End Of The Road

Minnesota's latest attempt to legalize sports betting came to an end on Sunday, and while everyone is saying progress was made, and next year will be different, I'm not so sure.

May 22, 2024

VIEWS: A look at what went wrong in Minnesota.
BEYOND the HEADLINE: The Minnesota Legislature doesn’t appreciate being left out of the process.
NEWS: Former DGE Director David Rebuck explains what the goal of regulated online gambling should be.
VIEWS: Is there a way to convince opponents to support online casino legalization?
AROUND the WATERCOOLER: Gambling advice from a professional gambler.
STRAY THOUGHTS: Stood up.

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What Went Wrong in Minnesota

Minnesota’s latest attempt to legalize sports betting suffered the same fate as past efforts. With the legislative clock ticking, the House was unable to bring a sports betting measure to the floor for a vote despite rumors of an agreement amongst stakeholders — I’m not sure how true these rumors are.

And progress in 2024 doesn’t mean the state will pick up where it left off in 2025. As Stev Bittenbender noted, the makeup of the legislative body could be radically different next year, “all 134 House seats are on the ballot this year.”

In yesterday’s newsletter, I explored the transition to Sports Betting 2.0, a term coined by The Innovation Group’s Brian Wyman. Wyman focused on the industry, but from a legislative perspective, we have now officially entered this new phase. The low-hanging fruit has been picked, and from here on out, legalization efforts will be complex and challenging.

The remaining states are dealing with stakeholder disagreements, resistant legislators, and ancillary issues that are being coupled with or pitted against gambling.

And, as Chris Grove tweeted, “I talk a lot about the big thematic hurdles to online gambling bills like stakeholder consensus, but MN is a good reminder of the more pedantic but still powerful gating issues: time and legislative bandwidth. Sessions are short, and to-do lists are long.”

Truth be told, I never had much hope for Minnesota this year, and that hope completely disappeared when the HHR issue and subsequent lawsuit against tribal casinos (see the next section).

Like the New York online poker bill that got Gambling Twitter excited, which, as I said yesterday, “didn’t even warrant a mention in my newsletter,” this was inevitable. Lawmakers and supporters will always say there is hope, but if you’ve been around long enough, you know to read between the lines of seemingly positive statements and what the reliable tells are when a bill is about to pass.

So, what went wrong in Minnesota? Nothing. The result was exactly what was expected in a state with significant stakeholder disagreements.

Beyond the Headline: Don’t Sidestep the MN Legislature

A sports betting bill didn’t pass, but a bill to prohibit the state’s racetracks from offering historical horse racing (HHR) did. The legislation was introduced after the Minnesota Racing Commission authorized HHR machines, which caused an uproar and triggered a series of accusations between the state’s racetracks and tribes.

One of the state’s racetracks, Running Aces, filed a lawsuit alleging that three tribal casinos were offering unauthorized Class III games.

“This was really poorly thought out, and it’s not going to end well,” Rep. Zack Stephenson, the lead sponsor of the House bill to legalize sports betting, told the Star-Tribune. “The Racing Commission does not have the power to override state law and place gambling devices at the tracks.”

For those of us who have been around for a while, Stephenson’s comments have a familiar ring.

In 2014, the Minnesota Lottery expanded its offerings to include online sales and gas stations. The regulatory change didn’t go over well with the Minnesota legislature, which felt the Lottery overstepped its bounds. Legislation later prohibited the sale of online lottery products.

"Every piece of gaming expansion or gaming activity has come through the Legislature. Big or small," bill sponsor Rep. Tim Sanders said at the time.

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David Rebuck

In a recent Crain’s Chicago Business opinion column, David Rebuck, former head of the New Jersey Division of Gaming Enforcement, tried to bring the conversation back on track.

In the column, Rebuck states, “A focus on increasing revenue threatens to compromise the main benefit of legal sports betting: the availability of a safe, highly regulated market.”

He goes on to say:

“The tax revenue generated from sports betting has been a boon to funding various state priorities, but states would be mistaken if they begin to see this as the overarching goal of legal sports betting, rather than as a secondary benefit. The primary purpose of enacting a legal sports betting market should always be to provide a safe, transparent, regulated market that customers will choose over readily available illegal options.”

The issue is one of overpromising and underdelivering. When the industry approached state lawmakers, it led with the tax revenue argument—look at all of this money that is going offshore or to a neighboring state. And in many states, tax revenue was the overarching goal.

That they could regulate something widely available through illegal channels was a nice little bonus and made selling it to skeptical colleagues and the public a lot easier.

Rebuck is 100% correct. It should be about consumer protections, but it’s not. Ask anyone why online poker legalization lags so far behind sports betting, and the answer will be one word: Money. There’s no money in online poker. If it was truly about “the availability of a safe, highly regulated market,” all of these states that have legalized sports would have also legalized online poker.

As I wrote in a previous column:

“When it comes to legalizing gambling, the goal is money; the selling point is consumer protection. The first has to make sense for everyone involved (everyone who matters anyway) before the second becomes the campaign’s public face.”

The Problem With Online Casino Arguments

Yesterday, I summarized The Innovation Group’s Brian Wyman’s take on Sports Betting 2.0 following the SBC Summit North America. Today, I look at his thoughts on online casino legalization.

Wyman believes that the cannibalization (revenue and jobs) concerns are not going away, and “iGaming operators will need to use several lines of reasoning to win hearts and minds.”

His suggestions include, using some of the tax revenue generated to offset any job loss (something New York State Sen. Joseph Addabbo floated this year), and, perhaps more importantly, giving an inch on the cannibalization debate.

“Even if iGaming has historically had a (modest, relative to the size of the iGaming market) negative impact on land-based gaming (still a contentious topic), land-based operators will evolve to use iGaming as a tool to actually grow their land-based businesses – omnichannel marketing and integrated loyalty programs will allow cross-promotion of the online platform and the land-based resort.”

But will it be enough? One of my go-to examples was a quote from Dr. Katherine Spilde, who said (something along the lines of) the following at a conference about a decade ago: “If you dig a billion-dollar hole in the ground and employ several thousand people, you tend to have a lot of say on future gambling expansions.”

As I’ve been reporting, the whole situation is far more complex than there is cannibalization.

As Wyman said:

“Casinos are incredible employers and community partners, and iGaming will reduce their revenue and take away union jobs. [I suppose there could be a commitment from the casino to preserve headcount or to create iGaming-related positions. There is a lot of buzz about live dealer studios, but in reality it’s inefficient for iGaming companies to make a live dealer studio in every jurisdiction, and the market would lose operators (and likely revenue, therefore, as a result of reduced competition) if this were mandated.]
“The reality is that most casinos don’t operate their own iGaming platform; they outsource it, and most of the economic benefit flows out of state. And the iGaming partner has no incentive to push traffic to the land-based casino.”
And then there are the ongoing infrastructure upgrades at land-based casino properties. Will those slow? As Wyman asks, “Will they continue to reinvest if there’s a competitive form of gaming drawing players partially away?”

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Around the Watercooler

Social media conversations, rumors, and gossip.

Professional poker player Doug Polk offered some solid advice on avoiding the many pitfalls that can beset someone setting out in the world of gambling:

Without posting his entire thread, here are the topics Polk covers, which I would put into any “Be a Better Gambler” curriculum (h/t Jamie Salsburg for the term):

1) You're going to lose over time.
2) Price matters.
3) Understand what you are paying.
4) Just because something happens 3 times in a row doesn't mean it’s unlikely to happen again.
5) Everyone is being paid to give you "picks". These are not good decisions.
6) Sports media personalities are in the business of making things interesting.

Polk finishes with:

Stray Thoughts

The Massachusetts Gaming Commission got no-showed by every licensed sports betting operator not named Bally’s on Tuesday. I have a lot of thoughts on this. I have so many thoughts that I’m saving them for Friday’s feature column, but this is either the shrewdest move I’ve ever seen the industry make or its biggest misstep.