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Why the long-discussed but never-adopted sports betting bill might finally pass (and one reason why it might not)

Minnesota could be the next state to legalize sports betting on mobile devices and in casinos, but only if there are enough votes to maintain tribal exclusivity on gambling in the state.

State Sen. Matt Klein, and state Reps. Zack Stephenson and Carlie Kotyza-Witthuhn at a Tuesday press conference announcing the sports betting bill.
State Sen. Matt Klein, and state Reps. Zack Stephenson and Carlie Kotyza-Witthuhn at a Tuesday press conference announcing the sports betting bill.
MinnPost photo by Peter Callaghan

A bill that would legalize sports betting and give all of the action to the 11 Native American tribes with casinos in Minnesota will begin its journey through the Legislature next week.

The bill reflects the DFL’s approach to gambling: “We have had a system of tribal exclusivity around gambling for 30 years, and it’s worked well,” House Commerce Committee chair Zack Stephenson, DFL-Coon Rapids, said Tuesday in announcing the bill.

Under House File 2000 and Senate File 1949, those tribes will be allowed to apply for licenses to offer sports betting and to contract with third parties — likely the big national sports books like FanDuel, BetMGM and DraftKings — to offer the games on mobile devices. The tribes can have physical sports books at their casinos but no other brick and mortar betting parlors will be allowed. That notably leaves out the two horse racing tracks in the state that offer some casino gambling — Running Aces in Columbus and Canterbury Park in Shakopee.

The state would collect a 10% tax on revenue for mobile betting but collect no taxes on betting that takes place at casinos. That relatively low tax would produce between $12 million and $15 million a year with proceeds going to problem gambling help and youth sports, particularly in areas with high rates of juvenile crime.

Minnesotans currently can’t gamble unless they go to a casino, so allowing mobile sports betting in the state would be a major change.

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The 43-page bill regulates what can and can’t be bet on, the types of bets allowed, who can and can’t wager, how betting is advertised, requirements for integrity monitoring and a ban on push notifications.

So hasn’t the Legislature been down this path before? The first bills were introduced in 2019, the year after the U.S. Supreme Court struck down a federal law limiting sports betting to Nevada. States can decide, a 6-3 court majority stated in Murphy v. NCAA. Since then, nearly two-thirds of states and Washington, D.C., have legalized some form of sports betting. Just this week, a federal court rejected a challenge of tribal exclusivity in Washington state brought by commercial gambling interests.

Legalized sports betting has failed in Minnesota, though, first awaiting buy-in from the state’s tribes, and then over a dispute about whether tribes would hold the monopoly or whether the two horse tracks — or even the major league teams — would have the authority to offer betting.

So why might 2023 be different? 

The 2022 election

Sports betting is not a clean, partisan issue. Many Republicans support sports betting and some DFLers oppose it. But there is a clear difference between the parties over tribal exclusivity. It’s what has snuffed out any deals in the past because DFLers controlled the House and the GOP controlled the Senate.

The political landscape is different now. On Nov. 8, the DFL — surprisingly — held onto the House and eked out a one-vote majority in the Senate. That weakened the GOP hand and allowed the DFL to move ahead with its approach. 

This is another of those mythical peace-in-the-valley deals that legislators often dream about. If only the disparate parties can work out their disagreements among themselves, then lawmakers don’t have to choose among friends, some politicians say. With the tribes and sports teams now supporting a bill, the Legislature can move ahead.

But as with the alcohol reforms of last year, it is easier to find peace in the valley if you limit who gets to enter the valley. In alcohol talks, the grocery stores were excluded from the talks and the bill. Here, the tracks were left out.

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The tribes are fully on board (and excited, even)

The state’s tribes are reluctant to say much publicly about their needs and demands. Gambling is no exception, except for one fundamental premise: Tribes should be the only entity to offer gambling, and that opening up too much to commercial gambling threatens the financial lifeblood of tribal economies.

In an interview last summer, Bemidji State University professor — and author of the book “Everything You Wanted To Know About Indians But Were Afraid To Ask — Anton Treuer said there is a difference between the economic impact of casinos in states where they have exclusivity and states where they do not.

“In 1990, before gaming exploded across the state, unemployment in tribal communities was around 50 percent,” he said. It has now fallen to 20 percent in Minnesota but remains at 50 percent in South Dakota. “And that’s because South Dakota already had legalized statewide gaming. Anybody who’s got better financing and better geography is going to have a more profitable casino.

“Would you rather drive to a rural reservation to gamble, or would you rather go down the block?” Treuer asked. “(The tribes’) advantage in gambling really happens not because of their better geography but because of their monopoly due to the legal structure of state gaming.”

A New York Times examination this year noted the decline in finances for tribes in states that added commercial sports betting or made it difficult for tribes to offer mobile betting off reservation.

On Tuesday, the Minnesota Indian Gaming Association offered its lengthiest and most-effusive words on the issue. In letters to Stephenson and Sen. Matt Klein, the Senate Commerce Committee chair, association executive director Andy Platto, supported their bills as drafted.

“Were your bill to become law, MIGA Tribes believe the resulting mobile and retail markets operated by Minnesota Tribal Nations would not only support Tribes, but would also provide a well-regulated and accessible market for the state’s sportsbettors and a competitive market that is important to our state’s professional sports team and market partners,” Platto wrote.

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Professional sports teams are there as well, with a few demands

The same day the tribes released their letter, a joint letter from six of the state’s professional sports franchises, offered their own support.

“As you know, the Tribes and Teams have worked together for many months to find alignment on a bill that will create a vibrant market while providing for consumer protections,” wrote the top executives of the Lynx, Timberwolves, Twins, Vikings, Wild and Loons. One difference from the House bill last year is there will be more licenses for tribes and opportunities for multiple sports books to operate in the state.

Teams get no direct revenue from sports betting. They do, however, get money from sponsorships and advertising with the big national betting companies. The American Gaming Association estimates that the four biggest leagues received $4.2 billion a year in income related to sports betting. There are no so-called “integrity fees,” or direct shares of sports betting profits, which some leagues have demanded in other states,

But the teams also made a demand: If the state lets other non-tribal entities in on the action, they want in, too. That is, if the tracks get a piece, the teams want a piece.

“You have to think about that if we’re going to go beyond tribal exclusivity, it’s not just a question of the tracks,” Stephenson said. “There are other stakeholders who would want licenses, and expanding gambling to that level probably is the area that would give a lot of legislators in both parties significant concerns.”

Gov. Walz appears to be OK with it

The equation for success in the Minnesota Legislature is 67+34+1. Bills need 67 votes in the House, 34 in the Senate and the signature of the governor to become law. That makes Walz’s support critical, because sports betting will hardly have a veto-proof majority if and when it passes.

Walz has said throughout that he is OK with adults making choices when it comes to recreational marijuana and sports betting. With the latter, however, he has made one demand: Make sure the tribes are on board. That suggests that even had there been votes for a Senate GOP proposal last year that included the tracks, he would have vetoed it. There weren’t Senate votes for that plan last year and there won’t be this year, either.

If it gets to Walz clean, he’s expected to sign it.

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“I look forward to seeing this bill move through the Legislature,” Walz said this week.

But are there really enough votes in the Senate?

A few weeks ago, former Senate Majority Leader Jeremy Miller unveiled his own bill that would share the sports betting market with both the tribes and the two tracks. Republicans have expressed sympathy for the tracks, which have struggled to be profitable, something that might get worse now that a 10-year marketing deal between Canterbury and the Shakopee Mdewakanton Sioux Community has expired.

Miller, R-Winona, said he didn’t think the DFL had 34 votes on its own to pass a bill.  Some DFL members oppose expansion of gambling at all, fearing that the ill-effects will fall disproportionately on low-income residents and among communities of color. But to gather enough GOP votes to replace those senators would require help for horse racing, Miller said.

“I don’t believe tribal exclusivity without something for the tracks has the votes to pass in the Senate,” Miller said Tuesday. “I could be wrong.” 

“We have two of the three major stakeholders that have an agreement,” Miller said Tuesday. “Now we just have to figure out a way to work in the race tracks. We’re not there yet but I’m optimistic we can get it done this year.”

Rep. Pat Garofalo, R-Farmington, was the first state legislator to announce his support for sports gambling, coming out shortly after the decision in Murphy v. NCAA. While he called the Stephenson-Klein bills “an important first step” toward legalizing sports betting, he said it has a major flaw.

“While I am encouraged by today’s developments, it is important that the concerns of all stakeholders, including horse racing tracks, are addressed as we move forward on this historic legislation,” Garofalo said.

But the bill also lacks any financial help for the tracks, perhaps by expanding their menu of table games. While some tribes would like to amend their compacts to permit additional games, there is no unanimity if it would also expand off-reservation commercial gambling,

Klein said he was confident it would pass but couldn’t provide a head count of yes votes.

“In conversations I’ve had with Democrats and Republicans, there is a great deal of enthusiasm about this bill, particularly about tribal exclusivity and the support that it will generate for tribes in Minnesota,” said the Mendota Heights DFLer. “I think his whip count might be off and I think we’re going to do very well.” But Klein added, “I can’t say I have 34 votes today.”