The effort to legalize sports betting in Minnesota is off to a weak start this legislative session, with a proposal backed by competing gaming industry groups already facing resistance from Democratic-Farmer-Labor and Republican lawmakers.

This year’s push to legalize the practice had a big setback Thursday in its first committee stop in the state Senate, where Sen. Matt Klein, DFL-Mendota Heights, is carrying a bill that’s the product of a compromise between the tribal gambling association, horse tracks and charitable gaming groups.In recent years, the biggest hurdle for legalization was an ongoing disagreement between Minnesota’s horse racing tracks and the Minnesota Indian Gaming Association over whether the tribes should have exclusive rights to offer sports betting.

Those groups have worked out a deal, but ever since the conversation at the capitol has evolved into one centering more around the potential harms posed by a major expansion of gambling.

As in the past, Klein and other advocates argue people are already making online bets in Minnesota, and that regulating the marketplace will be the best way to reduce harm.

“Sports wagering is already growing and flourishing in Minnesota through unregulated offshore platforms with no protections for problem or underage use,” Klein told the Senate State and Local Government Committee on Thursday. “This bill would address that practice.”

Addiction concerns

Thirty-eight states have legalized sports betting since the U.S. Supreme Court ended restrictions in 2018, including all of Minnesota’s neighbors. Most allow online betting, though Wisconsin, North Dakota and South Dakota only allow it in person.

Opponents such as the Minnesota Catholic Conference and DFL Sen. John Marty of Roseville — who is sponsoring a more restrictive sports betting bill — say there’s evidence that states that have legalized sports betting have seen rates of problem gambling rise, such as an increase in calls to problem gambling hotlines.

“It’s highly addictive and doing it on a mobile phone which is available 24-7 makes it far more accessible,” Marty said when presenting his version of the sports betting bill to the committee.

Marty’s bill doesn’t allow online betting and contributes 75% of its revenue to state addiction treatment programs. It also bans advertising for sports betting in public places.

Compromise bill

Klein’s bill would allow mobile and in-person sports betting exclusively operated by tribal casinos in the state. Wagers placed online would be taxed at 22%, and those placed on tribal land would not be subject to state taxation.

Sports betting wouldn’t be a huge moneymaker for the state. Klein’s bill last year expected the state to take in about $18 million to $40 million, depending on whether in-game bets are allowed.

That money would go to various initiatives, including 8.5% for the state to develop programs to address problem gambling and 45% to help support charitable gaming organizations that had their revenue reduced by a 2023 change to electronic pull tab rules.

Minnesota’s two horse tracks — Canterbury Park in Shakopee and Running Aces in Columbus — would get 15% of tax revenue. Another 15% would go to rural tribes who likely would not get the same level of revenue from sports betting as those close to the Twin Cities.

The bill also restricts advertisements targeting people younger than 21 and in places like college campuses. Sports betting phone applications wouldn’t be able to send users push notifications.

Similar proposals have gotten some traction in the past, but the Senate State and Local Government Committee failed to advance the bill in a 6-6 tied vote on Thursday. DFL and Republican senators alike had issues with the legislation.

“If the industry likes this bill it’s probably not good,” said Sen. Erin Maye Quade, DFL-Apple Valley, who opposes online sports betting. “It’s the lack of protections that net them money, and addict people to gambling — which is their hope.”

Sen. Mark Koran, R-North Branch said he felt the bill “paid off everybody” but wouldn’t provide lasting protections for charitable gambling organizations, who say they lost 20% of their revenue after the tribes pushed for legislation that banned the “open all” feature on electronic pulltab machines. Koran said he wanted other reassurances charitable gambling are protected in the long run.

As distant as ever

Odds for legalization appeared to be higher than ever in the 2022 session when the tribal gaming association offered its support to a proposal introduced by state Reps. Zack Stephenson, DFL-Coon Rapids, and the now-retired Pat Garofalo, R-Farmington.

Their backing was key to getting support from a wide swath of Democratic-Farmer-Labor lawmakers, generating optimism among supporters. More than three years later, legal sports betting seems as distant as ever.

Odds in the House of Representatives may have dropped this week, too. The main backer of a House legalization effort, Rep. Nolan West, R-Blaine, has said he won’t back any bill amid a separate controversy over tribal cannabis sales.

Pending agreements between Gov. Tim Walz and 10 of Minnesota’s 11 tribal nations would allow off-reservation sales of cannabis, MinnPost reported this week.

That and an exemption for tribes on rules banning ownership of both cannabis production and retail operations gives the tribes an unfair advantage, West said.

“If this is how the administration is going to function in negotiations, I am discontinuing my efforts to legalize sports betting in our state,” the representative said in a statement.