The vote to legalize sports betting in California this coming November is viewed by many as an ancillary issue—a choice between generating some extra state revenue and opening the door for commercial and tribal sportsbooks or letting things carry on like usual. In reality, though, this vote represents so much more. After all, there are billions of dollars at stake. Yes, billions. Illegal California sports betting is reportedly worth more than $15 billion per year right now. The November vote is the state's chance to secure themselves a massive chunk of a pie that's already being baked.
Will Californians vote to take the plunge? Many believe they will. There is legal sports betting in most of the United States, and as a region that typically skews more liberal, California projects to approve one of two sports betting proposals.
And if we assume legal sports betting is coming to the USA's most prolific market, the question then becomes: How much of that $15-plus-billion-dollar-per-year business will wind up in the state's pocket?
Illegal Sports Betting is Huge in California
Many might be taken aback by the $15 billion figure. We sure were. And it may not be accurate to the cent. But as the Los Angeles Times previously noted, an unpublished study estimated that California residents are already spending $15.7 billion each year by placing bets with friends, bookies or offshore sportsbooks.
When you really think about it, this shouldn't be that much of a shock. California not only has the largest population in the United States by a huge margin, but they also boast one of the most glamorous sports markets in the world, with flagship franchises across the NFL, NBA, MLB, NHL and MLB and even in college football and college basketball.
"But isn't sports betting illegal in California?!?" you might be wondering. Sure, for the time being, Californians aren't technically allowed to place wagers. But that's merely a roadblock. There are plenty of sites that make the cut for our reviews of the top online sportsbooks willing, at this very second, to allow residents of California to sign up for an account and start placing bets. And like the Los Angeles Times mentioned, there are also people wagering with friends or in person with unlicensed bookies.
Access, then, isn't the issue. The real problem, if we're being honest, is all this money gets wagered without California taking a cut. And when you assume the proposed 10 percent tax rate—it can be higher depending on the betting method, as well as the proposal that gets approved—we're talking about tens of millions of dollars in revenue being left on the table.
California Sports Betting Projections Could Actually Underestimate Potential
There is a chance that these illegal sports betting figures are off, and that California actually brings in much less from total wagers if and when the process gets legalized. For starters, all of the money invested in offshore betting won't immediately come stateside. There will still be those who opt to use international operators for a multitude of reasons, including the potential, in some cases, for higher limits and payouts.
California's sports betting revenue also depends on which initiative gets passed. The one backed by the state's federally recognized tribes would limit sports betting to them specifically and disallow online betting. Those restrictions will have a direct impact on the bottom line, since California residents would still have ample reason to continue placing wagers offshore.
On the flip side, California betting projections could also be underestimating the potential revenue. If the sports betting initiative backed by the commercial sportsbooks get passed, most of the illegal wagering should find its way through proper channels, since that bill allows for online betting and kiosks at sports venues, in addition to brick-and-mortar gambling.
What's more, the $15.7 billion estimate doesn't take into account interstate betting. California is within driving distance to multiple states that offer legal sports betting—including Nevada, where the gambling capital of the United States, Las Vegas, is located. It isn't clear how much legal out-of-state betting takes place among residents of California, but the figure could be in the hundreds of millions, if not darn near billions.
Bet on Sports Betting Getting Legalized in California
Even if we used only the $15.7 billion figure as a basis, California still stands to glean a ton of money from sportsbooks if and when they hand out licenses.
Of course, we must remember the $15.7 billion is just the total amount of bets placed. It doesn't account for winning wagers sportsbooks paid out. Still, if we assume that number gets slashed in half, and if we also go off the average tax rate proposed by both California sports betting bills, the state would still be projected to collect $785 million in additional tax revenue each and every year. And once more, this number could feasibly be higher.
Given how much money is at stake, we have know choice but to believe California will embrace open-access sports betting during the 2022 elections. We also believe they'll be bent on getting the sports betting infrastructure up and running by the start of 2023—which is great news for gambling enthusiasts, and perhaps even better news for California's pockets.
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