Sports wagering approved for Del Mar Fairgrounds, but don’t place that bet yet

Sports enthusiasts could be able to bet on the Padres and even SDSU Aztecs games at the Del Mar Fairgrounds as soon as 2023.

The 22nd District Agricultural Association board of directors, which runs the fairgrounds, agreed unanimously last week to allow wagering on professional and collegiate sporting events, but only if California voters approve it on the November 2022 ballot.

“Del Mar is the only fairgrounds in the state that would receive revenue from sports wagering under this ballot initiative,” said Josh Rubinstein, president and chief operating officer of the Del Mar Thoroughbred Club, at the 22nd DAA’s board of directors meeting Tuesday.

The situation in Del Mar is unique because of the special relationship between the 22nd DAA and the Thoroughbred Club, which leases the racetrack, the viewing stands and related properties from the district.

A U.S. Supreme Court ruling in 2018 paved the way for states to legalize sports betting when it found that a 25-year-old law prohibiting the action outside Nevada was unconstitutional. Since then, more than 20 states have legalized wagering on professional and collegiate sports and many are collecting significant tax revenue on it. Several more states are expected to start in the next year or two.

“If the citizens of California do not legalize sports wagering, then everything we are talking about goes out the window,” Rubinstein said.

The ballot initiative written by Native American tribes would authorize sports bets at Native American gaming casinos and at authorized horse-racing tracks in four counties — Alameda, Los Angeles, Orange and San Diego.

Revenue would primarily come from a $2 million increase in the annual rent that the Thoroughbred Club pays to the fairgrounds to host the annual racing meets, but also from related things such as food and beverage sales operated by the fairgrounds. The Thoroughbred Club, which is a separate entity from the fairgrounds, would hire the sports book operator and oversee the partnership.

No one at the board meeting argued against sports wagering, though people there often object to horse racing in general. Some speakers said the directors should hold out for a bigger slice of the profits.

Sports wagering could bring in billions of dollars for California, said Lori Saldana, a former state Assembly member from San Diego.

“You should be insulted by the $2 million,” Saldana said. “It’s a lowball offer. Please do not accept these financial agreements ... you don’t have to be in a rush.”

However, fairgrounds officials said time is a factor. There are only a handful of qualified operators in the country and without a deal Del Mar could lose out if those operators sign contracts elsewhere.

Board President Richard Valdez and some of the directors said the financial arrangement was reasonable and that it could be renegotiated if the venture proves successful.

“We do have to acknowledge that horse racing in general, nationally, has been in decline,” said Director Fred Schenk, adding that new sources of revenue are needed.

Also, Schenk noted, “for the first time in a long time,” no one at the board meeting argued against wagering.

“It was, ‘Get more, not less,” he said. “I’m not sensing a lot of opposition.”

The agreement to host the wagering operation is subject to a number of conditions, Rubinstein said. One is that the track club must contract with a “top tier partner” to run the wagering.

The operator would conduct the wagering in the Del Mar Saddle Club, a part of the Surfside Race Place that was used for off-track betting on horse races run elsewhere in the United States and around the world. The Saddle Club is an area of the Race Place excluded from the recent renovation that converted much of the facility into a concert and events center.

“The Saddle Club is a great space, but it hasn’t been used in several years,” Rubinstein said. “It’s got great bones, but it needs new carpet, TVs and paintings on the walls.”

All the necessary improvements will be paid for by the operator, he said.

Fair board directors have discussed the idea of sports wagering several times since 2018, but took no action until now. The advent of the COVID-19 pandemic in 2020 canceled the fairgrounds’ largest money-making events, including the 2020 San Diego County Fair.

The resulting financial slide led to layoffs for more than one-third of the fairgrounds’ staff of 158 full-time employees in October 2020. This year there was a scaled-back version of the county fair, as larger events begin to return, but the agricultural district continues to face economic troubles.

“We’ve been struggling here,” said Director Lisa Barkett, who advocated for approval without delay. “Competition is going to be tough, and we lose out if we wait.”

New Jersey has the country’s largest sports betting market and collected $49.4 million in new tax revenue in 2020, according to the National Conference of State Legislatures. Pennsylvania was second with $38.7 million in revenue.

The tribal-organized Coalition to Authorize Regulated Sports Wagering has spent nearly $12 million so far on the California ballot initiative, according to the industry magazine Gaming Today.

One of the top contributors to the campaign is the Pechanga Band of Luiseno Mission Indians, which operates the Pechanga Resort & Casino near Temecula.

“Californians should have the choice to participate in sports wagering at highly regulated, safe and experienced gaming locations,” said Mark Macarro, chairman of the Pechanga Band, in the ballot argument for the initiative. He called it “an incremental but important step toward giving Californians the freedom to participate in this new activity in a responsible manner.”

A group of card clubs including the Bicycle Casino in Bell Gardens and the Hollywood Park Casino in Inglewood are fighting the initiative with a group called No On the Gambling Power Grab.

“This initiative does nothing to advance sports wagering, and instead expands the tribal casinos’ tax-free monopoly on gaming and rewards those operators for prioritizing their own wealth over public health and safety,” said Kyle Kirkland, president of the California Gaming Association, in the opposing argument for the ballot.

California voters first authorized tribal casino gambling with a ballot proposition in 1998.