DraftKings CEO: Legalizing sports betting in California could help the homeless

“Legal online sports betting is expected to bring in hundreds of millions of dollars in state tax revenue each year to address two of the state’s most pressing issues: homelessness and mental health.”

That was DraftKings CEO Jason Robins during the company’s fourth quarter earnings call on Friday, promoting the idea that if sports betting is legalized in California, the tax revenue it brings in could help reduce homelessness and mental health issues in the state.

Here is the full quote:

“In California, we continue to work with a number of leading online sports betting operators to support a campaign to bring regulated, safe and responsible online sports betting to the state,” Robins said. “Legal online sports betting is expected to bring in hundreds of millions of dollars in state tax revenue each year to address two of the state’s most pressing issues: homelessness and mental health.”

States that offer legal wagering have seen their tax revenues increase significantly since they began accepting wagering. For example, New York took in $1.98 billion from bets in its first month of legalized gambling in 2021, generating $70.6 in tax revenue, according to New York Governor Kathy Hochul, a Democrat.

But it’s unclear whether a potential influx of sports betting tax revenue would be used to tackle homelessness in the state, or even be enough to move the needle. California Governor Gavin Newsom, a Democrat, recently announced a $12 billion spending package to address the state’s homelessness crisis.

See also: Baseball commissioner says the stock market is a better investment than owning an MLB team — is he right?

There is currently a proposed ballot initiative in California that would donate 85% of all sports betting tax revenue (which is not yet legal in the state) to homelessness causes. The initiative is supported by several California mayors and has received a total of over $50 million in donations from sports betting operators like DraftKings DKNG,
-21.62%,
the FLTR belonging to Flutter,
-4.40%
FanDuel Corporation and Penn National Gaming PENN,
-4.14%.
To be clear, the initiative is only a proposal and does not yet have the force of law.

The California State Department of Treasury and the California State Department of Finance did not immediately respond to MarketWatch’s request for comment on this story.

In January 2020, California had an estimated 161,548 people homeless every day, according to data reported to the US Department of Housing and Urban Development (HUD). This number represents an increase of approximately 7% over 2019 levels.

This is not the first time that gambling advocates trying to legalize gambling practices have made big promises on social causes to appease lawmakers and voters. In 1984, the California Lottery was created in part “to benefit public education” without raising taxes.

While more money for a state budget is obviously better than less money, the influx of money from the lottery hasn’t solved California’s public education problems. In 2018, for example, the California Lottery sent $1.7 billion to schools across the state, but that money was spread across many schools and only accounted for about 1.5% of the education budget. of the state, according to the Los Angeles Times.

Jack Pitney, a politics professor at Claremont McKenna College, says Californians know homelessness is a complex problem, and the promise that sports betting tax revenue could solve it is not a certainty.

“I wouldn’t take that as a safe bet,” Pitney told The Mercury News.

Ironically, research suggests that someone who is homeless is more likely to have gaming disorder. According to a Springer Nature research paper, the relationship, while correlated, is bidirectional. “Gambling may be a direct cause of homelessness, a secondary contributing factor, or only develop after the individual has become homeless,” the document states.

DraftKings stock fell nearly 20% in the moments after the company’s earnings call, despite revenue growing 46.9% to $473.3 million. DraftKings’ net loss widened to $326.3 million from $242.7 million, while losses per share fell from 69 cents to 80 cents.

DraftKings Inc. is down 51.3% in the past three months, continuing a recent plunge in sports betting stocks, compared to a 7.58% decline for the S&P 500 SPX,
-0.72%
during the same period.

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