Uh, this would be true of many states but not of states like CA/TX/FL.
There would absolutely be demand for a CA-only athletic organization.
There's a reason California did this and not, say, Alaska (no offense to Alaska of course).
One of the foundational reasons that the WWF / WWE became the dominant power in the wrestling market is that they were the first to ignore regional barriers.
Rinse, repeat.
Er, we're talking about them right now. College sports are extremely regional but still have significant national appeal. Many, many people tune into SEC conference games who have no connection to the SEC.
If you think people wouldn't watch an SEC-only league (I'm using the SEC here because it's the most obvious example), then I think that betrays your knowledge of college sports.
[0] admittedly, minor confused conferences like Conference USA and Big 12 stretch the definition a little bit, but they're still essentially regional.