California looking to legalize sports bets

If California lawmakers pass a controversial gambling measure now under consideration in Sacramento, the Golden State will join New Jersey in a bicoastal effort to overturn a 20-year-old partial federal ban on sports wagering.

The measure would legalize sports betting at licensed gaming establishments such as tribal casinos and racetracks, including those at Del Mar and Santa Anita.

"The bill is still alive," said Paul Donahue, a consultant for California state Sen. Roderick Wright, D-Inglewood, who authored the measure.

"Wright authored the bill because he believes California residents should be able to wager on sports," Donahue said. "Another reason was to help the horse racing industry, card rooms, tribal casinos and generate revenue for the state."

NO FEAR OF COMPETITION

Federal law prohibits sports betting in 46 states. California residents who want to place a bet on sports now must do it illegally or travel to Nevada where it’s legal to operate a race and sport book.

Nevada casino visitors wagered about $2.87 billion on sporting events in 2011. Gross gaming revenue for Nevada’s sports books last year was $140.7 million, which is equal to 4.9 percent of the total wagered.

Most analysts say that market will be safe, even if California allows sports betting.

David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, said he doubts customers would skip a Las Vegas experience during the Super Bowl or March Madness – heavy sports book events – just because they could lay down a bet in Los Angeles.

If anything, Schwartz said, Cantor Gaming, Station Casinos LLC, William Hill U.S. and other companies with a big Las Vegas presence would stand to benefit from California legalization because they could extend operations there.

Nevada is now one of four states exempted from the Professional and Amateur Sports Protection Act of 1992. The others are Oregon, Montana and Delaware, where operating sports lotteries are legal.

Also excluded from the act are jai alai, horse racing and dog racing. Also, Congress provided a one-year window of opportunity, until Jan. 1, 1993, for states that had casino gaming for the previous decade to pass legislation allowing sports wagering.

New Jersey failed to take advantage of that window to legalize sports betting.

Donahue said Wright’s bill is "enjoying bipartisan support" in the California Legislature, where it awaits a hearing in the Assembly Appropriations Committee. On May 29, the bill passed the state Senate on a 32-2 vote.

Calif. Gov. Jerry Brown has not indicated if he will sign the bill if it passes both houses. A recent Field Poll showed a majority of registered voters – 58 percent to 35 percent – support legalization of sports betting.

Senate Bill 1390, which Wright introduced in February, would allow any licensed gambling establishment to offer sports wagering. Wright is chairman of the Committee on Government Organization, which oversees horse racing. Wright’s district is home to Hollywood Park, a major horse track.

The measure is also expected to help the state’s struggling horse-racing industry, which has unsuccessfully tired to get slot machines to boost revenue. The committee analysis of the bill doesn’t mention tax figures, saying only that the "passage of this bill will capture significant economic activity that has been transferred out of state."

Total handle at racetracks last year declined by more than $537 million, according to the California Horse Racing Board’s annual report. The total dipped to $2.9 billion for the fiscal year ended June 30, 2011, a 15.6 percent drop from the $3.44 billion in fiscal year 2009-2010.

A spokesman for the California Horse Racing Board declined to comment. Other influential interest groups, including a number of American Indian tribes, are still scrutinizing the measure.

David Quintana, political director for the California Tribal Business Alliance in Sacramento, said tribes have serious concerns about the measure. He said it violates the state’s Constitution, which says any expansion of Class III gaming must be approved by voters.

"The other issue is protecting our industry," Quintana said. "If we go by the Wright bill as written … would tribes be in a better place? I don’t think we would."

Quintana said he’s worried about tribal casinos losing customers to card rooms and off-track betting shops.

He said the measure seems to violate the tribes’ casino revenue-sharing agreements, or compacts, with the state, which allow gaming on tribal lands in exchange for payments to the state. Quintana said the measure calls for tribes to negotiate new revenue-sharing agreements.

"That is a very dangerous proposition for tribes," Quintana said. "I expect we will offer some more restrictions to the bill."

FEDERAL REACTION UNCLEAR

Legalizing sports wagering in California would accelerate any showdown with the federal government over the issue. In New Jersey, the state Division of Gaming Enforcement has created regulations for sports betting, giving Republican Gov. Chris Christie the necessary framework for his campaign to overturn the federal ban.

The new regulations would restrict sports pool licensing to Atlantic City casinos and state-owned racetracks, or their joint venture. It would cost $50,000 for a license application, and a resubmission fee of the same amount over five years. Half of the fees will go toward prevention, education, and treatment programs for compulsive gamblers.

Christie has said he hopes to see sports betting by year’s end.

How federal officials will react remains anyone’s guess.

"I don’t think the Obama administration or U.S. Attorney General Eric Holder will do anything," said Schwartz. "I don’t see them sending in the FBI."

Opponents of legalized sports betting include the National Football League, National Basketball Association and other professional sports leagues. They argue that widespread legalized betting would threaten the integrity of their sports by adding incentives to cheat and fix games.

Not that incentives aren’t easy enough to find for those who seek them. According to the American Gaming Association, illegal sports gambling is a more than $300 billion industry nationwide.

And in the current sluggish economy, some American professional and college sports teams seeking to boost revenues have signed marketing deals with casinos. The San Manuel Indian Bingo and Casino, located in Highland about 60 miles east of downtown Los Angeles, is a sponsor of the Los Angeles Dodgers of Major League Baseball.

It’s unclear whether state-approved regulations would help Christie or Brown in California if opponents of sports wagering were to file an injunction to block sports wagers.

Schwartz said legalizing sports wagering in New Jersey is an effort to revitalize a gaming market that has been steadily losing revenue and customers to Pennsylvania, Connecticut and elsewhere since 2006. Gaming analysts estimate that sports betting would bring in annually about $1.3 billion in gross revenues and about $120 million in tax revenues.

New Jersey gaming revenues have declined from $5.3 billion in 2006 to an expected $3.1 billion this year, he said.

"They’ve been hurt by the competition," Schwartz said. "They need to differentiate themselves and give people a reason to drive to Atlantic City. To go there past all these other places with gambling."

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.