Possible Florida Decision May Pave Way for California Sports Wagering, Suggests Expert
On Monday, the U.S. Supreme Court chose not to take up an argument questioning Florida's decision to let the Seminole Tribe run online sports gambling from their tribal land servers.
This decision from the Supreme Court sets the stage for Hard Rock International, the gaming division of the Seminole Tribe, to maintain a monopoly on online sports betting in the third-largest state until 2051. It could also serve as a model for other states where Native American tribes have control over gambling but don't yet allow online sports betting—like California.
Deutsche Bank analyst, Carlo Santarelli, told his clients today that the Supreme Court's decision not to hear the West Flagler appeal provides a roadmap for California and other states with Native American gaming.
Much like Florida, if the tribes in California can modify the agreement they have with the state, the chances for traditional online gambling operators would remain unclear, according to Santarelli.
He also added that with the Florida ruling serving as a precedent, California tribes could easily revise their gaming agreements with the state instead of getting voter approval through a costly ballot initiative, like they did in 2022. That measure was soundly defeated, and some of the tribes admitted there's limited interest among voters in California to deal with this issue again soon.
Florida Decision Possibly Bad News for Online Sports Betting Operators in California
The Supreme Court's decision not to hear the West Flagler appeal didn't impact sports betting stocks on Monday, as DraftKings (NASDAQ: DKNG) and FanDuel's parent company, Flutter Entertainment (NYSE: FLUT), posted gains on Monday and extended those gains today.
However, this ruling may not bode well for these operators and others when it comes to California. Unlike Florida, California has multiple Native American gaming entities, many of which are large. While the higher number of entities in California might suggest that some would eventually work with out-of-state operators like DraftKings and FanDuel, Santarelli believes this idea "lacks understanding of tribal politics."
Commercial gambling companies already made mistakes in California by backing a 2022 online sports betting ballot initiative without consulting the tribes. The tribes fiercely opposing this proposal, eventually pouring tens of millions of dollars into defeating it.
Even if the California tribes decided to partner with commercial operators, the subsequent financial agreements would likely heavily favor the tribes, meaning the most populous state in the U.S. might not be the lucrative opportunity commercial operators and investors hoped it would be.
“Furthermore, given the sensitivity around the control of gaming in the state, we believe it is naive to expect the tribes to turn over any element of gaming to outside entities, without a substantial and ongoing financial return,” Santarelli concluded.
California and Florida Might Be Off Limits to Commercial Gambling Companies
By deciding not to hear the West Flagler appeal, the Supreme Court effectively confirmed that tribes can offer online sports betting as long as the servers are located on tribal land. This reduces the need for middlemen, and in California, where gaming tribes are politically active, it could be an easy step to amend gaming compacts with the state.
As for Florida, the Seminoles now have control of online sports betting for decades, and the same could be true for online gambling, which may be approved in the state in 2026. Santarelli stated that there are "negligible" opportunities for outside operators to profit in the state.
“In our view, the ruling puts the Seminole Tribe in a dominant position, and they can now operate as they see fit,” concluded the analyst.
In summary, an implication from the Supreme Court's ruling is that California and Florida—the largest and third-largest states, respectively—could effectively be off-limits for commercial gambling companies, and they have little control over the situation.
