Sports betting could get another shot in Minnesota this year. What have other states done?

ST. PAUL — Since the U.S. Supreme Court ended the federal prohibition on sports betting in 2018, more than 36 states have legalized the practice in some form.

The expansion has been aggressive, leading some advocates to raise concerns that states are moving on sports betting too quickly without fully assessing the potential consequences. Their chief worry is that there aren’t enough guardrails on multibillion-dollar companies operating potentially addictive services that can now be accessed from anywhere by mobile phone.

Minnesota, known for being slow to move on its morality laws such as those regulating alcohol and cannabis, is now surrounded by states that have legalized sports betting at some level, and is in the minority of states nationally that have not done so.

Last year, Minnesota saw its strongest push on sports betting yet, though it failed in a legislature divided between Democrats and Republicans. Now that government is under complete control of Democrats, the odds may have improved more still.

All of Minnesota’s neighbors have legalized sports betting, but what do their setups look like and how would they compare?

Of Minnesota’s four land border states, Iowa has the most expansive sports betting scheme, with mobile and in-person sports betting currently run by commercial operators. Minnesota lawmakers often talk of constituents who drive across the state border to place bets from their phones legally or to bet at the Diamond Jo Casino just 3.5 miles south of the border on the interstate.

Iowa, which legalized sports betting in 2019, taxes net receipts from sports betting at 6.75% and brought in close to $9.6 million in revenue last year in a state with an $8 billion budget. Sports betting taxes are not typically a huge revenue generator for states, and backers of Minnesota’s current proposal do not plan to use it as a major source of income.

None of the other three border states — the Dakotas and Wisconsin — allow mobile or online sports betting. As of early 2023, there was just one tribal casino in eastern Wisconsin that offered legal sports betting. North Dakota only allows tribes to run sports betting, though a proposed ballot measure would allow voters to be able to decide whether to allow it throughout the state. South Dakota allows both commercial and tribal operators to run sports betting, which it taxes at 9%.

For the past four years, Minnesota lawmakers have been pushing for legal sports betting without much success. Last year was a breakthrough, however, as the state’s tribal gaming association for the first time showed support for a bill.

That bipartisan legislation, sponsored by Reps. Zack Stephenson, DFL-Coon Rapids, and Pat Garofalo, R-Farmington, would give the state’s tribal casinos exclusive rights to run in-person and mobile sports betting for people 21 and older. 

Lawmakers and others who support legalization argue keeping online sports betting illegal doesn’t stop it from happening, and instead drives people to black market options that don’t offer any consumer protections. 

Support from the Minnesota Indian Gaming Association means the bill would have a better chance of being passed and signed into law. Gov. Tim Walz in the past has said he would only sign gambling legislation if it were supported by the tribes.

Legislation passed in the House on bipartisan lines last spring, but a competing version of the bill that included Twin Cities metro area horse tracks as authorized sports betting operators never got a vote from the full Senate. The tribes opposed that version of the bill.

Sports betting would be taxed at 10%, and revenue would go to gambling addiction programs, youth sports and gambling law enforcement efforts. Nearly half of that money would go to harm reduction programs, something Stephenson said was unique to Minnesota.

“There's a lot of consumer protections and safeguards in the bill and on top of that, we devote almost half of the tax revenue generated by sports betting to treatment for problem gaming,” he said. “No other state comes anywhere close to that.”

Other states like New York tax sports betting at 51%, but the overall revenue is still negligible compared to the state budget.

As of early February, Stephenson had not yet introduced sports betting legislation, nor had Senate Republicans. But Stephenson, who chairs the House Commerce Committee, said he expects a bill similar to last year’s to advance in the coming months. 

While no sports betting bills had been filed as of early February, Sen. Jeremy Miller, R-Winona, says he’s introducing a proposal to allow the tribes, Canterbury Park in Shakopee and Running Aces in Columbus to run sports betting.

Groups that work to fight gambling addiction worry most about the implications of constant online access to sports wagering, which they say needs more regulation to reduce the potential for harm.

Susan Sheridan Tucker, executive director of the Minnesota Alliance on Problem Gambling, said gambling apps use algorithms designed to feed customers betting opportunities that keep them playing.

“Our concerns with mobile are that people have 24/7 access, and there's no friction at all when somebody is betting online,” she said. “So that means there need to be many more kinds of guardrails in place for those that essentially lose control when they're gambling.”

Sports betting has become legal so recently in many of the states that now allow it that it's hard to say exactly what effect it’s having on public health, Sheridan Tucker said, but anecdotally there are some examples showing the potential.

New Jersey, which led the charge to overturn the U.S. sports betting ban, was one of the first states to legalize sports betting after the federal prohibition ended. Calls to that state’s gambling addiction hotline have tripled since 2018, with the trend being driven by online gambling, according to an NBC New York report based on data from the hotline .

So what can Minnesota do to dampen the potential negative effects of legal sports wagering? Sheridan Tucker says placing limits on advertising is a big part of the picture.

While some states have placed regulations on advertising, companies have still faced penalties for violations. In Ohio, online sportsbooks advertised on university campuses despite being prohibited from doing so, but the fines could be shrugged off by multibillion-dollar companies, Sheridan Tucker said.

The sports betting bill passed by the Minnesota House last year contains some safeguards, including restrictions on apps.

“Operators like FanDuel and DraftKings are very unhappy with some of those limits,” Stephenson said. “For example, the bill contains a flat ban on push notifications on your phone … that I don't think has happened in any other state. The operators are really mad about it, and we're probably going to fight about it all year long.”

Sheridan Tucker said there has been some reluctance to include major advertising restrictions in the bill, but that she would like to see them put into law.

Follow Alex Derosier on Twitter @xanderosier or email aderosier@forumcomm.com .