Capitol Briefs: Online sports betting companies align with California’s gaming tribes

Two years after California voters rejected online sports betting following an epic and costly ballot box fight, the two major forces at odds over the issue – California’s powerful gaming tribes and online sports betting companies like DraftKings and FanDuel – suddenly find themselves united against a common enemy: so-called gray market “sweepstakes” gambling sites that both camps say are cutting into their profits and undermining legal gaming operations here and across the country.

Jeremy Kudon, president of the Sports Betting Alliance, which represents DraftKings, FanDuel, BetMGM and Fanatics, recently spoke about the issue on the Tribal Gaming Association’s webcast The New Normal, co-hosted by Victor Rocha, a high-profile and outspoken leader in California’s tribal gaming community.

Kudon’s appearance represents just the latest sign that tensions between online gaming operators and California gaming tribes are slowly easing in the wake of the hundreds of millions of dollars spent on 2022’s propositions 26 and 27, which both failed.

Beginning last year, FanDuel made a series of hires strongly suggesting it now wants to work with California’s gaming tribes, not against them.

In October 2023, it hired San Manuel Band of Mission Indians Chief Operating Officer Rikki Tanenbaum as a senior vice president for strategic partnerships. In January, it hired Frank Sizemore, a former San Manuel vice president of operations, as a vice president of strategic partnerships. In February, it convinced E. Sequoyah Simermeyer, the chairman of the federal National Indian Gaming Commission, to resign his office to also take a job as a vice president for strategic partnerships with the company.

Then in April, a humbled Amy Howe, the CEO of FanDuel, appeared at the Indian Gaming Tradeshow & Convention in Anaheim, where she admitted the 2022 initiative battle was a “spectacular failure” and that her side “learned a lot.”

Still, relations remain so frosty between online sports betting companies and California gaming tribes that Rocha told Kudon on the webcast, “I think a lot of people were shocked when I announced that you were going to be our guest this week. I think a lot of people thought that after California 26 and 27 that there would be no way that the East and West shall meet. But yet here we are, aren’t we?”

Rocha, Kudon and webcast co-host Jason Giles, executive director of the Indian Gaming Association, spoke for nearly an hour about the scourge of sweepstakes gaming sites like High 5 Casino and Fliff, which according to them are unlawfully offering sports betting and iGaming to gamblers across the country by marketing their sites as “social” operations – that is, just for fun – but then selling users bonus “sweepstakes” coins that they can wager and exchange for real money.

“It’s more prevalent than any of us fully appreciated,” Kudon said on the webcast. “I think it’s supposed to be right now $2 billion in revenue for these sweepstakes sites. And they’re predicting they’re going to get up to $4 billion by the end of 2025. That’s a lot of money. That is a ton of money. That’s money that could be going to the states. That’s money that could be going to the tribes.”

Rocha, Kudon and Giles all complained that these sweepstakes sites are operating out in the open but are unregulated and untaxed – and therefore unfairly competing with lawful, licensed operations that pay fees and taxes to the government.

“It would be like a speakeasy,” Kudon said. “You go into what looks like a soda shop and then like all of the sudden I like flip this and it becomes an actual bar.”

The trio expressed hope that attorneys general across the country would start cracking down on these unlicensed operators, and that could develop in the weeks and months ahead.

But the biggest news out of the webcast arguably was the online sports betting community’s public display of once again kissing the California gaming tribes’ metaphorical ring after they so soundly defeated them in 2022.

“I was involved in … 27 in California,” Kudon said early in the webcast. “I think our intentions were pure, but we learned a lot from that. And we learned to allow the tribes to lead going forward. … You always look at these things as the worst thing that could ever happen. And I think, ultimately, we’re going to see 27 and the failure of that to be one of the best things to happen. Because we learned how important it is to follow your lead and follow the tribes’ lead and work together and do what we can.

“When you guys are ready to do it, we’re going to be there to help you in any way, shape or form that you think is best. I think there’s a great future there.”

In other words, after California’s gaming tribes thoroughly embarrassed online sports betting companies at the ballot box in 2022, operators like DraftKings and FanDuel are ceding the fate of sports betting in the Golden State to the tribes – and appear to be hoping that their subservience will leave them a seat at the table whenever the tribes decide it’s time to legalize.

Image by Sinenkiy