Future prospects for legal sports betting in Minnesota rests with tribes, horse tracks

State Rep. Zack Stephenson was optimistic as he unveiled a bill to bring sports betting to Minnesota. In the four years since the U.S. Supreme Court cleared the way for states to offer such gambling, he’d managed to move a majority of the state’s federally recognized tribal governments from ‘heck no’ to ‘maybe yes.’

The tribes don’t have legal exclusivity over gambling in the state but they have political clout. DFL Gov. Tim Walz and DFL House Speaker Melissa Hortman had no interest in betting bills without tribal sign-off.

Stephenson, DFL-Coon Rapids, said he reached an agreement with tribal leaders across the state first by respecting their sovereignty and then by abiding by a fundamental tenet of the tribal position on gambling. His bill would give the tribes control over the new-to-Minnesota form of gambling, excluding non-tribal players such as race tracks from sponsoring betting.

Having the tribes on board – something that was strengthened by the Minnesota Indian Gaming Association’s endorsement of Stephenson’s actual bill released in March – gave him and others cause for optimism. Could Minnesotans be – legally – betting on sports by the start of the Vikings NFL season?

As it turned out, no. 

House File 788 passed the state House 70-57 in mid-May, mostly with DFL votes but with a smattering of GOP votes as well. But with adjournment looming, the Senate GOP version of the bill lacked the key element that had brought the majority of the tribes along.

“The House Bill and the Senate bill are pretty much the same, except for one major area,” said Sen. Roger Chamberlain, the Lino Lakes Republican and prime backer of the Senate version. That area? Chamberlain granted the two horse racing tracks in the state – Canterbury Park in Shakopee and Running Aces in Columbus – equal authority to sponsor sports betting via mobile platforms.

The House DFL wasn’t. A majority of the tribes with casinos weren’t either. The Minnesota Indian Gaming Association “has consistently opposed the expansion of non-tribal commercial gaming and will continue to do so,” wrote executive director Andy Platto.

The Senate bill never reached the floor and the session adjourned without a sports betting bill. Again.

Did the tribes walk away from a goldmine? Would they have still benefited financially had they agreed to cut the track in on the sports betting action? Probably not. 

Unlike slot machines – and state lotteries – sports betting is a high-volume, low-margin form of gambling. Most of the money bet is paid back to players with much of the rest covering costs. Under the Stephenson bill, tribes would keep all profits from in-person sportsbooks at casinos and would acquiesce to a 10 percent tax on net winnings – the amount bet by players minus payouts and expenses – to the state.

While that would be the first significant sharing of gambling revenue with the state (some fees are paid now to cover the costs of state regulation), taxes might only amount to $13 million a year according to an analysis by Senate committee research.

On the surface then, the profits weren’t enough to push a majority of the tribes into giving up their position on exclusivity. Economics and geography played into a lack of unanimity among the tribes. Those with casinos in more-remote locales and those that suffered from the closure of the Canadian border due to COVID-19 might benefit more from gambling on mobile platforms than those in population centers.

Sports betting – available to all states following a 2018 U.S. Supreme Court ruling against a federal law that granted it only to Nevada and New Jersey – is the future of gambling, say those who follow the industry. Yet Minnesota remains among a minority of states without legal sports betting, sending its residents to neighboring states or to the unregulated, illegal market.

And it is popular. A springtime poll for KSTP by SurveyUSA found that 64 percent of the 650 adults surveyed supported legalization of sports betting. The same poll found that 57 percent want mobile betting offered and 57 percent said in-person betting should be available in both tribal casinos and horse tracks. Only 7 percent said tribal casinos should have exclusivity.

Gambling’s economic impact

Gambling for tribal nations is more than just another business. It is central to their economies, their political clout and their sovereignty. 

“Much progress remains to be made,” states the conclusion of a history of the issue on the Minnesota Indian Gaming Association’s website. “But the first 25 years of Indian gaming has begun to reverse the tide of poverty and neglect experienced by generations of Minnesota’s Native people due to failed federal policy.”

Anton Treuer is a professor of Ojibwe at Bemidji State University. Among his 19 books is “Everything You Wanted To Know About Indians But Were Afraid To Ask.”

“The political and economic power of Native nations has grown tremendously, especially following the development of casino gaming,” he writes there. “Tribal leaders are more used to and effective at operating in the American and Canadian political systems, and the public has become slightly more aware of and knowledgeable about what is happening in Indian country, which helps generate outside support.”

There are a dozen counties in Minnesota where tribes are the largest employer.

“You’d better be nice to Indians there,” he writes. “You’ll probably end up working for one someday.”

“In 1990, before gaming exploded across the state, unemployment in tribal communities was around 50 percent,” he said. It has now fallen to 20 percent in Minnesota but remains at 50 percent in South Dakota.

“And that’s because South Dakota already had legalized statewide gaming,” he said.  “Anybody who’s got better financing and better geography is going to have a more-profitable casino.

“Would you rather drive to a rural reservation to gamble or would you rather go down the block?” Treuer asked. “(The tribes’) advantage in gambling really happens not because of their better geography but because of their monopoly due to the legal structure of state gaming.” 

A sports betting deal that brings the two horse tracks in might not be a good deal, at least not yet, he said.

“Why would they even waste their time with something that’s gonna pay a few million a year if they’re gonna ask for sovereignty and revenue-sharing concessions or a chance someone will try to leverage them for something if they agree to it?”

But Treuer said tribes in Minnesota are pragmatic politically. Because it is not unimaginable that the government could be controlled by Republicans, they “are usually a bit politic about not inflaming the right as to get them lined up for an all-out attack on tribal sovereignty.

“That might sometimes have them moving a little slower on things that might seem like they’re an obvious benefit to tribes because they’re trying to get other things done that might get held up as political backlash,” he said. Not that it is necessarily a factor in sports betting, Treuer said, but it is “part of the political tapestry” tribes navigate.

Who’s in?

Minnesota tribes have a presence in the State Capitol but it is a translucent one. The Minnesota Indian Gaming Association is the public lobbyist but even their employees are not especially obvious. The association declined to make anyone available for an interview. 

Platto, the current executive director, told Stephenson’s Commerce Committee in March that all but one of the tribes he represents supported Stephenson’s version.

“In concept, the (bill) does recognize that tribes, as the state’s gaming experts, are best positioned to operate Minnesota’s sports betting market in both retail and mobile environments,” he said. In looking at other states that have legalized sports betting, Platto said the impact on existing tribal gaming has been positive but only if the laws are “carefully crafted to ensure that tribes play a critical role in bringing the marketplace to consumers.”

But Chamberlain sees the issue as one of consumer choice and preserving horse racing in the state. Chamberlain said his bill would have multiple bookmaking services that would set different odds and different prices.

“We’ve always been willing to help the tribes’ business model, but we cannot allow exclusivity in this case simply because it won’t be a good product,” Chamberlain said after his bill cleared the Finance Committee with the help of DFL leaders. “It would also put the tracks out of business, right? When you put the horse tracks out of business, that’s a lot of jobs in the state too.”

Canterbury is in the midst of a 10-year marketing agreement with the Shakopee Mdewakanton Sioux Community and Mystic Lake Casino in which the tribe provides financial support for purses while the track owners agree not to seek expansion of their other gambling offerings.

That leaves it to racing associations and the owners of Running Aces in Columbus to speak for those interests. Mike Cronin, the executive director of the Minnesota Horsemen’s Benevolent & Protective Association, did not want to talk about the issue more recently. But during the 2022 session he wrote via email that the Stephenson bill was a threat to the industry.

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“It would be like Burger King not being able to offer fries and beverages while McDonald’s serves whatever they want,” Cronin wrote. “Take a wild guess who will prosper and who will die.” The two tracks have been managing betting on races both on site and in other tracks for decades, Cronin wrote.

Bipartisan push

What is sometimes overlooked is that many legislators never got to the question of which entities should run sports betting. Lawmakers on both the right and left oppose any expansion of gambling for moral and social justice issues. Addiction remains a problem for many who gamble and the negative impacts fall more heavily on communities of color and the poor. Any pro-sports betting majority would need to be a bipartisan coalition. And within those coalitions are differences of opinion over who controls and who benefits from the new betting.

Stephenson expanded his view from casino-only sports books at the 19 existing casinos to mobile betting via apps. He said he became convinced that the sports betting industry is dependent on mobile. That, in turn, convinced him to stick with tribal gambling managers who have been running gambling for years.

“Expanding gambling off of specific locations is a huge thing. It’s a huge development to be able to gamble from your house,” Stephenson said. “If we’re going to do that, we should stick with the most-established, sophisticated players in the market, which are the tribal casinos.”

Coincidental or not, that also matches with a central DFL belief that the tribes should be the primary beneficiaries of gambling because revenue is used for social, health and economic development programs for tribal members.

Stephenson’s bill would have created two master sports betting licenses: one for the four Dakota tribes and one for the seven Ojibwe/Chippewa tribes. Individual tribes would sign contract agreements with the master licensee and then apply for sports betting licenses with the state. Those tribes could then contract with one of the large private sports betting companies such as DraftKings, Bet MGM and FanDuel or create their own betting platforms. Organized as the Sports Betting Alliance, those companies lobbied the issue heavily in St. Paul.

Once legalized statewide, sports betting could be available inside casinos following compact negotiations between the state and the tribes under the federal Indian Gaming Regulatory Act, the 1988 law that created the structure for tribal gambling across the U.S.

The existing compacts – one that offered slot machines and a variety of machine-based games that mimic other card games, and one that offered blackjack – have no sunset clauses, and the tribes like it that way. They never have to return to the state for further negotiations or, perhaps, concessions.

“That’s a red line for them,” Stephenson said. It is why both the Stephenson and Chamberlain versions direct the governor to negotiate a third set of compacts for in-person sports betting at existing casinos.

Stephenson agreed that the tracks are struggling to maintain prize money to support the industry. But he said the tribal leaders he spoke to wondered what that has to do with sports betting. “Why do you give preferential treatment to this industry that isn’t working out?”

What’s next?

Two of the legislators who have been pushing for legalization of sports betting spent the recent session in the minority – Rep. Pat Garofalo, R-Farmington and Sen. Karla Bigham, DFL-Cottage Grove. As such, they weren’t calling shots on the bills or the strategies, leaving them somewhat freer to analyze from a safe distance.

“As we transition from a black market to a regulated market, people will fight for access and market share,” he said. “When you regulate a black market, government decides who is going to be in the business.” Despite the federally recognized tribe’s special standing codified by the Indian Gaming Regulatory Act, the others will still lobby for a share.

“It’s to be expected,” Garofalo said. “The only way sports betting is going to be legalized in Minnesota is if those three stakeholders are all in favor of a bill. If any of the three is opposed, it is highly unlikely it will become law.”

Garofalo was a cosponsor of the Stephenson bill and was one of five Republicans to vote for it (four DFLers voted no). But he said his motivation was to get something out of the House and into a conference committee with the Senate. The Senate’s failure to pass anything ended that path.

“That’s not a purity test of mine,” she said. But Bigham, who is leaving the Senate to pursue a seat on the Washington County board, said she wouldn’t support a bill unless it had most of the tribes in support.

“I do believe the end game will have some sort of accessibility outside of tribal casinos,” she said.

The Minnesota Indian Gaming Association (MIGA) issued a short statement in response to questions about the future of sports betting: “MIGA tribes are still evaluating the outcome of the 2022 Legislative Session and continue to consider their future policy positions heading into 2023.” 

Correction: This article was updated to reflect the latest version of Rep. Stephenson’s bill and how it distributed licenses. The 11 tribes would receive licenses from the state, not the holder of the two master licenses, and could contract individually with sports betting companies.