LEGAL SPORTS REPORT (March 14, 2024) – Lawmakers continue working toward a consensus Minnesota sports betting proposal, including a tax rate hike Thursday.
Sen. Matt Klein (D) guided his Senate Bill 1949 through the Senate Taxes Committee on Thursday, including an amendment that raised the Minnesota sports betting tax rate from 10% to 20%. The base proposal grants Minnesota’s 11 tribes sports betting exclusivity.
The amendment also changed the appropriation of tax revenue, including money for charitable gaming organizations and a change from last year on revenue distribution to the state’s horse racing tracks. The changes come as legislators and stakeholders, namely the state’s tribes and tracks, work toward an agreement on the proposal.
The bill now moves to the Finance Committee. It still has more than a month to advance from fiscal committees.
Bipartisan work toward Minnesota sports betting
Beyond the amendment, an indication of bipartisan cooperation might have been the biggest takeaway Thursday. A bipartisan agreement is needed as there are opponents on both sides of the aisle. However, the Democrat-Farmer-Labor legislators want tribal exclusivity, while Republican lawmakers want horse racing tracks directly included in the industry.
Earlier this session, Sen. Jeremy Miller (R) introduced his own sports betting proposal at the beginning of the session. With his legislation stagnant, Miller supported Klein’s bill and the amendments during Thursday’s meeting.
“We’re not there yet,” Miller said. “This is a step in the right direction, and I’ll continue to advocate for more money and flexibility for the tracks to enhance the horse racing industry. “I encourage the stakeholders to continue to have those discussions and help us work toward solutions.”
Minnesota sports betting tax change
Klein said the 10% tax rate did not create sufficient tax revenue. Even with the doubled tax rate of 20%, the new estimate of $18 million in tax revenue annually is less than half of the $40 million estimate before lawmakers altered the bill last week in the Committee on Commerce.
Legislators added multiple safeguards for problem gambling, and also took the unusual step of banning in-game wagers. Rep. Pat Garofalo (R), a long-time sports betting proponent, tweeted that the amendment made the bill unworkable following the change, a sentiment Klein addressed Thursday.
“It has a significant impact and will be something to consider moving forward,” Klein said. “It creates some difficulties for stakeholders, particularly the tribes, with how much revenue is lost and the diminished value of the licenses.”
New destinations for MN sports betting tax revenue
Last year, Klein picked up Rep. Zack Stephenson’s (D) proposal in the Senate and added funding for the tracks to appease Republican demands. It did not move the needle quite enough, as it capped contributions at $3 million.
The new appropriation sends 5% of tax revenue to the tracks. It also sends 20% to charitable gaming enterprises, which have advocated for relief if lawmakers legalize sports betting. Klein said the legislature negatively affected the organizations with changes in a pull tab gambling ticket policy last year.
Other destinations for tax revenue include:
45% to the general fund
15% to Explore Minnesota Tourism for Minnesota Sports and Events
10% for problem gambling support
5% to the Minnesota State High School League
Promo deduction phaseout
Klein introduced a phaseout for promotional play deductions. The tiered step-down begins with 100% deductible before January 1, 2028, and lowers 25% each year until no deductions are allowed after December 31, 2030.
Sen. Scott Dibble (D) introduced an amendment to abolish the deductions. Klein said the industry wants the deductions to help bring bettors into the legal market.
Lawmakers voted against Dibble’s amendment, 8-2.
Other defeated amendments
Dibble also introduced an amendment to eliminate the funding to the tracks and charitable gaming entities. He argued they initially came to the legislature and touted themselves as economic drivers, and are now asking for tax subsidies.
Klein argued sports betting changes the modality of wagering in Minnesota. The amendment lost by voice vote.
Dibble also proposed direct licenses from the state, hoping to bring in higher tax rates through an open bid process similar to New York. Klein explained why the licenses are tied to the tribes, who have killed sports betting proposals in the past. That amendment also lost on a voice vote.