Entering the year, Minnesota seemed to be one of two states most likely to legalize sports betting.
The other, North Carolina, passed legislation authorizing sports wagering this month. Kentucky and Vermont also surprised and passed legislation for the US to reach 37 states with legal sports betting.
After coming close to passing late in the 2022 session, Minnesota sports betting efforts took a step back in 2023.
PlayUSA spoke with Minnesota Indian Gaming Association executive director Andy Platto, Canterbury Park CEO Randy Sampson, Running Aces CEO Taro Ito, Minnesota Twins President Dave St. Peter, bill author Sen. Matt Klein and several other Minnesota legislators to get the full story of why Minnesota sports betting legislation failed to pass in 2023 and what needs to change for it to reach the finish line in 2024.
Agreement almost reached in 2022
After the US Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) in 2018 to open the door for states to regulate sports betting, Minnesota tribes initially opposed legalizing sports betting.
In 2022, MIGA informed lawmakers that tribes were interested in sports betting with an online component if they got exclusivity. Rep. Zack Stephenson worked with the tribes to develop a bill.
Stephenson’s bill with tribal exclusivity passed the House with a week left in the legislative session.
Sen. Roger Chamberlain had been pushing sports betting legislation in the Senate for a couple years. But Chamberlain and Republicans controlling the Senate wanted to include the state’s two horse racetracks.
Canterbury Park wasn’t involved in the discussions because it was in the final year of a marketing agreement with the Shakopee Mdewakanton Sioux Community (SMSC). As part of the arrangement, Canterbury agreed not to advocate for gaming expansions.
Three days before the session ended, Running Aces struck a deal with eight of the 11 Minnesota tribes. Tribes would get exclusivity over retail and mobile sports betting. Tracks could expand table games to offer craps and roulette with a $300 betting limit. Authorizing craps and roulette also would allow tribes to offer the games in their casinos.
“We would have accepted that as a compromise because it allowed us to offer more opportunities, more choices,” Ito said.
Platto sent a letter to Chamberlain and Stephenson indicating that eight member tribes agreed to this compromise. But two member tribes opposed pairing sports betting legislation with any expansion of gaming, the Lower Sioux Indian Community and SMSC. And the SMSC is the most successful and influential of the gaming tribes in Minnesota.
With the SMSC opposed and Chamberlain still wanting tracks to get direct participation, the legislature adjourned without exercising the deal.
Changes shake up Minnesota legislature
The 2022 general election altered the political party dynamic in Minnesota. Previously, there was a stalemate between the Democratic-Farmer-Labor Party (DFL) controlling the House and the Republicans in charge of the Senate.
The DFL flipped the Senate in November, giving the Democrats a trifecta of control in the House, Senate and governor’s office.
Chamberlain was one of the Senate Republicans to lose his re-election bid.
During his press conference introducing sports betting legislation in 2022, Chamberlain spoke defiantly about not needing tribal support to pass sports betting.
“I don’t want to get political about it, but we never needed their support to pass legislation. It’s just a lobbying group that has a particular amount of leverage and power.”
Nine months later, he was ousted from office.
With the DFL in full control of Minnesota, the party could finally pass all the agenda items it couldn’t in previous years. Sports betting fell down the list of legislative priorities.
Legislators get behind tribal exclusivity
With the change in Senate leadership, Klein became chair of the Commerce and Consumer Protection Committee.
Prior to the session, he spoke with Stephenson, who chaired the same committee in the House. Stephenson pitched him on why he believed Minnesota tribes should get exclusivity over sports betting.
“He had a visionary introduction with me,” Klein said. “Chairman Stephenson talked about how legal gambling in the state of Minnesota has restored financial independence and dignity to our Indian tribes, giving them a power that partially made up for the indignity they’ve suffered over the past centuries. He felt strongly about tribal exclusivity for sports betting.”
Klein agreed. Tribes also have support at the executive level. Gov. Tim Walz gave the edict that he wouldn’t sign any bill passed without approval from the tribes. And Lt. Gov. Penny Flanagan is a member of the White Earth Band of the Minnesota Chippewa Tribe and an advocate for indigenous communities.
Klein filed SF 1949 as a companion bill to Stephenson’s HF 2000. Former Senate Majority Leader Jeremy Miller, now in the minority party, filed SF 2425 giving tribes exclusivity over online sports betting but allowing tracks and pro sports facilities to have retail sportsbooks. And it encouraged tribes to partner with the other stakeholders on mobile sports betting.
Sen. Eric Pratt signed on as a co-sponsor to Miller’s bill. The Republican’s district includes the largest tribal casino, Mystic Lake, and the largest track in Canterbury.
Pratt told PlayUSA:
“I think there’s enough to go around for everybody and we’re letting greed get in the way. I mean, we’re talking just two tracks. Quite honestly, parimutuel wagering already is sports betting so it makes sense for tracks to have both. I think there’s a lot of synergy with having the tracks being more than just a financial partner. But if that’s the deal we have to strike, then it just has to be a fair deal.”
But Miller and Pratt no longer had the same clout in the Minnesota Senate. The majority party supporting tribal exclusivity provided the framework by which tracks needed to negotiate their inclusion.
Minnesota sports teams also back tribes
Professional sports teams in other states have received sports wagering licenses. But Minnesota sports teams joined with tribes in supporting tribal exclusivity for sports betting.
St. Peter, the Twins president, explained the teams’ perspective:
“The teams spent a lot of time studying the landscape around the country, but we also recognize the landscape here in Minnesota. A year ago, we spent a lot of time with the tribes and ultimately came out in support of tribal exclusivity. At the same time, we underscored to the tribes that we expect and desire a robust marketplace with one license for each tribe.”
Minnesota teams have long and fruitful partnerships with the biggest Minnesota gaming tribes. The Twins have a three-decade-long relationship with the Prairie Island Indian Community and its Treasure Island Resort & Casino. Treasure Island also partners with the Timberwolves, Lynx and Wild. And the SMSC’s Mystic Lake Casino Hotel partners with the Vikings.
“The Treasure Island relationship has been very important to the Twins, not only as a partnership but as friends,” St. Peter said. “Our desire not only is to continue that relationship but expand it in the years to come, and hopefully that will include legalized sports wagering.”
St. Peter stressed that just because the teams supported tribal exclusivity in 2023 doesn’t necessarily mean they will in 2024.
“As we look to 2024, the teams will once again get back together, assess our position, and speak with the tribes and legislative leadership on what the path looks like for 2024. We haven’t really determined a position for 2024.”
Senate surprisingly takes lead on sports betting
When Klein agreed to join Stephenson in introducing companion sports betting legislation, he expected to take up the issue when the House bill came over to the Senate. But it never did.
“I figured he would get the bill all prepped and finalize a deal bundled up with the tracks,” Klein said. “We require a bipartisan vote in the Senate because two or three Democrats said they would never vote for it. And the only way to get Republican support would be to get the tracks on board.”
Stephenson tasked Rep. Brad Tabke with finding a compromise between tribes and tracks. Tabke also has Mystic Lake and Canterbury in his district. But with no deal made, the bill stalled in the House.
“Zack had a pretty full plate and the Democrats had a lot on their agenda, so I think he just made the decision to put it off this year,” Ito said.
Tribes and tracks continued to discuss a deal independently. Klein said that tribes came to him with three weeks left in the session with their last proposal to the tracks. The state would share 30% of its 10% tax revenue on online sports betting with the tracks. But after the fund reaches $20 million, tracks would be limited to $3 million annually.
Tracks were not yet satisfied with the negotiations. But Klein thought a deal was close enough that he added the amendment in committee and said the sides would continue working out the details.
“When you’re trying to buy a car and you and the dealer are $500 apart, everyone knows you’re not leaving the place without that car. You’re going to find a way to get that car. I figured that’s where we were. I thought we might be really close to something that works. But one side got cold feet altogether.”
Tribes dictate how state spends sports betting dollars
Following Klein’s amendment, representatives from MIGA, Canterbury and Running Aces continued discussing a compromise. And lawmakers waited to see if they came back with a deal.
“We were negotiating with the tribes on revenue share of the state’s tax money,” Ito said. “Doesn’t that just seem weird to say and for people to think it’s normal and OK?”
Rep. Pat Garofalo, the original sponsor of sports betting legislation in Minnesota, explained the dynamic where gaming issues are negotiated independent of lawmakers.
“The legislature is just a proxy battle for the tribes and the racetracks,” Garofalo said. “Ultimately, one or both sides were not willing to move any further to get the bill across the finish line.”
Minnesota tribes and tracks can’t reach deal
Tracks need to split revenue with two horsemen associations. So if capped at $3 million per year, that’s less than $1 million per racetrack.
“I don’t understand the purpose of the cap other than to keep the tracks down,” Pratt said. “If we do well, everyone should do well. If we struggle, everyone should struggle together.”
Canterbury countered to lower revenue share to 2% uncapped. At the high end of $400 million projected Minnesota sports betting revenue, that could amount to $4 million per track.
But tribes discovered their split in partnerships with online sportsbook operators could only be around 5%. That could amount to less than $2 million a year for some tribes.
Even if it wasn’t coming out of their end, tribes didn’t want to see tracks making more from their sports betting exclusivity than they do.
“It was a concern of some of the tribes, particularly smaller tribes, that after paying the platforms and paying taxes, there just wasn’t a lot of money to the tribes,” Klein said. “I tend to disagree with that. I think the projections of money to come from this are way low. But it was a concern from tribes that they’re giving a lot of revenue away and there might not be much left for them.”
Unable to agree on a response, tribes didn’t make a final offer to tracks.
Entering the final days of the legislative session, House Speaker Melissa Hortman said that time had run out on getting sports betting done this year. Leadership had other priorities to finish off the session.
“We really did run out of time,” Sampson said. “There were efforts right up to the end to find a compromise. But we were never presented with any option other than the $3 million cap.”
Horse tracks are and aren’t on same page
Running Aces wasn’t on board with the revenue share being discussed by tribes and Canterbury Park at the end of session.
“The offers that the legislature was making vis-a-vis the tribes – let’s face it, the tribes are calling the shots on this – were insufficient or not even in the realm of fairness. It wasn’t just that we’re getting some allowance, as one senator very accurately characterized it. It was the fact that we’re getting an allowance and also told how we could spend it. And the way they said we could spend it had no significant benefit to Running Aces.”
Tribes are fine with racetracks using sports betting revenue share to enhance their horse racing offerings. But they don’t want to fund gaming expansions or lobbying for their commercial competitors.
Canterbury Park is, first and foremost, a horse racetrack. It’s hosted thoroughbred racing since 1985. Sampson said his preference was to get a sports betting license. But revenue share from sports wagering could help replace the boost to racing purses from the recently expired $84 million, 10-year agreement with SMSC.
“We felt from the beginning that the right way to approach sports betting in Minnesota would be for the tracks and tribes and even teams to get licenses. But Rep. Stephenson and Sen. Klein made clear right from the start with their comments in public hearings that this was going to be exclusive to the tribes and that was non-negotiable. So from there the main opportunity left for the tracks if we could not participate was to share in the revenue from sports wagering.”
Running Aces has a harness horse racing track that opened in 2008. But it’s more focused on the gaming around the track. Before coming to Minnesota, Ito helped run three of the largest cardrooms in California.
Running Aces wants to expand its gaming offerings with historical horse racing, sports wagering or craps and roulette. But with the revenue share discussion available with Canterbury, tribes weren’t willing to talk table game expansion. Even though eight tribes agreed to allow tracks to have craps and roulette last year, more tracks took a stance against allowing any gaming expansion for tracks in 2023.
Working out a deal on revenue share with Canterbury could be enough to add the Republican votes necessary to pass sports betting without Running Aces on board. That was the potential outcome at the end of this session if tribes were willing to lift the revenue share cap.
Legislature alters rules for electronic pull tabs
Although they couldn’t get sports betting passed, Minnesota tribes did pull off a major gaming victory during the 2023 legislative session.
The legislature added language to the omnibus tax bill restricting electronic pull tabs so that they don’t mimic slot machines. That was a point of contention with tribes, which have exclusivity over slot play in Minnesota.
These e-pull tabs started in 2012 as a way to fund construction of the U.S. Bank Stadium, home of the Vikings. But the games at restaurants and bars grew to fund many charitable causes. And charitable groups say the changes could cut contributions by 25%.
Lawmakers saw a need for the change after a Minnesota state Court of Appeals ruled in February that the “open all” feature of e-pull tabs was illegal.
Ito watched how tribes got their objections of e-pull tabs handled by the legislature this session despite objections from charitable organizations. And it makes him fearful of what tribes could do to tracks next year.
“Youth soccer teams, veterans, little leagues and senior citizens that rely on that revenue from e-pull tabs are going to lose millions of dollars,” Ito said. “If they can do that to that group, I don’t think they will have any feelings about doing that to the racetracks.”
All signs point to 2024 for Minnesota sports betting
Following the legislative session, Hortman did an exit interview with the Minnesota Reformer. Asked what the legislature didn’t get done this session, the House Speaker said an equal rights amendment and sports betting.
About sports wagering, Hortman told the Minnesota Reformer:
“It wasn’t as important — it’s a recreational thing. We know Minnesotans want to be able to legally engage in sports betting, but it was definitely not a top priority. Those two things were left undone, but I’m sure we’ll finish them next year.”
Klein was encouraged by Hortman’s remarks.
“For her to say sports betting among the two priorities for next year really is a good sign,” Klein said.
Ito also took notice of Hortman’s quote. And he thinks Minnesota will legalize sports wagering in 2024. But he’s not sure that’s good for tracks.
“I think it will be one of the major agenda items,” Ito said. “Everybody wants it. The public wants it. While they had bigger fish to fry this session, I think now they’ll be able to focus on it. My worry is, like e-pull tabs, it will get put in a bigger bill and pushed across the finish line, leaving us out entirely.”
Sampson acknowledges that possibility but is more optimistic about reaching a resolution for the state and tribes to share sports betting revenue with tracks.
“This year we had enough support in the legislature that they wanted to make sure tracks were included in the bill. Who knows what’s going to happen in the future. It’s very possible that they could pass a bill over our opposition. But hopefully we can reach a resolution. I think we were close enough that with a little more time, we could have probably resolved it.”
Best-case scenario: Stakeholders reach agreement before session
St. Peter said he hoped that the tribes, teams and tracks could come together in advance of next session with alignment on a plan. MIGA and Canterbury also expressed interest in continuing to work on a deal during the interim and entering next session with a joint proposal.
“I believe next year we should be able to resolve this because the differences aren’t insurmountable,” Sampson said. “We have some time now to have a dialogue about how to put this together in a way that makes sense for everybody.”
That would be a welcome sight for legislators who are just ready to get Minnesota sports betting off their plate.
“Boy, that would make my job a lot easier to come up with a solution and bring it to me,” Klein said. “I don’t care where the money goes as long as the state’s regulatory costs are covered.”