One day after the Missouri House Rules Committee sent a pair of sports betting bills to the House floor, the Senate had its first informational hearing on an issue that lawmakers have been trying to solve for going on five years.
The Senate Appropriations hearing — which was interrupted for several hours while the full Senate went into session — was less explosive than past hearings, but high-powered. Representatives from all five of the state’s professional sports teams were present, along with lobbyist Jeremy Kudon on behalf of DraftKings, FanDuel, and other operators; Penn National Gaming Vice President Jeff Morris; Joe Briggs from the NFLPA; and many others.
There was no vote, and it’s unclear when Appropriations Chairman Dan Hegeman will call for one, but the General Assembly goes on spring break after today’s session unitl March 21. Sports betting legislation is already on the House floor, and it’s possible that the House will approve the bills after the break, leaving it to the Senate to hammer out details and come to a consensus with stakeholders.
The hearing covered a lot of the same ground discussed last month in the House, but various parties deemed it useful and “productive.” It became clear during the hearing that key issues including the tax rate, problem and responsible gaming funding, and promotional write-offs are still to be resolved. Sen. Denny Hoskins, one of the bill sponsors, also had multiple questions about the proposed entertainment district that would surround professional sports venues and how the teams will benefit from having a digital skin, though neither issue appears as critical as the first three.
Tax rate key in fight against black market
Wednesday’s hearing was on five bills related to legal sports betting and video lottery terminals. Hoskins has his own bill, while a coalition of casinos and professional sports teams supports others. Hoskins earlier this session separated sports betting and VLTs and put them into separate bills. In the past, he has tried for a single bill legalizing both, but without success.
None of the current wagering bills earmarks money for problem and responsible gaming programs. Hoskins proposes a 21% tax rate as compared to 10% in bills sponsored by Sen. Tony Luetkemeyer and Appropriations Chairman Dan Hegeman, and there are many questions surrounding whether operators should be allowed to write off promotional credits.
We just finished the hearing on my bill to legalize sports betting in Missouri. My bill protects consumers and keeps money in Missouri to fund our schools. I appreciate @Chiefs, @Cardinals, @Royals, @StLouisBlues, @thekccurrent and @stlCITYsc for testifying for my bill. #moleg
— Tony Luetkemeyer (@TonyForMissouri) March 9, 2022
The tax rate is a critical issue for operators, in large part because while they compete against each other to gain a foothold, they must also compete against off-short sportsbooks, which are not taxed. One base argument for legalizing wagering is to stamp out the illegal market.
“This is all about us taking market share from the illegal market,” said lobbyist Kudon. “People think we’re each others’ rivals, but it’s really sites like Bovada and MyBookie.” He said that the tax rate can directly affect what kind of odds an operator can offer, while black-market books don’t have to contend with building a tax rate into their odds.
Operators are most comfortable with a tax rate at or below about 10%, though many are live in states with higher rates. Missouri is bordered by two states with higher rates — Illinois at 15% and Tennessee at 20% — but both of those states may end up with fewer platforms than Missouri. In addition, Tennessee offers only digital wagering, as there are no brick-and-mortar casinos in the state.
Illinois and Tennessee are among the states that do not allow operators to write off promotional play, which can change the effective tax rate. In essence, allowing operators to write off promotions can lower the amount of tax dollars that a state receives. Taxes are levied on adjusted gross revenue, and if promotions are written off, the AGR is lower, in turn, reducing the payout to a state.
Last week, a House committee discussed a step system in which operators could be allowed to write off 100% of promotions in the first year, with that percentage gradually reduced over five years. That compromise could also be an option in the Senate.
Questions still linger
In starting to consider funding to address problem gambling, senators invited consultant Brianne Doura-Schawohl, who was representing the National Council on Problem Gambling, to offer testimony. She pointed out that Missouri traditionally has earmarked little for a growing problem, and said 92,000 Missourians are estimated currently to suffer from gambling addiction.
On the House side, Doura-Schawohl has already worked with lawmakers to increase the minimum commitment proposed for state funding in their bills to $500,000 from $250,000. Her goal is to get both chambers to agree to allot a percentage of adjusted gross revenue to the issues, as well as commit to a fixed minimum number.
Hoskins peppered witnesses with questions Wednesday but did not get all the answers that he wanted.
Update today in Missouri as well… Missouri HB2502 and HB2556 which would legalize sports betting in the state moved out of special committee today. The bills will now move to the full House. https://t.co/jwgGLjPISM
— Alex Gold (@AlexGold) March 2, 2022
“I think the hearing overall went well, but I think there are still some issues that need to be worked out,” Hoskins told Sports Handle after the hearing. He said the various proposed bills in both chambers “are still pretty bare bones and give a lot of latitude to the teams. The teams and casinos have come up with a bill that benefits them, but I want a bill that benefits the people of Missouri.”
Penn National Gaming’s Morris brokered a deal among the casinos — PNG has three retail locations in Missouri — and the five professional teams to put them in agreement on a legislative proposal. Members of the group spent eight months negotiating with one another to reach a consensus they hope finally leads to legalized wagering in Missouri.
“I thought it was a very productive hearing,” Morris told Sports Handle, “and we look forward to continuing to communicate with the senators on their areas of concern and look forward to moving the ball forward and getting sports betting legalized by the end of the session.”
