Sports betting sponsor solves potential problem, increasing odds for legalization in Minnesota

The House sponsor of a sports betting bill announced a deal Tuesday to settle an electronic pulltabs matter that had the potential to scuttle the entire gambling legalization effort.

Rep. Zack Stephenson, DFL-Coon Rapids, said the arrangement he brokered resolves the concerns of the Allied Charities of Minnesota (ACM) that runs charitable pulltab operations in bars and restaurants throughout the state.

“We still have a lot of work to do to pass a sports betting bill, but this is a very important step in the right direction,” Stephenson said.

ACM has been concerned that changes to electronic pulltabs would curb its income. In 2023, the DFL-controlled Legislature banned the “open-all” feature on electronic pulltabs, meaning the tabs had to be opened individually and not with a single touch. The charities argued this would slow down pulltab users.

The electronic pulltab change came about after years of legal challenges and lobbying by the tribes. The state’s tribes argued that since becoming legal in 2012 as part of the legislation to build U.S. Bank Stadium, electronic pulltabs had become so dynamic that they mimicked slot machines in violation of tribes’ exclusive rights to operate casino games in the state.

The tension over electronic pulltabs hasn’t been central to the push to legalize sports betting in Minnesota, but had the potential to cost votes on an issue that needs widespread bipartisan support for passage. Republicans especially were not pleased at how the change might hurt charities in smaller communities throughout the state.

Under the Stephenson deal, the charities agree they won’t ask the Legislature to change the 2023 electronic pulltab law banning the open-all feature. In exchange, Stephenson said the tax on sports betting would increase from 10% to 20% to cover $40 million in tax cuts for charitable gambling.

Since the end of the 2023 session, Stephenson said he has been working with the tribes and charities to reach a “durable agreement” on the pulltabs. “I am happy to report that we have found a deal that both the charities and the tribes can live with,” he said.

The Minnesota Indian Gaming Association issued a two-sentence written statement from Executive Director Andy Platto in support of the tax relief for charities.

Charitable gambling operations fund all sorts of things throughout the state from veterans services to youth sports, public safety equipment and services for people with disabilities. Stephenson said the taxes from sports betting will be a “major benefit” to organizations from American Legions to youth hockey clubs.

Allied Charities Executive Director Rachel Jenner supported the agreement, saying in a letter, “We are hopeful that the sports betting legislation will pass and give Minnesota charities the much needed tax relief. This historic reduction in taxes will allow us to better serve our communities.”

The St. Paul-based organization represents more than 500 charities throughout the state. Adding the $40 million to $15 million in charitable gambling tax relief in 2023, Jenner said the charities will net more revenue than they pay in taxes for the first time.

In exchange, ACM won’t seek to revisit the electronic pulltab regulations “at least until the full impact of the game changes and the tax relief can be jointly assessed,” Jenner said.

She also noted that Minnesota charitable gambling leads the nation.

Stephenson said he plans to incorporate the agreement into his bill to legalize sports betting on Thursday in the State and Local Government Finance and Policy Committee hearing. He will need committee votes to do so and noted that the underlying gambling bill has several committee stops remaining before a House floor vote.

In the Senate, Sen. Jeremy Miller, R-Winona, called the Stephenson agreement a “step in the right direction” and an important aid to the charities, but he said he’s continuing to work to ensure horse racing tracks also “benefit fairly” from any proposal.

The state’s two tracks have repeatedly said they should be part of any expansion of sports gambling.

Taro Ito, CEO of Running Aces Casino, Hotel and Racetrack in Columbus just north of St. Paul, said the track is committed to a sports betting solution that includes the two tracks. “Racetracks have offered sport betting since 1985 and taken millions of sport bets over the past 39 years,” he said in a statement. “Why would racetracks be excluded, now?”

He said the tracks must be compensated to make up for a loss of business from tribal-only sports betting. “We know that the horse racing industry in Minnesota would be dramatically damaged by this legislation,” Ito said.

Sen. Matt Klein, DFL-Mendota Heights, is the chief sponsor of the Senate bill, which currently awaits action in the Senate Elections Committee. He declined to comment because he had not seen the Stephenson agreement.

The Senate Taxes Committee endorsed a legalization bill last week that changed the tax rate to 20%, with 20% of those collections going to charitable gambling operations as well as youth sports, gambling addiction programs and tourism.

But the Senate bill also contains a “whistle-to-whistle” ban on in-game betting, something opposed by gambling platforms. The provision would allow bets only on the outcome of the game, not a series of bets on activities during the game such as specific plays or scores or pitches.

The provision, sponsored by Sen. Jordan Rasmusson, R-Fergus Falls, was added when the bill was in the Commerce Committee earlier this month.