With the state of California staring down a $54 billion budget deficit directly attributable to the coronavirus pandemic and the subsequent economic fallout, two Northern California lawmakers are offering a potential partial solution: legalize sports gambling, and tax the winnings to generate revenue.
"You could kind of look at it as the COVID-19 Relief Act," State Sen. Bill Dodd (D-Napa) told SFGATE.
When the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PAPSA) on 10th Amendment grounds in 2018, it opened the floodgates for individual states to legalize sports betting. In total, 23 states have authorized legal wagering on sports, but the country's three most populous states (California, Texas and Florida, respectively) have not yet passed sports gambling legislation.
If all goes according to plan for Dodd and Assemblyman Adam Gray (D-Merced), Californians will vote on a ballot initiative in November that would allow the state to legalize sports gambling by 2021 and immediately raise much-needed funds. Dodd and Gray first introduced State Constitutional Amendment 6 in 2019, and the state Senate appropriations committee will hold a hearing on the bill on Tuesday.
Under SCA-6, the state would allow individuals to place in-person bets at Indian casinos, horse-racing tracks and card rooms, and also bet online through mobile betting platforms. Dodd and Gray stated they envision online betting entities such as FanDuel and DraftKings entering the California market in addition to new betting platforms popping up.
The bill would place a 15% tax on online bets and a 10% tax on in-person bets. Citing estimates of $20 billion worth of illegal bets placed on sports games in the state annually, the lawmakers believe that the taxes could generate anywhere from $500 million to $1 billion in revenue per year. While that figure is nowhere near enough to fully close the budget gap, it's a start.
"Senator Dodd and I are two of 120 members of the state Legislature, and are some of the only ones who have put forward a proposal that is real money," Gray told SFGATE. "And $500 million to $1 billion is real money, and that could solve a lot of problems for everyday Californians. And the notion that, ‘Oh well, you didn’t fix the whole problem, therefore your idea is no good,’ I think that's rather silly. There are 30 standing committees other than Governmental Organization in the State Assembly, and there are many committees in the state Senate, and if every committee chairman came up with a billion dollars, we’d be in a good place, wouldn’t we? But right now, the only two committee chairmen who have come up with anything are Senator Bill Dodd and Assemblyman Adam Gray.”
Dodd and Gray are battling a competing proposal backed by a number of Native American tribes that could also appear on the November ballot that legalizes only in-person betting at casinos and horse racing tracks. Because the proposal does not include online betting, the Legislative Analyst's Office projects it would raise only tens of millions annually.
"The reality is they're going to pick up only 15 to 20% of the market, max," Dodd said. "That online portion is completely eliminated, so I think that's important for the people of the state of California that part is taken care of."
If the bill clears the Senate Appropriations Committee on Tuesday, it will be brought for a floor vote before being sent to the state Assembly. Assuming the bill appears on the November ballot, the funds raised from the taxes will not be earmarked for any specific purpose, leaving it up to Gov. Gavin Newsom and state lawmakers to determine where the funds go. Dodd and Gray are optimistic on its chances.
"I should have the votes to be able get this across," Dodd said. "We've worked it hard, we've taken a number of amendments. At the end of the day, timing is going to be critically important to be able to get it to the ballot this year. We've done research and we believe voters in the state of California are interested."