California handling a potential $30bn sports wagering holy grail

Should votes in the state of California approve online and real sports betting later this year it will open the door to a market that has the potential to generate more than $30bn in wagers annually, according to projections from PlayCA.com.

The California assembly took a significant step towards legalisation in the Golden State last week by adding implementation details to ACA 16 and SCA 6. 

The new language in the bills, which were originally introduced in June 2019 by Senator Bill Dodd and Assemblymember Adam Gray, would amend the state constitution to authorise the activity at the state’s tribal casinos and racetracks if approved by voters, but not at its cardrooms.

Furthermore, a tax rate of 10 per cent on gross revenue for in-person wagering and a 15 per cent tax for mobile or online wagering would be set, as well as imposed taxes on the platform operators rather than directly by the tribes, which would be done to avoid sovereignty issues.

By comparison, New Jersey, the nation’s largest online sports betting market, levies a 13 per cent tax on online sports betting revenue and 9.75 per cent tax on revenue from retail sportsbooks. By contract, Pennsylvania levies a 36 per cent rate, by far the highest in the nation.

With this in mind, analysts stipulate that the region could generate $240m in operator revenue and $36m in state taxes annually from online sports betting and another $60m in operator revenue and $6m in taxes a year from in-person betting, according to PlayCA.com estimates. Those wagers would generate in the region of $2m in operator revenue and $300m in state taxes per year.

“California is the holy grail of sports betting markets, and not just because of its sheer size,” said Dustin Gouker, chief analyst for PlayCA.com. “It appears that legislators are working to put in place a structure that will make California uniquely attractive to every major operator.

“And because it has the potential to be the largest legal sports betting market in the US, ultimately it represents a seismic shift in the industry.

“The tax rates are fair for both operators and the state, and would be competitive with many of the states that have already legalised sports betting. 

“The rate certainly won’t scare off sportsbook operators, who are all eager to enter California. This balanced approach should help the market ramp-up quickly once the industry launches, which is ideal considering California’s budget crunch.”

The state assembly and senate still must approve the bill, which must then be signed by Governor Gavin Newsom before it can make its way to ballots this fall. 

“The structure of these bills seems sound, and it should help the state eventually realise its revenue goals to the benefit of all of California,” Gouker said. “As for the gaming industry, if sports betting is approved by voters, it stands to change the face of sports betting across the country.”