Forbes reported earlier this year that the U.S. sports betting market generated $1 billion in revenue in 2020, and that number is projected to grow sixfold by 2023. | Paul Sancya/AP Photo

OAKLAND Major gambling players intend to ante up $100 million for an online sports betting initiative that would fund homelessness and mental health efforts, adding a new wrinkle to the 2022 battle over California's lucrative gaming future.

Proponents told POLITICO they will file the California Solutions to Homelessness and Mental Health Support Act" today with the state attorney general's office. Top backers include DraftKings, FanDuel and BetMGM, and they will establish a campaign committee today, according to campaign manager Dana Williamson, a veteran political strategist who advised former Gov. Jerry Brown.

Though 21 states plus Puerto Rico and the District of Columbia now allow online sports betting after a 2018 U.S. Supreme Court ruling, the California ballot measure would be the first in the nation to dedicate a permanent revenue stream for homelessness and mental health programs.

Permanent solutions require a permanent funding source. The California Solutions to Homelessness and Mental Health Support Act will raise hundreds of millions of dollars annually to fight homelessness and expand mental health support in California by allowing regulated entities to offer safe, responsible sports betting online," Williamson told POLITICO in a statement.

The potential windfall from such a measure could be huge. Forbes reported earlier this year that the U.S. sports betting market generated $1 billion in revenue in 2020, and that number is projected to grow sixfold by 2023.

Proponents insist the measure does not conflict with a sports-betting initiative backed by California gambling tribes that is already headed for the 2022 ballot. That initiative would allow for in-person sports betting at tribal casinos and racetracks. Backers of the new proposal called their measure "complimentary" to the tribal one.

Any online sports betting operator seeking to participate in the California marketplace must do so by partnering with a California tribe," Williamson said, noting that a portion of the measures revenue is dedicated to uplifting Tribal communities."

Still, the initiative could open a third front in the battle for control of a lucrative new gambling sector. Native American tribes have already donated roughly $12 million to qualify the measure that would give them control over sports wagering. Meanwhile, card rooms have spent $450,000 so far to pass a rival proposition giving them a slice. Tribes and card rooms have long battled over gambling revenue and turf.

Given how many of Newsom's consultants are tied to the new initiative, the effort also risks cleaving Newsom from Native American tribes, one of his most financially powerful supporters. Tribes have channeled more than $3.2 million so far to beating back the recall, accounting for some 5 percent of the roughly $60 million Newsom has raised.

Williamson, who served as Browns cabinet secretary, heads a powerhouse group of California political players hired to get the measure across the finish line. Also involved: Bearstar Strategies, the political consulting team behind Newsom, Kamala Harris, U.S. Sen. Alex Padilla and San Francisco Mayor London Breed, among others. So is Nathan Click, the former communications director for Newsom and current spokesperson for the anti-recall campaign and David Binder, the pollster for Newsom and the presidential campaigns of Barack Obama.

With three separate proposals potentially headed to the ballot, the issue could be resolved next summer in the state Capitol. Lawmakers could craft a compromise measure that would prompt tribes, card rooms, race tracks and the sports betting giants to withdraw their proposals before next fall. But the interest groups have tried for years to get their own versions of bills through the Legislature without success.

It was not immediately clear how the new proposal would divvy up revenues between mental health services, homelessness and tribes that affiliate with online gambling firms.

The initiative calls for 85 percent of total revenue to go to homelessness and mental health, with 15 percent going to tribal communities, proponents say.

Sacramento Mayor Darrell Steinberg said he welcomes the measure. As a Democratic assemblymember, Steinberg spearheaded the 2004 initiative that increased income tax rates on millionaires to pay for mental health services.

It is a rare occasion when any initiative seeks to dedicate hundreds of millions of dollars or more for the cause," he said in an interview. "Funding mental health programs and fighting homelessness is currently subject to the whims of the economy."

Backers could face opposition from those concerned about expanding gambling access in California, as well as gambling interests that get cut out of proceeds. Proponents say the new initiative strictly limits online betting to individuals 21 years of age or older, using the most advanced and proven technology to enforce restrictions, and it imposes fines of up to $100,000 for any operator who knowingly accepts bets from minors."

The initiative also gives the California Department of Justice "broad power to regulate online sports betting in California to ensure there is no corruption or illegal activity in the market," proponents say.

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Sports gambling giants back new online betting initiative in California - POLITICO Magazine