Published in cooperation between Cardstudios and San Jose Inside

Gambling in the United States, though popular, is a complicated issue with states granted the autonomy to set their own regulations. In many respects, this is a good thing for states where local governments and consumers are able to explore what is best for them and vote accordingly; however, it has resulted in a fragmented gambling industry across the country.

Utah and Hawaii are the most restrictive states, offering absolutely no gambling markets for consumers. At the other end of the spectrum, Nevada and Louisiana offer a vast array of licensed betting markets, excluding online casino gambling.

Online casino gambling is the most limited betting market in the United States, with only seven states currently offering licensed operations. Despite this, many states are exploring the possibility of legislative change.

As things stand, California is recognized as being one of the more prohibitive states, with many consumers wondering whether change will come to bring it in line with more gambling-friendly states.

California's Current Gambling Environment

California is the largest state in the United States in terms of population, with almost 40 million residents, and has the third largest land mass of more than 155,000 square miles. The state is famous for its incredible beaches, Hollywood, Silicon Valley and countless other sites and attractions that entice more than 250 million annual visitors.

This means California has the potential to become one of the States’ biggest gambling revenue generators. However, its current regulations limit this potential significantly, with the only gambling markets available to consumers including charitable gaming, parimutuel gambling, lotteries, tribal casinos and racetracks. While this might seem like an extensive choice for consumers, bettors are missing out on retail casinos, sports betting and online betting markets.

Online gambling expert Alex Hoffmann has created a California guide to help bettors in the state find the best markets that can be legally accessed, with offshore online betting operations proving popular. While the state does not offer licensed online betting operations, consumers can access international sites, with the best options being licensed in the jurisdictions they operate from.

Bettors can find online casino operations and sportsbooks, with many offering large bonuses and deals for new customers. Players can enjoy secure online betting with a variety of payment methods to suit all preferences.

The offshore online casino industry is especially popular among United States consumers, with online casino opportunities severely limited in the country. California’s tough stance on retail and online casino and sports betting makes it particularly susceptible to offshore marketing.

The tribal casino industry in the state has an annual tax impact of just under $6 billion and supports jobs for more than 184,000 Californians. The 86 tribal casinos are spread throughout the state, with tribal compacts determining tax and payments. Payments are made to either the Special Distribution Fund or the Revenue Sharing Trust Fund.

The Revenue Sharing Trust Fund receives a flat fee of $2 million for deals signed in 2004, while more recent payment models differ by operator and tribe. The Special Distribution Fund is determined by the number of slot machines operating in casinos, and funds generated by this program are used for gambling education and support, to cover state regulatory costs and to cover other costs incurred by the state in direct relation to tribal gaming activities.

While casinos are limited to tribal operations in California, licensed cardrooms are permitted with games like poker, baccarat and more available. Charitable gaming events such as raffles, poker and bingo can operate, but organizations can only run one event per year. Parimutuel wagering in California covers horse racing at tracks including Golden Gate Fields, Cal Expo, Del Mar,  Los Alamitos and Santa Anita.

The California State Lottery has been in operation since 1985, with players able to buy tickets for draw games or play scratchcards.

2022's Failed Proposition 27

Attempts have been made to update gambling legislation in California, with one of the most prominent coming in 2022. Proposition 27 attempted to legalize sports betting in the state, with plans for revenue to support the Homelessness Prevention Fund Initiative. Had the proposition passed, online sports betting would have been introduced in association with existing tribal operations.

Proposition 26 offered similar changes in regards to land-based operations that would have seen tribal casinos and racetracks offering sports betting markets.

It was predicted that the legalization of sports betting in California could produce revenues running into the hundreds of millions, and sports betting platforms would pay a one-off application fee of $10 million while gaming entities would pay $100 million. Suggested taxation on the sports betting industry included a 10 percent tax on winnings paid by bettors and a 10 percent tax on gaming entities.

The majority of funds raised through this would have been distributed to mental health and state housing programs, and a suggestion of 85 percent was floated. Admin costs would also have been covered by sports betting revenue, while 15 percent would have been issued to Californian tribes that don't offer sports betting to go toward local governments, education and infrastructure.

Opponents to the proposition argued that sports wagering rules would be determined without legislative input, and there would be no potential for legislative change after passing. Concerns were also raised that the proposition outlined participants without negotiation and that any plans to raise or lower tax rates would require another electoral vote.

Of the 10,755,548 valid votes cast on Proposition 27, 8,849,206 voted against it, representing an overwhelming 82.28 percent of the electorate. This came as a crushing blow to advocates.

The Future of Gambling in California

The gambling industry’s success in other states serves as an inspiration to those pushing for change in California. Though Proposition 27 failed drastically, it does provide a framework for future propositions.

Looking at the main reasons Proposition 27 was rejected, future propositions will be able to make changes that allow for greater legislative input and the potential for change as markets develop.

The growing popularity of offshore betting sites could have a long-term effect on how states approach future legislative proposals, with consumers now able to access markets regardless of state laws.

Prohibiting operators from setting up licensed sports betting and online betting operations in California limits the protections the state can offer to consumers. Offshore betting sites are licensed in other countries that typically have less restrictive regulations than United States states that allow online operations.

This can cover everything from how sites advertise and incentivise, to how they deal with complaints. The transparency of online betting sites also is an important part of auditing to ensure they are fair, with the potential for offshore operators to bypass some safety precautions that United States operators implement. This is why it is important to find trusted offshore operators, but it also could be a catalyst to spark change in the Californian betting market.

Consumer safety is a massive concern for legislators, but there is also the threat of lost revenue. Bettors spend millions of dollars every year on gambling online, and with no licensed operations in California, that money is moving to other countries.

Future propositions will look to explore the potential revenue being lost and how it could be implemented to improve infrastructure and education.