click, a spokesperson for the initiative’s campaign, wrote in a statement.

“California is best served by creating a safe and tightly regulated sports betting market, one where customers can know they are working with experienced platforms with a proven track record of safe and responsible operation in other markets,” Click wrote.

FanDuel and BetMGM did not respond to CalMatters’ request for an interview. DraftKings directed CalMatters’ interview request to Click, the campaign spokesperson.

Here’s What the Initiative Does

The initiative backed by sports betting companies would:

• Allow adults 21 or older to bet on sports events online, as well as on some non-athletic events like awards shows and video-game competitions, outside of Native American lands  


• Enable tribes to offer online sports betting under the tribe’s name and branding. Tribes would have to pay a one-time $10 million licensing fee to the state and $1 million renewal fee every five years


• Allow gaming companies such as Fanduel and DraftKings to offer online sports betting if they strike a deal with a tribe to access the California market, pay a one-time licensing fee of $100 million plus a $10 million renewal fee every five years, and they are also licensed to operate in 10 states (or are licensed to operate in five states and operate 12 casinos)


• Create a new division within the state’s Justice Department to regulate online sports wagering


• Impose a 10% tax on all companies or tribes offering sports betting. After covering the state’s regulatory costs, most of the revenue from the tax and the licensing fees would be used to address homelessness and create interim and permanent housing. Of the funds, 15% would go to Native American tribes that aren’t involved in online sports betting. 

The state’s Legislative Analyst’s Office wrote in its assessment of the measure that it’s uncertain how much money the new taxes and fees would generate for the state, but it could reach the mid-hundreds of millions per year. 

The measure hasn’t qualified for the ballot yet — it’s still gathering signatures. But Click, the spokesperson for the campaign, said the measure is well ahead of where it needs to be to qualify. 

Other measures that legalize sports betting could make the ballot — or are already eligible. One, backed by a coalition of tribes, would allow sports betting at tribal casinos and four horse race tracks only, while another, backed by a separate coalition of tribes, would allow tribes to offer online and in-person sports betting exclusively.  Native American tribes have long had the exclusive right to offer certain forms of gambling in California. Many tribes are campaigning against the gaming companies’ initiative arguing, among other things, that it would threaten tribes’ sovereignty and self-reliance.

If one of the initiatives passes, California would become one of over 30 states to legalize betting on sports.  The industry could generate $3.57 billion per year in net revenue for entities offering sports betting to people in California if online and in-person betting is legalized and many companies are able to operate, according to projections from Eilers & Krejcik Gaming LLC, a research firm. That’s larger than the firm’s projections for Texas, New York, or Florida. 

So Much for the Sports Betting Startups

The $100 million licensing fee is much higher than what any other state has on the books, said Becca Giden, director of policy for Eilers & Krejcik. Now, New York’s $25 million licensing fee is the highest, she said. Most states that have legalized sports betting have licensing fees in the low single-digit millions or hundreds of thousands — and no other state requires companies to already be licensed in other states, according to Giden.