Minnesota Sports Betting Bill Causes Raucous in the House

After a failed attempt to present sports betting legislation in the Minnesota House of Representatives, Rep. Zack Stephenson took back his sports betting bill and made significant changes. The bill in question is HF2000. His changes resulted in the bill passing through the House State and Local Government Finance and Policy Committee by a vote of 8-5.

The main amendments to the bill called for a $40 million reduction in the gaming taxes to be paid by charities, plus regulatory changes related to how Daily Fantasy Sports is treated in Minnesota. While these changes gained favor in the committee, they certainly caused a raucous within Minnesota's horse racing industry.

About the Charity Tax Cuts

In Minnesota, charities run bingo games and offer access to electronic "pull tabs." These pull tabs are treated as a form of electronic gaming and get taxed as such. In the past, progressive taxes have been levied on pull tab revenue. This has created a situation where the charities are left with very little profit after paying winners and the state's tax requirement.

Charitable organizations are generally opposed to any form of gambling that could savage the limited profits they are currently getting. That's the primary reason they have been objecting to the passing of any sports betting. Under the new amendment, the tax rates on pull tab revenue would be reduced to 3% for small charities with revenue of $87,500 or less. The highest rate would be adjusted down to be capped at 26% for revenue up to $157,500 by 2027. Under these new rates, the tax savings for charities is estimated to be $40 million each year.

This amendment has certainly gained enough favor in support of the state allowing sports betting from charitable organizations. At the same time, it seems to have left a bad taste in the mouths of principles for Minnesota's horse racing industry.

Why Minnesota's Horse Racing Industry is Not Pleased

The way the current sports betting bill is worded, Minnesota's Indian Tribes will get exclusive rights to offer retail/mobile sports betting services. What the Minnesota horse racing industry is upset about is the new bill now gives both the Indian Tribes and charities a lot in the way of concessions, yet nothing is being offered to the horse racing industry.

The Minnesota horse racing industry is comprised of two race tracks: Canterbury Park and Running Aces. What's been offered to the tracks in HF2000 is a small stipend of $625K as a contribution from sports betting revenue.

At issue is the notion that sports betting revenue will be drawn from race track revenues, costing the tracks millions of dollars every year. The $625K stipend will do very little to offset those losses. To Running Aces CFO Tracie Wilson, it feels like an intentional attack on the racing industry.

What the industry wants is the right to offer historical horse racing (HHR) machines to create an additional stream of income. Nowhere in the new bill is this mentioned.

While the sports betting bill getting out of committee is a big step forward, Randy Sampson, CEO of Canterbury Park shared this in a press release:

“Unfortunately, we continue to go backward, which isn’t helping reach a reasonable solution that allows for a viable horse racing industry in Minnesota.”