Vice went one for two at the Minnesota Legislature Thursday.
A conference committee trying to reconcile differences between House and Senate versions of liquor law changes produced an agreement that included much of what craft brewers and distillers wanted. “For the first time in two years, the brewers of Minnesota are wearing a smile,” said Bob Galligan, the legislative director for the Minnesota Craft Brewers Guild.
The same day, however, a bill to legalize sports betting approved by a key Senate committee moved in a different direction from the House version. While the DFL-controlled House bill gives most of the sports betting action to the state’s 11 recognized Indian tribes, the GOP-controlled Senate bill includes the two horse tracks.
Not including the tracks in the bill would keep the Senate from approving it; not preserving tribal control of gambling in Minnesota would keep the House — and Gov. Tim Walz — from doing so.
House Commerce Committee Chair Zack Stephenson, a Coon Rapids DFLer, has been in the middle of both issues as prime sponsor of both the sports betting bill and the liquor regulation bill. It was Stephenson who prodded the liquor industry to reach a deal — the so-called “peace-in-the-valley agreement” — and bring it back to the Legislature. He also brought the tribes into agreement on sports betting, despite tribal leaders previously having little interest in it.
Stephenson said Thursday he is not giving up on gambling and is ecstatic about the liquor law changes. “This is a very good deal,” Stephenson said of the liquor bill. “This is a bill that gives a real shot in the arm to the craft industry in Minnesota. It is what Minnesotans have been asking us to do in terms of modernizing our liquor laws. It’s been nine months and we are at the doorstep.”
His counterpart in the Senate — Commerce Committee Chair Gary Dahms — is not considered someone who has been enthusiastic about expanding access to liquor. But the Redwood Falls Republican has also said he would consider changes that come with broad agreement.
What it would mean for brewers — and consumers
Under the deal, larger Minnesota brewers that had grown too large to be allowed to sell growlers (64-ounce jugs) and crowlers (32-ounce cans) under current state law — Surly, Summit, Fulton, Castle Danger and Schells — will once again be able to do so. Smaller and medium-sized brewers will also be allowed to sell their beer in bottles and cans, something they have been pleading to do for several years.
And small distillers will no longer be relegated to small bottles and will be permitted to sell in standard 750-milliliter bottles.
Letting an alcohol producer sell their products was a big change from the state’s historical regulation scheme known as the three-tier system. A product of post-Prohibition laws across the U.S., it required that production, distribution and retail be in separate hands so none could dominate the industry as happened in the early decades of the 20th Century.
When craft brewers were finally allowed to sell growlers — in 2011 under the so-called Surly Bill — they were required to forfeit that right when they grew larger, which was measured by producing 20,000 barrels a year.
But brewers said they still needed the revenue after reaching that size — and that customers expected to be able to take home their favorite beers when the visited the breweries.
“We’ve been fighting for almost eight years to free the growler,” said Sen. Karin Housley, a Stillwater Republican who has been pushing for changes. “I’m so glad all the stakeholders finally came together and we can get that signed off and make it one of our successes this session.”
Rep. Jim Nash, R-Waconia, has also been advocating for the new provisions. “The big winners here are the manufacturers of craft beverages in Minnesota, who will finally be on an equal footing with neighboring states.”
To say the conference committee reconciled differences between House and Senate versions is only true in a technical sense. The House bill (House File 2767) contained all of the changes that emerged from the agreement among most of the industry’s players: brewers and distillers, private and municipal liquor stores, alcohol wholesalers and the Teamsters Union, which represents the drivers who deliver beer, wine and distilled spirits.
An informal part of the agreement was that none of these players would seek additional changes to the state’s liquor laws for at least five years. That brought comfort to liquor stores and others that they would not have to fend off two potential changes they oppose: beer and wine inside grocery and convenience stores and an end to the rule that limits liquor store owners to having one store per city.
The Senate Bill (Senate File 3008) had none of these changes. Instead it altered what is known as the Coleman Act by saying that alcohol producers can no longer have exclusive distribution deals with wholesalers. Exclusive deals tended to favor the larger distributors and has long been a complaint of smaller operations.
The House pushed the issue to conference by slapping HF 2767 onto SF 3008 and requesting a conference. The Coleman Act amendment is in the final deal.
No Liquor Advisory Council
The major concession made by Stephenson was to jettison something called the Liquor Advisory Council, which he created to formalize the industry negotiations that led to this deal. Under the bill language, the council would consider liquor law changes and recommend them to lawmakers. Any segment of the industry, however, had the ability to veto any agreement.
At first, the council excluded grocery and convenience stores from the board. Even after the agreement was changed to add one representative from the retailers (the other sectors would have two votes each), they still opposed it.
The Liquor Advisory Council did not survive the conference committee. One reason was because of a draft legal agreement that circulated around the capitol earlier in session. That document appeared to bind the brewers, distillers, wineries, liquor stores, distributors and Teamsters to an enforcement agreement not to lobby for changes for five years.
Those players denied that a contract was being contemplated, since it wouldn’t be needed if the same players have a verbal agreement not to push for changes. And if they are united against a bill, it would be hard for lawmakers to push back; all of the legislators have small liquor stores in their district, and many have breweries or distilleries that have become popular gathering spots.
However, House Minority Leader Kurt Daudt, a Crown Republican who is in line to return to the Speaker of the House role if the GOP wins the House this fall, has said he will push for grocery store beer and wine sales regardless of the industry agreement.
Currently, grocery and convenience stores can sell beer, but it can only have lower-alcohol content: 3.2 percent alcohol by weight or 4 percent alcohol by volume.
Long odds for gambling bill
Minnesota and other states have had the ability to legalize sports betting since 2018, when a U.S. Supreme Court struck down a federal law that banned the practice everywhere but Nevada. Since then, 28 states have legalized some form of betting.
Sen. Roger Chamberlain, R-Lino Lakes, said the bill he got through the Senate Finance Committee Thursday, is one that can pass the Senate. He said the sports betting bills in the House and in the Senate are mostly the same “except for one major area.” That area is how it treats the two race tracks, Canterbury Park in Shakopee and Running Aces in Columbus.
“If they’re not willing to move on it, it won’t move, it won’t go anywhere,” Chamberlain said of the House DFL and Minnesota’s Native American tribes. He said consumers should have more than one or two options for where to bet.
And the tribes are not willing to move. Nine of the 10 tribes with gambling operations support the House version, which would not allow the tracks to operate sports betting operations. But in a letter to the Finance Committee, the Minnesota Indian Gaming Association (MIGA) said it will oppose the Senate version, which does give tracks the chance to get in on sports betting: “tribal gaming has an unblemished reputation and expertise in conducting gambling and thus entrusts tribes to exclusively operate as sports betting license holders,” wrote Executive Director Andy Platto. “But to be clear, MIGA has consistently opposed the expansion of non-tribal commercial gaming and will continue to do so. This opposition seeks to protect the gaming industry that today serves as the essential tax base tribal governments and communities rely on.”
The gambling compact Minnesota has with the tribes — a requirement of the national Indian Gaming Regulatory Act — does not grant them exclusive gambling rights, nor does it include any revenue sharing with the state. But the tribes in fact have a monopoly because of their political clout, primarily but not exclusively due to support from DFL lawmakers and governors.
“We need to have a conversation about what is possible,” Stephenson said. “I’ve never drawn any lines in the sand. I would need to talk to them and I would need to talk to the tribes and other stakeholders and see where we’re at.”
It is likely that any legal sports betting would contract with one of the three national companies, Fan Duel, DraftKings or Bet MGM, which have been lobbying the issue in St. Paul. Both the House and Senate bills would allow both on-site betting at casinos and via mobile apps. In legal sports betting states, most of the action comes via mobile apps.
Chamberlain said his bill would not produce significant revenue for the state, no more than $20 million a year. He said he doesn’t support it as a revenue source but to bring what is already happening illegally under the regulation of the state.
His bill would split the revenue among existing charitable gambling organizations who might lose revenue, promotion of big sports events like the Super Bowl and the men’s and women’s NCAA Final Four and for mental health needs, including problem gambling.