Let’s see, what has happened over the summer and fall in Minnesota to change the landscape since the first all-party deal on sports betting emerged too late in the session to pass but early enough to be encouraging?

• One of the two commercial horse racing tracks and several tribes continue to sue each other over where each fits under state gambling law.
• Gov. Tim Walz broke precedent and appointed two tribal leaders to the Racing Commission, angering Republicans, the tracks and the horse breeding industry.
• One of the two horse tracks — OK, the same one as above, Running Aces — placed a series of newspaper ads over the summer and fall attacking Walz, several tribes and the primary House author of sports betting legislation. That would be Rep. Zack Stephenson, DFL-Coon Rapids, who won reelection anyway.
• Running Aces president and CEO Taro Ito sent a surprise peace offer to the Minnesota Indian Gaming Association on Election Day offering to work together towards a bill, but not necessarily THE bill.
• And, the Minnesota House is likely tied.

So, not much, right?

Despite some drama, most of the people who worked on the issue last session say they think the deal is still intact. And while there will be time to lobby over the details, any proposals that break from the basic ingredients in the May deal — including that the state’s casino tribes have exclusive control of the new betting — will be harder to sell. 

The wild card is the Minnesota House. How will it be organized, assuming it remains tied after a pair of recounts? Who will replace longtime sports betting advocate Rep. Pat Garofalo as the House GOP lead? And will Running Aces join the agreement, or remain neutral as it was last spring?

Senate Commerce Committee Chair Matt Klein, DFL-Mendota Heights, said Monday he thinks the deal he helped negotiate in May is still the basis for a long-time-coming agreement. States have been allowed to regulate sports betting since the U.S. Supreme Court in 2018 declared that Congress did not have the sole authority to regulate the form of gambling. Since then, 38 states and the District of Columbia — including every state that borders Minnesota — have legalized some form of sports betting.

“I’ve been in close communication with the tribes and tracks, and all parties still support the end-of-session deal,” Klein said via text message. “It’s my hope that we can get bipartisan authorship on a bill that reflects that deal. I’ve reached out to GOP legislators in the House and Senate with that offer, which I think would smooth the path for the bill and avoid the end-of-session scramble we’ve historically experienced.”

Klein said anti-gambling legislators in his own Senate DFL caucus continue to oppose a bill, which is why getting GOP votes is necessary. But an end-of-session threat to filibuster the bill might be eased, because rather than a last-minute deal, the bill will go through a more-normal committee process.

“If senators have amendments, they will have an opportunity to offer those in committee,” Klein wrote. “To my way of thinking, this should eliminate some of the objections from my caucus at the end of last session that the bill was being rushed and they didn’t have an opportunity to offer their changes.”

There will be lobbying against the bill, led by the Joint Religious Legislative Coalition, which last month distributed a letter to lawmakers opposing expansion of gambling. The coalition includes the Minnesota Catholic Conference, the Jewish Community Relations Council, the Islamic Center and the Minnesota Council of Churches. 

“We oppose the legalization of online sports betting because it poses significant and imminent harm to vulnerable Minnesotans,” stated the letter signed by coalition executive director Leah Patton. It linked to research from already legal states that indicated that betting depletes household financial stability, increases the likelihood of bankruptcies and increases incidents of domestic violence.

“We ask you to insist that significant protections be included as a baseline for any discussion of the online sports betting proposal, because we now know it is not a question of whether or not this proposal would harm vulnerable people, but rather how much destruction and suffering it will leave in its wake,” the letter stated. “Ultimately, the only way to prevent harm from this bill is not to pass it at all.”

Garofalo, who resigned from his House seat in June, will hand House GOP leadership on the issue to Rep. Nolan West, R-Blaine. But rather than be in the minority trying to influence majority DFLers, West will be in a caucus that gained a tie in the House. He said he thinks the tie could make it more likely a sports betting bill could finally pass.

West said his views on sports betting, like his support for legalization of cannabis, are formed by his libertarian take — that people should be able to make their own choices. After the last redistricting, West’s House District 32A now contains the Running Aces track, hotel and casino.

He called the May bill a good starting point that he has some issues with — particularly how it places daily fantasy games, which are already legal, into the same tribal exclusivity framework as sports betting would be placed.

“I’m hopeful with a 67-67 House that that will be an optimal environment,” West said. “I’m hopeful we get started on things that are bipartisan early.

“But this is a very difficult and circular issue,” West said.

Garofalo, who has had a betting bill every session since the 2018 court ruling, agreed that tie helps, not hurts.

“There are few issues that benefit more from a 67-67 split than sports gambling. I expect the tribes and tracks will reach an agreement fairly early in session. The alternative is two more years of stagnation on the issue. That won’t benefit anyone,” he said.

Garofalo said the issues that will be argued over next session are tribal exclusivity, the age at which people can place bets — 21 or 18 — and how the revenue from the 22% tax is distributed.

“The rates are too high but that won’t be a showstopper,” he wrote. “I’m more optimistic about passage than at any time since 2018 when the Supreme Court overturned the ban.”

The deal’s details

At the end of the 2024 session, legislative backers of a bill to add Minnesota to the list of states permitting sports betting thought they had a breakthrough. For the first time, the two major parties that must agree finally found a bill they could agree on. In return for giving the state’s casino tribes exclusive control of the new betting, plus a way of helping smaller tribes not as well positioned, the tribes would agree to putting some state revenue into the tracks and charitable gambling.

The 22% state tax on net winnings —  that is, what is left over after winning bets are paid — would apply only to mobile betting, not bets placed in physical tribal casinos, though most betting action in the United States is mobile, not brick and mortar. Those expecting a revenue windfall from sports betting might be disappointed, because most of that estimated $88 million a year in tax revenue would be used to compensate the tribes, the tracks and the charities, with some devoted to gambling addiction and youth sports and to recruit national events like the NCAA Final Four.

The deal also would regulate fantasy sports betting and control how and when certain types of bets are made and how and when sports books can send push notifications to bettors.

Details could change as the backers and the vested interests have more time to lobby. But while there are a handful of anti-gambling expansion lawmakers — especially in the Senate — the issue would likely have bipartisan support if it was signed off on by the tribes, the tracks, charities, the professional sports teams and the increasingly powerful national sports books like FanDuel, Fanatics, DraftKings and BETMGM.

At the Minnesota Legislature, those four are organized as the Sports Betting Alliance which currently has 11 lobbyists registered to represent it.

The May deal also contained a unique aspect that is likely to remain in the 2025 version, something pushed by Garofalo that came to be called the Iowa Plan. Because it will take months and months for the the Department of Public Safety — the state agency assigned to regulate the new industry — to draft rules, Garofalo wanted a faster way to get betting started. Under the negotiated version, any national sports book that is licensed in Iowa could offer betting in Minnesota as soon as it reaches a deal with a casino tribe. Earlier betting means tax revenue will flow to the state, and to the various parties that would take a cut, sooner.

The charities, the tracks and the smaller tribes especially want their shares to begin arriving earlier, not later. The later distribution is one of the new elements of the deal. Because each tribe would contract with a different national sports book, the tribes with the biggest casino operations would likely win the biggest national partners with most of the market share.

While there are other, lesser-known sports betting companies, their share of the market is small and therefore the revenue to their tribal partner would be less. That is where the tribal equalization fund would come into play with money flowing to tribes with less than 10% of the market share getting payments. Even tribes that don’t want to offer sports betting could get money from the fund.

The Minnesota Indian Gaming Association did not comment to MinnPost on the situation with sports betting in the Legislature. But it has communicated to key lawmakers as well as the other interests lobbying the bill that it continues to support the May deal.

Right track?

As for the two tracks, they are on, well two tracks.

Taro Ito is the president and CEO of Running Aces, the Columbus harness racing track. He raised some eyebrows when he posted a letter to the head of the Minnesota Indian Gaming Association (MIGA) on Election Day offering to work with the tribes toward a sports betting compromise.

“We believe it is possible to work through any disagreements and arrive at successful compromises,” Ito wrote to MIGA Chair Cole Miller. But Ito had spent much of the summer on a public campaign against the tribal monopoly with full-page newspaper ads criticizing the size of the tribal lobbying effort and its campaign contributions to DFLers, including Walz.

Another ad singled out Stephenson who was in a tight reelection campaign. Stephenson is the primary DFLer on the issue who won his race and will likely be in the lead again, though now in a tied House.

Ito said Monday the company was neutral on the May bill but said he thinks it violates fairness and public opinion by giving sports betting licenses only to tribes. He said he sent the letter before election results were known so as not to be seen trying to position the track based on any new House and Senate majorities.

“All we ever wanted was a fair deal. We never wanted to be obstructionists and not have sports betting,” Ito said. “But we certainly would never agree to a deal that made no sense. That’s what I was trying to convey in that letter.”

Ito said he continues to want tracks to be allowed to have sports betting licenses, something not in the May deal and something opposed by the tribes and their DFL allies. Tribes are governments, and gambling proceeds go toward government services, they argue. And tribes in states that have significant, statewide commercial gambling make far less revenue from gambling than tribes in states like Minnesota.

“We’re the only entity in the state that has ever taken a sports bet,” he said. “We use a lot of the same vendors, the same technology, the same accounting system. For us, we would just be continuing to do what we’ve done forever. Why wouldn’t we get one?”

Ito acknowledged that Running Aces could make more money from the distribution of money from the May deal than it would if it offered its own sports betting. That is because it, like smaller tribes, would have to settle for national sports books with tiny market share compared to the big four.

Ito, however, said he is acting on the principle that the tribes should not have exclusivity and that such a bill as the May deal would further that. Finally, Ito said a better outcome for the state is for the tracks and tribes to offer their own sports books without involvement from the national companies that will make most of the profits from sports betting in Minnesota.

Randy Sampson, the president and CEO of Canterbury Park, said Monday he continues to support the plan and decided not to confront the tribes or the DFL as Ito did. He had written MIGA a week earlier reiterating his support for the May deal and asking to continue working with the tribes to pass it.

“We did not participate in that advertising. I was aware of it but it wasn’t something we supported,” Sampson said. “We did not think it would be helpful. To pass a sports betting bill is not going to happen without the support of the tribes.” Sampson said he was even asked by some tribal officials if Running Aces and Canterbury were playing a good-cop, bad-cop strategy. They were not, Sampson said. Running Aces simply has a different business model and a different strategy. 

“They chose a different direction than we did, but that doesn’t mean they’re wrong and we’re right,” Sampson said.

Sampson said that he, too, took the position that the tracks should be able to offer sports betting alongside the tribes. The May bill changed his opinion because he thinks the track will do better, and the people who breed and race horses will do better, with the distribution from the bill.

“We believe it will have a better outcome for Canterbury than a license,” he said.   

The national sports books have kept a low public profile, preferring to let the tracks, the tribes and the charities — as well as their legislative allies — lead the public discussions. Blois Olson, a spokesperson for the Sports Betting Alliance, said Monday while the May bill is a good place to start, “there are a lot of new legislators that have an opinion, and we need to understand where they are.

“We would look to work with stakeholders, particularly the tribes, to make sure the framework still works for them and the lead authors,” Olson said. The benefit of the May deal, he said, “is there are trusted relationships that have been built. That is critical and gives a starting space that is much-further ahead than in 2018.”

Olson said the sports books will continue to emphasize the fact that the illicit sports betting market exists in Minnesota, a market that is unregulated as to youth gambling and problem gambling.

“That is something we’ve heard from legislators, and it’s important to make the folks who are doing this as safely as possible are allowed into the market,” Olson said.

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