Minnesota Sports Betting Bill Surfaces, But Legislature, Tribes May Not Play Ball

Posted on: January 29, 2021, 06:41h. 

Last updated on: January 29, 2021, 02:18h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

Minnesota’s sports betting bill arrived at the legislature in Saint Paul Thursday, as had been widely anticipated. The bipartisan legislation would legalize sportsbooks in the state, initially in the land-based casinos and racetracks. Then it would eventually move online but through those casinos only.

minnesota sports betting
Vikings fans, like the ones seen at a game here, look like they might be ready for Minnesota sports betting, but tribal operators aren’t so sure. (Image: MLive.com)

The bill was introduced by State Sen. Karla Bigham (D-Cottage Grove) and State Rep. Pat Garofalo (R-Farmington). They told local ABC affiliate WDIO Thursday that the bill would establish consumer protections and would be good for the regional economy.

“We have a lot of sporting events that are hosted here in Minnesota,” Bigham said. “The Super Bowl, the NFL draft maybe, the NCAA tournaments, different things like that. This would enhance the consumer experience in that and drive economic activity.”

“The important thing is to let Minnesotans do legally what they are already doing underground, and that is to have a safe and regulated sports gambling market in Minnesota,” Garofalo said.

Onerous Tax on Handle

The bill proposes a “six percent tax on wagers at a casino or racetrack,” and an “eight percent tax on wagers placed online.” This appears to propose taxing a sports book’s handle, rather than its gross gaming revenue, as is standard in the industry.

If that’s the case, it would be excessive. Sportsbooks’ hold percentage (the percentage of the handle they keep after winnings are paid out) is typically between 5 and 10 percent. They could see the entirety of their gross gaming revenues swallowed up by tax, leaving them with nothing.

The alternative would be to raise their hold percentage by increasing the vig, which would mean offering uncompetitive odds. That would be bad for the Minnesota consumer, although possibly a very good thing for Iowa’s sports betting markets.  

Perhaps fortunately, then, the bill in its current form looks like a heavy lift. Despite Gov. Tim Walz’s assurances that he is “open to the possibility” of sports betting, Senate Majority Leader Paul Gazelka (R) was less optimistic this week.

“Any major policy item that has a lot of disagreement I don’t foresee happening this year. But in addition, many of us just don’t think it’s the right thing to do for Minnesota,” Gazelka said.

Tribes Don’t Want Minnesota Sports betting 

And then there are the state’s 11 federally recognized tribes, who between them control 21 casinos. In 2019, the tribes said they did not want sports betting in their casinos and would actively oppose any legislative effort to introduce it.

That’s because they’re pretty happy with the status quo. Minnesota tribes were some of the first in the US to negotiate compacts with their state following the passage of the Indian Gaming Regulation Act (IGRA) in 1988. And unlike others, Minnesota’s tribal operators do not contribute a portion of their revenues to state coffers.

State lawmakers would like them to, though, and so the tribes are mistrustful of any initiative that might bring them within 20 miles of a negotiating table.

With no revenue-share payments to threaten to withhold, the tribes may have a sweet deal. But they also have less leverage in their negotiations than those in other states.   

IGRA is a federal law that only permits tribal gaming on sovereign reservations. And so, for the tribes to offer sports betting, it would likely require some form of renegotiation of their compacts with the state, which would then need to be signed off by the Interior Department.

The tribes would rather not go there. And with the regular legislative session due to finish at the end of May, the bill’s backers will have a lot of convincing to do over the next four months.