The Missouri Senate entertained its first sports betting hearing of the 2023 session on Wednesday, with casinos and professional sports teams speaking in favor of a legal wagering bill that would allow both retail and statewide mobile wagering.
The measure would enable sports betting through existing casinos and professional sports venues, whose representatives claimed “agnosticism” or spoke against a second bill that additionally would legalize video lottery terminals.
But the real discussion was happening behind the scenes in a paper war in which factions differ on whether SB 1, the bill from Sen. Denny Hoskins that seeks to marry legal wagering with legal VLTs, is constitutional.
Two documents arguing for and against the bill’s constitutionality were obtained by Sports Handle. Both were written by Jefferson City legal firms that specialize in gaming law.
According to a legal memo from Ellinger Bell, SB 1 is unconstitutional because “the Lottery Revenue Share allocates monies that are not ‘administrative expenses’ away from education.”
Follow the money
SB 1 names the Missouri Lottery Commission as the regulator of VLTs, which are currently referred to in the state as “gray machines.” Essentially, these machines look and act similarly to slot machines found in casinos, and they are widely available in gas stations, convenience stores, laundromats, bars, and other establishments, but are not licensed and taxed.
Through his bill, Hoskins seeks to bring VLTs into a licensed framework, but existing Missouri law requires that all lottery proceeds be earmarked for education.
Hoskins’ bill would allow for all proceeds from the machines, less administrative expenses, to be split between VLT operators and retailers. It also directs the lottery to funnel some money to the state veterans fund. The Ellinger Bell memo says the provisions are outside the bounds of current state law. The memo states of the administrative expenses as defined for operators and retailers, that it would be “unreasonable, inconsistent, and inequitable to label them ‘administrative expenses.'”
Quick status check on active sports betting bills/legislation, with sessions in fulls swing:
– Georgia: Legislators debating multiple bills, the need for a constitutional amendment
– North Carolina: The filing of a bill to legalize mobile is imminent
— Sports Handle (@sports_handle) February 22, 2023
On the flip side, Stinson partner Charles Hatfield wrote in his argument that SB 1 is within the bounds of constitutionality, because state law allows for lottery expansion and the VLTs offer games that are clearly “not games of skill.”
On the issue of revenue, Hatfield acknowledges that the constitution calls for lottery funds to be “solely appropriated for public institutions of elementary, secondary, and higher education,” and that “a minimum of 45% of the money received from Missouri state lottery ticket sales” should be paid out in prizes. But he also states that “monies received from the Missouri state lottery shall be governed by the appropriation of the general assembly,” suggesting that the legislature has latitude in determining how monies are classified and directed.
Essentially, Hatfield agrees that 100% of “net proceeds” should still go to education, but that the legislature has broad powers to determine what can be deducted from gross proceeds before the net proceeds number is reached. He suggests that the “administrative expenses” defined for operators and retailers would be allowable.
There was no vote during Wednesday’s Senate hearing. The state’s casino industry and professional sports teams spoke in favor of SB 30 (backed by stakeholders), while the pro sports teams also testified at least partially in favor of the sports betting section of SB 1, but neutral with regard to the VLT section.
Movement in the House
The House Committee on Emerging Issues was expected to vote Wednesday on HB 556, the bill brought by Rep. Dan Houx and supported by stakeholders, but due to an administrative error the vote was pushed to Thursday morning or after adjournment of the day’s floor session.
The bill is a mirror image not just of SB 30, but also of the bill that passed the House in 2022. It would allow for statewide mobile wagering with both casinos and professional sports franchises eligible for digital platforms. The casinos would also be allowed to have brick-and-mortar locations.
The Houx bill has long had the support of a consortium of local casinos and professional sports franchises, who banded together in 2021 to hammer out differences and support a common bill.
As the bill begins its march through the House, the issue it could face in the Senate is no different than it has been in the past — Sen. Hoskins has long married legal sports betting to authorization of video lottery terminals, which is a dealbreaker for casinos. The machines, they say, pose a threat to their highly regulated businesses. Hoskins filbustered and killed the Houx bill in the Senate in 2022.
Casinos: VLTs not well monitored
Casinos would like to see VLTs and sports betting acted upon in separate bills. Currently, the companies providing the machines and the retailers providing space for them are unregulated and do not pay taxes. The casino lobby is opposed to the existence of VLTs in general, but even more opposed to them being legalized.
Mike Winter, the executive director of the Missouri Gaming Association, said that surveillance in VLT parlors is not as well monitored as is required for casinos. As shown in a photo obtained by Sports Handle, a lack of monitoring surveillance cameras could result in minors more easily accessing or being exposed to the machines.
In addition, though it was not brought up at the hearing, because the VLTs are not licensed, those with problem gambling issues do not have the option to self-exclude. Nor is there a requirement for the machines to post responsible gambling messages like their casino counterparts.
“We support the sports betting part of this bill,” St. Louis Cardinals Managing Partner Bill DeWitt testified. “But when it comes to VLTs, we’re pretty agnostic. … To the extent that it will make this bill harder to pass, we don’t support [the VLT section]. We’d like to see these issues bifurcated.”