Minnesota lawmakers continue to tinker with and advance legal sports betting legislation, but time is limited, and those tweaks may not be enough to win over doubters and may even prompt pushback from supporters.
The Minnesota Senate Taxes Committee approved an amended version of SF 1949 on Thursday and referred it to the chamber’s finance committee.
Senate File 1949 is a companion bill to House File 2000, and both measures would authorize retail and online sports betting in Minnesota, which remains one of a shrinking number of states without any authorized forms of event wagering.
Both bills would also put Minnesota’s federally recognized Native American tribes in the driver’s seat. Mobile sports betting licenses would be reserved for the 11 tribes, who could partner with operators such as DraftKings or FanDuel and open brick-and-mortar sportsbooks at their casinos.
Tax and spend
S.F. 1949 was amended by the taxes committee on Thursday, including a doubling of its proposed tax rate for mobile sports wagering to 20% from the previous 10% (wagering that occurs on tribal lands is not subject to state taxes). One of the sponsors of the bill, DFL Sen. Matt Klein, said this was because they felt the 10% rate was “insufficient.”
Other changes to the bill look like they are trying to win over groups who may be concerned about legal sports betting in Minnesota.
The tweaks include a requirement for payments to various charitable gambling groups (such as the Veterans of Foreign Wars), which might be affected financially if there is legal competition for their pull-tab, raffle, and bingo games. Those groups would receive 20% of revenue raised through legal sports betting in Minnesota.
“There's a great deal of anxiety among folks who do that work in our communities,” DFL Sen. Aric Putnam said during Thursday’s committee. “And this is our opportunity to appease that anxiety and enable the continuation of that good work.”
Off to the races
S.F. 1949 would now provide 5% of the revenue earned by the state to the Minnesota Racing Commission for grants to licensed racetracks. The role of those tracks in a sports betting scheme has been a long-running point of contention in Minnesota and helped sink previous attempts at legalization.
Another 15% of revenue raised would fund grants for Minnesota Sports and Events, 10% would go toward problem gambling programs, and 5% would be set aside for grants to the Minnesota State High School League. The remaining 45% would flow to the general fund.
Another change is a win for sportsbook operators, as it would remove promotional credits and free bets provided to customers from taxable revenue until 2028, at which point the deduction limits would fall by 25 percentage points every year until they hit zero in 2031.
“They are tax-exempt, and in the argument of the industry, that's because really no money has changed hands,” Klein said Thursday. “If you take $20 of that credit and spend it wagering, you haven't given any money to the platform or to the license holder. In addition, the industry argues that these are important to sort of cultivate people who are currently participating in the illicit market over to the legal market, they sort of have to have an incentive to move over.”
Promo problems
It was clear, however, that there is still work to do before any sports betting bill is signed by Gov. Tim Walz, a supporter of legal wagering. Notably, senators recently stripped in-game wagering from the bill, which may not sit well with some lawmakers and the industry.
The loss of in-play betting contributed to a drop in projected tax revenue from legal sports betting under S.F. 1949. Rather than the previous forecast of around $40 million per year for the state, the expectation is now for approximately $18 million, even with the higher tax rate.
“I will say the significant impact that prohibiting in-game wagering has had on revenues creates some difficulties for our stakeholders,” Klein said on Thursday. “And in particular, I think the license holders, the tribes, looking at how much revenue has been lost and how diminished the value of these licenses will be, will have some concerns about that provision going forward.”
The Democratic-Farmer-Labor Party (DFL) has a majority in both chambers of the Minnesota legislature, but not all members may be on board with the push for legalization. DFL Sen. Senator D. Scott Dibble, for instance, moved several of his own proposed amendments during the committee meeting, including one aimed at the treatment of promo credits.
“This means the taxpayers, the public, is paying for the promotional activities of the industry to establish itself and hook people on this addictive behavior,” Dibble said.
Time is of the essence
While those amendments were defeated, time is running out. Committees in both chambers must give the nod to any sports betting-related bill by Friday, March 22. The Minnesota legislature must finish all of its work for this year’s regularly scheduled session by May 20.
There are also several religious recesses on the horizon. An Easter break will start on March 27 until noon on April 2, followed by an Eid recess from April 9 to April 11 and a Passover adjournment from April 22 to noon on April 24.
The pressure on Minnesota lawmakers to legalize sports wagering remains, however. The state is one of just 12 that has not legalized sports betting, and it is surrounded by legal wagering jurisdictions like Iowa.
Republican Sen. Jeremy Miller, who has proposed his own sports betting-related legislation, said S.F. 1949 was a “work in progress,” and told committee members he wants to see more money for the tracks and charitable organizations.
“We're trying to find a bipartisan solution that we feel can pass both through the House and the Senate,” Miller said.
