Taking a Deeper Look at the California Online Sports Betting Initiative

• The proposed license fees for online sportsbook operators are the highest in the country.
• No untethered online sportsbooks will be allowed in California.
• The initiative proposes a 10% tax rate on adjusted gross online sports betting.

After the dust settled yesterday from the bombshell announcement that seven sportsbook giants in the country were supporting a California sports betting initiative for the 2022 general election, details about the proposed online sports betting plan were released after the initiative was officially filed with the state attorney general’s office.

The “California Solutions to Homelessness and Mental Health Support Act” was officially filed with the state attorney general’s office and seeks to allow qualified sportsbook operators to partner with California Tribal Nations to operate online sports betting.  Backed by DraftKings, BetMGM, FanDuel, Fanatics Betting and Gaming, Bally’s Interactive, WynnBET and Penn National Gaming/Barstool Sportsbook through a $100 million contribution, the campaign for the initiative will now ready itself to start collecting verified signatures to officially place the initiative on the 2022 November general election ballot.

Possible 2022 vote?

The 62-page initiative was made available to the public yesterday and offered new details into the proposed online sports betting plan for California, including a high-priced barrier to gain market access into the state.

The California Secretary of State will provide the initiative with a title and summary, which should take place in the next 65 days. Then the backing campaign will begin procuring thousands of needed verified signatures to qualify the initiative to be placed on the November 2022 general election ballot.

It may be a price worth paying, however, as California is home to the fifth largest economy in the world and will likely be one of the largest markets in the country if sports betting is legalized.

DraftKings statement on the 2022 California ballot effort for legalized sports betting from CEO Jason Robins.

"In addition to raising money to tackle California’s homelessness and mental health crises, this initiative will have a special focus on responsible gaming." (cont)

— RLinnehanXL (@RLinnehanXl) August 31, 2021

California Online Sports Betting License Prices

The proposed license fees for online tribal run sportsbook and qualified sportsbook operators are some of the highest in the country, offering a steep entry fee into what will prove to be one of the most successful sports betting markets in the country. A tribal run sportsbook license will cost $10 million for 5 years, while a qualified sportsbook operator license will cost $100 million for 5 years. Renewal fees for tribal licenses are set at $1 million and $10 million for qualified sportsbook operators.

By comparison, a New York online license costs $25 million for 10-years.

While the California license fees are pricy, the proposed tax rate is nominal, at only 10% of the online sports betting operator’s adjusted gross online sports betting revenue.

The initiative allocates 85% of revenue to the California Solutions to Homelessness and Mental Health Support Account, which will help combat homelessness and mental health issues in the state. The additional 15% of revenue will be allocated to the Tribal Economic Development Account, which will provide economic development and assistance to tribes in the state who do not participate in the online sports betting program. There are 104 federally recognized tribes in the state.

This is the third sports betting initiative to be filed in the state. The backers explain the “California Solutions to Homelessness and Mental Health Support Act” will not be in conflict with a Tribal-proposed initiative that has already qualified for the 2022 general election ballot. The Tribal initiative seeks voter approval to legalize in-person sports betting at tribal casinos.