Published: April 4, 2022

Sports betting's time may have come in Minnesota Legalization could wipe out a robust black market

Minnesota can wipe out what is now a multibillion-dollar black market on sports betting and transform it into legal, regulated industry that would benefit tribes — including poorer ones — and protect consumers while also generating funds for youth sports in disadvantaged areas.

While there are many details to be worked out, the positives outweigh the negatives enough that the state should take this opportunity.

Much has happened to upend the gambling landscape in recent years. In 2018 the U.S. Supreme Court, in a landmark ruling, struck down a federal law that had long prohibited most states from legalizing college and pro sports betting.

Since then, states have practically trampled one another moving in on what once was the province of bookies, offshore sportsbooks and the gambling mecca of Nevada. More than 30 states now offer some form of sports betting, including every state bordering Minnesota. And Canada.

Minnesota's lack of a legal sportsbook has done little to tamp down demand. At a hearing earlier this week, state Rep. Zack Stephenson, who chairs the Commerce Committee, noted that the black market on sports betting in this state rakes in an estimated $2 billion a year — all without regulation, taxes, limits or consumer protections.

That should change. While this Editorial Board recognizes the problems associated with compulsive gambling, there is also the reality that illegal sports betting continues apace. It is time to put up some guardrails for those who want to bet on the outcome of college and pro games and who will find a way, whether it's through offshore betting or just slipping across the state line.

This year there seems to be fresh momentum for such a shift. Stephenson, DFL-Coon Rapids, has done an impressive amount of legwork in crafting a bill. He has visited each of the state's 11 tribes in turn, talked to problem-gambling experts and traveled to Iowa to see how its sports betting works. He and Rep. Pat Garofalo, R-Farmington, who has done years of work on this issue, have joined forces to build a bipartisan coalition that just might get the job done.

HF 778 would extend tribal exclusivity to sports betting for what Stephenson said would be the "biggest [legal] expansion of gambling in Minnesota in 40 years."

But as Stephenson noted in his testimony, the real point is "creating a legal marketplace that will displace the black market, and in doing so provide consumer protection, ensure the integrity of the game and limit money laundering and other illegal activity."

The bill would grant two master licensing agreements, one for the northern Ojibway tribes and one for the southern Dakota tribes. Tribal leaders, in turn, would work out an arrangement to benefit all tribes, including the smaller, poorer, more remote ones that have not seen as much gain from casino gaming. Mobile betting would be limited to those 21 and older.

The mobile component — the hottest element in sports betting — would allow Minnesotans to bet on the outcome of games from the privacy of their phones. The state would collect a 10% tax on profits from mobile betting. A full 60% of that would go to help the slice of the population for whom gambling can become compulsive. That may sound at cross-purposes, but problem gamblers already have a gambling addiction, with insufficient help. The remaining money would go to youth sports, particularly in communities in high-crime areas.

Sen. Roger Chamberlain, R-Lino Lakes, also backs legalized sports betting. But Chamberlain, who leads the Education Finance and Policy Committee, has a different plan that would require tribes to sublicense to the six pro sports teams and two racetracks. The tribes historically have fought any expansion that would bring casino-style gambling to racetracks, transforming them into so-called racinos.

Such an arrangement, Chamberlain told an editorial writer, would provide more competition and throw a lifeline to racetracks. "The tracks are barely making it now," he said. "If they don't get something, more likely than not they won't exist in Minnesota and they employ a lot of people. We can't just ignore that."

His other concern, he said, is charities that rely on electronic pulltabs. They pay a 30% tax on e-pulltab profits, he said, or three times what the tribes would pay on mobile sports betting profits. His bill would devote 60% of tax collections to offsetting what charities pay, allowing them to keep more of their profits.

Andy Platto, executive director of the Minnesota Indian Gaming Association, told an editorial writer that gaming has become the economic lifeblood of tribal governments, tribal communities and the tens of thousands of Minnesotans who work there. "In many cases," he said, "the impact of sports wagering expansion has been a positive one, but only when the authorizing legislation is carefully crafted to ensure that tribes play a critical role in bringing the marketplace to consumers."

Testifying on the House bill Thursday, Platto thanked Stephenson "for his respectful engagement on this issue," and said the tribes wished to continue in good faith as details were worked out "to ensure any expansion of off-reservation gaming benefits both the tribes and the … sports-betting public." Platto did not address the Chamberlain bill.

The House bill, thanks to the groundwork that's been done, has passed through four committees, including Taxes, and now heads to Ways and Means, typically the last stop before a floor vote.

"People see the popularity and opportunity in this," Garofalo told an editorial writer. "There are supporters and opponents of gambling in both parties. This is really not a partisan issue. But if we're going to get it done, legislators will have to work together to address concerns. That's the only way this happens."



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