After months of speculation, Minnesota lawmakers introduced a sports betting legalization bill in the state House of Representatives earlier this week. Now the proposal begins a difficult trek through the state legislature.
Championed by Rep. Pat Garofalo, HF 1278 would legalize sports betting at the state’s Native American casinos. Now with six additional cosponsors, the bill awaits further action in the House commerce committee, which will likely discuss the measure sometime after it reconvenes next week.
With a rich sporting history and a major population center, Minnesota has been a primary target of gambling industry lobbyists and a hotbed of activity among the more than two dozen states set to take up legalization bills this year.
While the formal introduction of the bill is a landmark first step, major hurdles remain with HF 1278 – and legalized wagering efforts in Minnesota as a whole.
Despite support from several lawmakers, the sports betting bill drew criticism even before it was introduced.
In January the Minnesota Indian Gaming Association publicly came out against any form of legal sports betting legislation. It argued the state should thoroughly review the impact on wagering on sports before proceeding with any bill and reiterated opposition to any form of gaming off federally recognized Native American lands.
In part as a way to appease the MIGA, Garofalo’s bill only permits wagering at tribal casinos. That would give the state’s 11 federally recognized tribes a monopoly on sports wagering in the state, which HF 1278 supporters like Garofalo hope would in turn garner the tribes’ blessing.
The MIGA hasn’t commented publicly since the tribal-only bill was introduced Feb. 18. The organization had not responded for comment at the time of publication.
Though this bill may earn backing from Native American groups, it could anger other would-be sports betting purveyors. The state’s horse tracks and other gaming establishments, as well as possible restaurant or bar partners, would be left out of the revenue potential from sports betting. A Native American-only provision would assuredly draw strong opposition that could derail the bill’s trajectory.
Accessibility is also a concern. The bill wouldn’t allow for online betting outside tribal lands, a measure supported by Native American groups which hope to drive more in-person traffic to their casinos. But this could drastically hinder the pool of would-be players.
Minnesota’s harsh winters and large distances between population centers are among a myriad of factors that could deter travel visits to place a sports bet. That would likely lead players to continue placing illegal wagers with local bookies or through offshore sites. The continued competitive viability of the black market would subsequently hurt the state’s potential tax revenue.
The lack of online options would also anger gaming stakeholders who would be effectively shut out of the Minnesota market, but a push for mobile offerings could also jeopardize relations with the tribes. This creates a delicate balancing act for lawmakers to navigate in order for the bill to advance through the legislature.
Taxation levels, as well as political dynamics, could also further complicate matters in the statehouse.
HF 1278 calls for a 0.5 percent tax on every wager. Supporters say this will keep revenues more consistent as they won’t depend on gambling purveyors holding high margins from players.
Unlike in Minnesota’s proposal, all eight states now taking legal bets tax on net profits, not each bet. Most states tax around 10 percent of winnings.
Since sportsbooks typically net about five percent of total money wagered, the 0.5 percent of gross wagers should create a tax burden fairly similar to the 10 percent of winnings model used in other states. Still, this type of tax structure has never happened before in American sports betting and could be another variable in legalization efforts.
These questions are sure to be discussed in debates within the House commerce committee, where it faces an uncertain fate. Republican representatives like Garofalo have spearheaded sports betting, but the House is controlled by the state’s Democrat-Farmer-Labor Party. There are 12 DFL members in the committee compared to only eight Republicans, including Garofalo.
If the bill passes the DFL-heavy commerce committee, it would then need approval from the whole House, which is also under DFL control. Should the Republican-backed bill overcome partisan divisions, it could face better odds in the GOP-controlled Senate, but it would also need the signature of DFL Gov. Tim Walz to pass into law.
Fortunately for gaming proponents, gambling has tended not to fall along partisan lines in other states, but Minnesota’s divided power structure presents another question mark for sports betting.
As Minnesota weighs these questions, among other key issues, a host of other states nationwide – and in the Midwest- are doing the same.
Despite the obstacles, Minnesota sports betting backers are still optimistic about the prospects of legal wagering, possibly as soon as the end of 2019. Part of the urgency comes from actions across state lines.
Minnesota neighbors North Dakota, South Dakota and Iowa have all planned to take up legal sports betting in 2019. Other states across the Midwest including Illinois, Michigan, Indiana and Ohio are set to do the same.
Regional competition has already helped spark sports betting legalization efforts in the Mid-Atlantic.
Since Delaware and New Jersey took bets in the weeks after the Supreme Court struck down the federal ban, Pennsylvania, West Virginia, the District of Columbia and Rhode Island have all followed suit, with nearly every other state in New England and the Mid-Atlantic expected to consider bills of their own sometime this year.
That domino effect is continuing in the Midwest. It remains to be seen if Minnesota will join the list of states with legal wagering, but the recent introduction of a bill shows the Land of 10,000 Lakes will remain squarely in the conversation.
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