Will Smaller Companies Be Left Out of the California Sports Betting Industry?

Sports betting efforts are moving steadily along in California, with residents possibly able to vote on the option this fall. There are currently four sports betting initiatives on the table in the state, each looking to make the November ballot for consideration. As the efforts ramp up, critics have started to speak out, revealing that the fine print could leave smaller companies left out of the new industry, if sports betting comes to pass in the state.

No Small Companies?

It is expected that sports betting in California could be a multi-billion-dollar business annually. Because of the population and potential revenues, tons of operators want in on the action, both big and small. However, the language within the current sports-betting initiatives could leave smaller businesses unable to offer services.

The way the initiatives are set up, commercial companies can offer services online as well as Native American tribes. However, requirements would make it difficult for smaller companies to get started. Right now, as the measure languages states, companies must pay $100 million in licensing fees to get started. Companies must also have licensing in 10 states or operate in five states and function in 12 casinos.

The fee alone makes it pretty much impossible for startups or smaller companies to get involved. Basically, the measures are setting up existing operators like FanDuel and DraftKings to offer services with no way for anyone else to provide sports betting in the state.

Oklahoma State University professor John Holden is familiar with sports betting, as he studies gambling policy. He commented that it is absolute nonsense as to how the measures are set up. He said:

“I think what’s effectively happening is, basically, the 5 to 10 frontrunners in the market have decided ‘Alright, let’s ensure that there’s no one else who can compete by agreeing to pay these exorbitant license fees.”

The $100 million feel will provide revenues to fund homelessness housing and mental health treatment in the state. It also would provide support for Tribal nations. A spokesperson for one initiative campaign, Nathan Click, said that the market is best served in the state by providing experienced platforms with a proven track record for safe and responsible operation in other markets.

More Details of the Sports Betting Company Backed Initiative

For the measure pushed by companies like BetMGM, DraftKings, and FanDuel, there are several key elements that residents should know about if the initiative makes it to the ballot this fall. First, the sports betting industry would be offered online to players 21 years of age or older. Athletic and some non-athletic events would be offered.

Tribes can offer sports betting online with their name and branding. For tribes, a one-time fee of $10 million is required and a $1 million renewal fee is paid in five-year segments. For companies like FanDuel and DraftKings, they must pay a $100 million licensing fee and a five-year renewal fee of $10 million.

A new division would be created in the Justice Department of the state to regulate online betting. A 10% tax would be set on operators who offer services. Of the amount collected, 15% would go to Native American tribes that do not offer services. If the initiatives are voted on this November and passed into law, California would be one of more than 30 states to offer sports betting in the USA.

It is expected that over $3.5 billion would be collected in net revenues from the industry. It will be interesting to see if any of the initiatives are voted on and how the industry would be set up if it is able to become a reality. Will smaller companies be left out due to high fees or will changes be made to ensure everyone has a fair shot at operating in the state?