Nearly untying the sports betting political knot was a rare example of Minnesota bipartisanship

Call it the Minnesota sports betting deal that wasn’t.

Backers of a sports betting bill in Minnesota say they were close Sunday night, May 19, to passing a bill after nearly six years of trying, closer than they’ve ever been.

“We believe we have the support of the tribes, the tracks, the charities, bipartisan support in both chambers, if we had the opportunity to have it on the floor for a vote,” said Rep. Zack Stephenson, the Coon Rapids DFLer who has been pushing for a bill.

But the turmoil of the final weekend meant the agreement could not come to a final vote.

“I think if we had another 48 hours, I think we could do this,” said GOP Rep. Pat Garofalo of Farmington. “I sincerely mean that. We really could.”

Which leaves two questions — at least — about the latest failed attempt to pass sports betting: If the deal was there, why didn’t it pass? And what was in what sponsors call “a framework” that untied the political knot that has flummoxed supporters in the past?

The why is less clear. Backers said there was only a narrow path to success in the final days of the legislative session. To meet Senate rules, the agreement needed to have passed the House by Friday, May 17, to allow it to be “read in” three times on three separate days. Once the House failed to pass it, that timing was blown.

DFL sponsors say they only needed one GOP vote to go along with 67 DFL votes, but that vote didn’t materialize. But wasn’t Garofalo in support?

Garofalo said he did support the framework but there were still important details to be worked out. The issue likely got caught up in end-of-session politics, however, because it was one of just a few — along with a bonding bill and perhaps the Uber-Lyft bill — that might have required GOP votes, and leadership did not want to release it until a broader agreement was reached. Garofalo hinted at that Sunday when he said: “The reality is, factors that are beyond the authors’ control, factors that are beyond the stakeholders. Those were really the things that have put us in a position where it looks like it’s not gonna happen.”

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Sports betting is a rare legislative issue in that it has bipartisan support and bipartisan opposition. Putting together the bill in the right combination to gather yes votes was more complicated than bills that divide more strictly along partisan lines. 

Supporters, however, say they are more positive about the bill’s chances now than they have ever been. That is because they finally found a combination that settled the historic dispute between the state’s tribal nations and the two horse racing tracks. That, combined with an earlier-in-session agreement to help the charities that use pull tabs to raise money for their work and with the lead Senate sponsor’s realization that the votes he needed were with Republicans and not with anti-gambling DFLers, broke the bill free.

Sen. Matt Klein, DFL-Mendota Heights, had been trying to figure out a way to craft a bill that could pass with only DFL votes. Not having to satisfy GOP demands that the two horse racing tracks get some help made the bill less complicated. He spent part of the session trying to attract opponents within his own party via amendments to limit the scope of the betting and by adding protections for consumers, especially those with gambling addictions. But ultimately, those opponents — especially Finance Committee Chair John Marty, DFL-Roseville, did not come along or even hold a promised hearing.

That made the tribal-tracks agreement vital to getting the six GOP votes he needed in the Senate. Klein no longer supports a Marty amendment to prohibit all in-game betting, like bets on who will score first or whether a player who hits a home run or scores a touchdown will do it again in the same game. These “prop bets” make up about half of all bets, according to the betting platforms. The bill would have, however, banned such bets on college sports. And Klein supports some of the protections, such as self-imposed betting limits and waiting periods before those limits could be increased.

So what was in the “framework?”

Minnesota would have become the 39th state to legalize sports betting since the U.S. Supreme Court ruled in 2018 that Congress couldn’t decide which states could offer sports betting and which could not. The Minnesota version would have:

• Given tribal nations exclusive authority over sports betting for bettors 21 and older, both with physical sportsbooks in their casinos and mobile betting, likely using the existing national sports betting platforms such as FanDuel, DraftKings and Fanatics
• Allowed the tribes to contract with a sportsbook to handle the betting for a share of the profits
• Imposed a 22% state tax on net winnings — what is left after winners are paid off — but only on mobile bets placed off-reservation, not on sports betting in casino sportsbooks. That said, nearly all of the betting action is via mobile, not in-person betting.
• Raised around $88 million a year in taxes, with the proceeds divided like this: charitable gambling 45%, horse racing 15%, tribal equalization fund 15%, 10% for problem gambling programs and education, 10% to recruit national events like the Final Four and 5% for youth sports and activities.
• Allowed so-called prop bets during games but could not be placed on college sports. Prop bets are on such wagers as how many points a team or player will score in a quarter, who will score the first touchdown, and even how long the National Anthem will last at the Super Bowl.
• Taxed the value of gambling promotions — think the $100 of free bets the sportsbooks offer in TV ads — as though they were paid for by the gambler
• Regulated fantasy sports betting under somewhat different rules and faced a tax of 15% on adjusted gross receipts
• Blocked platforms from sending push notifications when the app is closed except to notify of possible fraud. It also would let gamblers impose self-limits and would require integrity monitoring to identify potential insider betting, say from athletes who are not allowed to place bets.
• Instructed the state Commissioner of Public Safety to regulate gambling

The key to the deal might have been the funding for horse racing as well as tribes that don’t benefit greatly from sports betting.

“I think there was a lot of skepticism that at the end of the day, you could find a deal that the tribes and the tracks could both support, and we believe we’re there,” Stephenson said.  “It’s a major accomplishment … I think it sets the stage for future action. Now we know that the deal is there to be had.”

Finding a solution to that problem fell heavily on Rep. Brad Tabke, DFL-Shakopee, who represents both Canterbury Park and the Shakopee Mdewakanton Sioux Community’s Mystic Lake Casino. The final agreement satisfied both tracks and tribes via new funds to distribute shares of the state’s sports betting tax revenue. Tabke called the tribal equalization fund “a very elegant” solution.

“The sportsbooks and the big corporations are the people who really make out the most in this,” he said. “It’s not the people of Minnesota, it’s not the tribes, it’s not the tracks, it’s definitely the sportsbooks.” The solution was to help smaller tribes that wouldn’t benefit as much.

Because each of the 11 tribes would need to contract with a sportsbook, it is expected that the states with the largest casino operations would grab the largest sportsbooks, which dominate the market. Other tribes would be left with companies with smaller chunks of the market (less well-known companies like Superbook, Unibet, and BetFred all operate in Iowa) and, therefore, make less money.

The Minnesota Indian Gaming Association (MIGA) has had two foundational stances since the issue arose: that tribal governments have exclusive rights to sports betting and that the horse tracks do not make more from the deal than the smallest tribes. So the special funds get equal share of state revenue and tribes that see less than 10% of market share can get compensation from the fund. Even tribes that don’t enter agreements with sportsbooks could get money from the fund.

Tabke said the horse racing fund was meant to help the horse owners, the jockeys, the trainers and the other people who depend on racing. The two tracks — Running Aces in Columbus and Canterbury Park in Shakopee — would have gotten a piece of the other fund with at least 50% going to race purses. An end-of-session offer in 2023 would have capped racing’s share of revenue at $3 million a year. Some lawmakers wanted all of that money going to the prizes that horse owners get from racing since that supports the owners, not the tracks themselves. The 50% minimum is what Running Aces insisted on to stay in the deal, multiple sources close to the agreement said.

Had it been Tabke’s choice, all of the money would have gone to purses. Overall, he said, the solution had enough for all the parties that they all signed on.

“It’s beyond unfortunate and frustrating that it didn’t get done,” Tabke said.

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Another key provision that has not been publicized is what might be called the Iowa Plan. An amendment that was proposed by Garofalo but never moved because the bill was never debated was included in the last draft. It would have given any sportsbook licensed in Iowa a provisional license to operate in Minnesota quickly. That is, if the company could have reached an agreement with a tribe, they could have been allowed to offer mobile sports betting by Sept. 1 — in time for the NFL season.

Because that would have allowed betting this summer rather than January 1, 2026, the revenues to the state would have begun earlier. Garofalo said he was inspired by the gap between the legalization of recreational cannabis and the opening of retail stores. As with marijuana, a driving rationale for legalizing sports betting is to replace as much as possible an illicit market with the state-regulated market.

Charitable gaming has been in financial churn for several years. Pull tabs and e-pulltabs raise money for the charities and the state. One of the largest sources of money to repay bonds for the Vikings stadium was electronic pull tabs. But once bonds were retired, the tax remained. And after the tribes prevailed in litigation challenging a certain type of e-pulltabs because they too closely resembled the slot machines the tribes have exclusive rights to, revenues dropped.

The bill would have given slightly less than half of sports betting revenue to charitable gambling. It would also have allowed some of the revenue to renovate the halls of military veterans associations such as the American Legion and the Veterans of Foreign Wars. Along with a pull tab tax cut last year worth about $15 million, charitable gaming would have received $55 million in tax relief and benefits each year had the bill passed.

One provision in the framework agreement was disliked by the platforms but insisted upon by some DFLers. When gambling platforms enter a market, they build market by attracting bettors with promotions of free gambling. Often that means platforms lose money in the early years and try to argue that those bets aren’t using real money and therefore shouldn’t be taxed. They lost that debate. If a fledgling gambler is given $100 in free bets and loses it all, that $100 would have been taxed in Minnesota, unlike other states.

The Sports Betting Alliance, a lobbying group representing the four largest betting platforms — BetMGM, FanDuel, DraftKings and Fanatics Sportsbook — was supportive of the work by the sponsors but non-committal as to the framework.

“We appreciated the spirit and hard work of the stakeholders of working together to legalize sports betting this past session,” a statement from the betting alliance stated. “When we renew the effort again in 2025, we hope to have further progress on limiting the illegal market.”

Garofalo, who introduced the first sports betting bill right after the U.S. Supreme Court ruling in 2018 and is not running for reelection this year, sought to make the framework agreement say something bigger than gambling.

“I know there’s more important issues than sports gambling, but the barriers that legislators are dealing with in sports gambling are a symptom of a bigger problem,” he said, citing increased partisanship and polarization in legislatures.  “The fact that legislators of both parties with geographic diversity were able to get so close to an agreement … I think that’s a testament to the people who are involved in it, that these things still can happen.”

Editor’s note: Peter Callaghan wrote this story for MinnPost.com. Callaghan covers state government for MinnPost.

This article first appeared on MinnPost and is republished here under a Creative Commons license.

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