A Legislative Path for Sports Betting in California: An Examination of Hotel Employees and the California Supreme Court’s Dueling Interpretations of the Constitutional Ban on ‘Casino-Style’ Gaming

Abstract

This article addresses a timely and important issue of constitutional law in California: namely, does the California Constitution’s prohibition against Nevada-and-New Jersey-style casinos expressed in Article IV, Section 19(e) prevent the California Legislature from authorizing sports betting through a statutory enactment? No prior judicial decision or law review article has directly addressed this issue, which has suddenly become relevant with the demise of the federal ban on state-authorized sports betting and increasing state efforts to legalize sports betting in recent years.

In the aftermath of the 2018 U.S. Supreme Court decision striking down the Professional and Amateur Sports Protection Act on constitutional grounds, close to thirty states have enacted new laws authorizing sports betting. However, California—projected to be the largest market for sports betting in the United States by a considerable margin—is not among this group of first-mover states. While many states have been able to proceed expeditiously, passing statutes following several months of legislative deliberations, California’s expected ascendancy to the U.S. sports betting throne has been delayed due to the widely-held belief that an amendment to the state constitution— accomplished through a ballot measure approved by voters during a statewide general election—is a prerequisite to the legalization of sports betting in California.

This article challenges that premise. Building off this author’s prior testimony before the California Senate and California Assembly Governmental Organization Committees, this article examines the Legislature’s power to authorize sports wagering through the lens of the California Supreme Court’s decision in Hotel Employees & Restaurant Employees Int’l Union v. Davis, 21 Cal.4th 585 (1999), which, to date, is the only judicial decision to break down and interpret the individual component parts of section 19(e)’s declaration that the “[t]he Legislature has no power to authorize, and shall prohibit, casinos of the type currently operating in Nevada and New Jersey.”

In Hotel Employees, the Supreme Court identified two possible ways to interpret that constitutional language—one which is tied to the specific gambling activities that were “unique to or particularly associated with” Nevada and New Jersey casinos in 1984, and the other more broadly referring to all categories of gambling that were banned in California at that time. This Article will examine these seemingly contradictory interpretations as part of a broader inquiry into whether section 19(e) applies to sports wagering. Dissecting the Supreme Court’s dual interpretations of section 19(e) in light of: (1) the facts of Hotel Employees and well-established principles of constitutional interpretation recognized by the California Supreme Court (including the substantial deference that must be shown to the legislative interpretation of a constitutional provision that is capable of several interpretations); (2) subsequent decisional law equating section 19(e) with a ban on “casino-style” gaming; and (3) the material differences between sports betting and casino-style gaming—both in terms of their essential characteristics and treatment under the law—this Article ultimately concludes that section 19(e)’s ban on casino-style gaming is not a barrier or obstacle to the legislative authorization of sports betting.

Keywords: sports betting, sports wagering, sports gambling, sports law, casino gambling, casino-style gaming, casino-style gambling, ballot measures, ballot initiatives, Indian gaming, IGRA, tribal casinos, California Constitution, California Legislature, slot machines, roulette, keno, Wire Act

JEL Classification: K10, K14, K19, K20, K23, K29, K00, K3, K29, K30, K42, K49, L83