Sports wagering, video lottery games again in conflict as legislature prepares for 2023 session
Changes in leadership, Senate membership could be key to action on gambling issues that have been on lawmakers’ agenda for several years
Bill DeWitt III, president of the St. Louis Cardinals, foreground, testifies in April in favor of sports wagering alongside Todd George, executive vice president of Penn National Gaming, center, and Jeremy Kudon, president of the Sports Betting Alliance. (Rudi Keller/Missouri Independent)
In the first week of legal sports wagering in Kansas, more than 100,000 Missourians found out how precise online location tools have become when they were blocked from making bets.
How many more crossed the border – or went to any of the other four legal sports wagering states adjoining Missouri to make bets – is unknown.
The stream of visitors to Kansas, however, is big enough for the Kansas City, Kansas, tourism agency to devote a page on its website to help people find a comfortable place to play.
When Missouri lawmakers return to work Jan. 4, they will try again to make sports wagering legal in the state. The starting point is the agreement between major league sports teams and most casinos to divide the market. The plan won approval last year in the Missouri House but died in the Senate, blocked by demands to add video lottery terminals, also called VLTs, and definitively stop what are called “gray market” devices.
State Sen. Denny Hoskins, R-Warrensburg, said in an interview with The Independent that while the casinos see sports wagering as their best bet for reversing declines in traffic and revenue, the best deal for the state is video lottery.
“We want to get it done, but we have got to get it done as a package,” Hoskins said. “There is almost no revenue without (video lottery terminals).”
The organization that lobbies for the state’s 13 casinos isn’t interested in a package deal.
“Our position has been consistent over the last couple of years, to have a standalone bill,” said Mike Winter, of the Missouri Gaming Association. “Including VLT provisions in the bill makes it a much more difficult bill to get passed.”
Gambling expansion and control will, as it has for several years, be a significant issue in the 2023 session. All the bills filed so far are similar or identical to bills filed in past sessions. And the positions of the key lawmakers and interest groups haven’t changed.
What has changed is the legislative leadership. The House and Senate have new top leaders, Rep. Dean Plocher of Des Peres as House Speaker and Sen. Caleb Rowden of Columbia as Senate president pro tem, as well as new majority floor leaders.
And the 34-member Senate has eight new members.
Andy Arnold, lobbyist for video lottery terminal company J&J Ventures, said the outcome of the 2022 elections make it more likely a package deal for gambling interests will gain favor.
“The dynamic change, from a video lottery perspective, is we have a very good relationships with everybody coming into the Senate,” Arnold said.
Through Monday, four bills dealing with gambling issues have been filed in the Senate and three have been filed in the House. Along with sports gambling, there are proposals to authorize a new casino at the Lake of the Ozarks, strengthen the laws defining illegal gambling machines and change the way state gambling taxes are spent.
The deal presented to lawmakers last year for sports wagering was negotiated by owners of the 13 licensed casinos and the state’s major league franchises – the Kansas City Chiefs, Royals and Current – a women’s professional soccer team – and the St. Louis Cardinals, Blues and St. Louis City soccer club.
Each of Missouri’s six licensed casino operators would be able to offer three platforms, or “skins,” per casino, with each casino company capped at six total. Each of the sports teams would contract with a single platform.
Only bets placed in-person at a casino or through one of the approved websites would be legal in Missouri. The sports teams would each have a “designated sports district” for 400 yards around its stadium where only the team’s chosen platform could advertise.
Both Hoskins’ combined bill and a bill filed by Sen. Tony Luetkemeyer, R-Parkville, would enact the negotiated plan. No sports wagering bill has been filed in the Missouri House.
One big difference between the negotiated plan and the laws regulating casinos generally is the tax rate. When a gambler loses money at a casino, the state share is 21%. The tax rate on sports wagering under the negotiated plan is 10%, minus the cost of promotions intended to lure players.
The only reason to expand gambling is the revenue, Hoskins said. His bill, he said, would help both education and veterans programs.
“I just want to make sure we honor our commitment to veterans, and have a dedicated funding source,” Hoskins said.
The tax on casino winnings is dedicated to education programs, as is the net proceeds from the Missouri Lottery. Video lottery would increase that support, Hoskins said.
Casinos also support programs like state veterans’ nursing homes and cemeteries. The gambling companies pay $2 for every person who enters the gambling floor, plus $2 for every two hours they remain in the casino.
Half of that money goes to the host community. The other half goes to the Missouri Gaming Commission. After the commission’s administrative expenses are paid, surplus funds pay for the veterans programs.
The problem with that funding mechanism is that fewer people have been visiting casinos each year, a trend exacerbated by the COVID-19 pandemic, when casinos closed for three months. Sports wagering has accelerated that trend, especially in the Kansas City market.
In the first five months of the current fiscal year, the number of people visiting casinos statewide is down 6% compared to the same period in 2021. But in the four Kansas City casinos – Ameristar, Argosy, Bally’s and Harrah’s – admissions are down 7- to 13% since July 1. Two of those casinos, Argosy and Harrah’s, have seen declines in gambling revenues despite winning more from each visitor.
Taxes from medical marijuana sales are also dedicated to veterans programs, but the new revenue – $13 million this year – is about equal to the decline in casino support due to fewer admissions.
“The (medical marijuana) money is just not enough,” said Rep. Dave Griffith, R-Jefferson City, who filed a proposed constitutional amendment to split gambling and lottery revenue between education and veterans programs. “I am trying to find creative ways to fund the veterans commission.”
Griffith said he is also preparing a bill to increase the admission fee at casinos, which hasn’t been increased since 1992.
The agreement on sports wagering would add to the funds for veterans through the fees charged to apply for and maintain a license. The veterans homes need the money to pay competitive wages and overcome staffing issues, Hoskins said.
There are veterans who qualify for care being turned away because there is not enough staff, he noted.
“We literally have empty beds in our veterans homes,” Hoskins said, “and not because we don’t have a waiting list.”
State Rep. Rasheen Aldridge, D-St. Louis, has had enough of the ‘gray market’ video games that have proliferated around the state in the past five years.
The games drain money out of the community, he said, and offer a bad example of adult behavior to children.
“I know a couple where people are literally smoking cigarettes in the store as they play,” Aldridge said. “That is the image children are seeing as they are getting a bag of chips.”
No one knows how many of the machines are in place, or how much money they handle. During floor debate last year, Senate President Pro Tem Dave Schatz, R-Sullivan, estimated that there were 25,000 of the games.
“There’s millions of dollars every day going through, not getting into the hands of the taxpaying base in this state that should be going to education,” Schatz said at the time.
Suppliers claim they are legal because they have a “pre-reveal” function that allows a player to see the outcome of any particular game and wager amount prior to playing. Opponents, including state gaming regulators, argue they are illegal because they play like a slot machine and players must accept losing to get to the next spin, which has an unknown outcome.
Many prosecutors are reluctant to file charges until there is a clear appellate decision on the legality of the machines or lawmakers amend current law.
Torch Electronics, which owns many of the pre-reveal machines around the state, has fought any change in the law, made $240,000 in political contributions this year and is suing the Missouri State Highway Patrol to shut down investigations.
One game vendor, Integrity Vendor LLC, was convicted of felony gambling charges in September 2020 in Platte County. Three other vendors, including Torch Electronics, face felony charges in Linn County.
The first trial, of a company called Tritium International Consultants that makes what it calls electronic raffle machines, is set for February.
The video lottery games that would be authorized by Hoskins’ bill would be allowed in truck stops, fraternal halls and bars. The games would be placed in an enclosed area, with restricted access to make sure no one under 21 could enter.
Aldridge’s bill is almost identical to the one Schatz filed for several sessions.
Any machine offering a cash prize to players that is not authorized by the Missouri Gaming Commission or the Missouri Lottery Commission would be illegal. To help with enforcement, the bill would give the gaming commission clear authority to authorize investigations of illegal gambling and the state Alcohol and Tobacco Control Division authority to suspend the liquor licenses of retailers who offer illegal games.
“The liquor license is probably their biggest cash cow outside of tobacco,” Aldridge said. “I am saying we are going to hit you in your pocket because what you are doing is one, illegal, and, more importantly, it is bad for the community.”
Authorized video lottery terminals would have an assured payout to players, clear accounting of the proceeds and help fund education, Hoskins said.
Limiting the games to fraternal halls, truck stops and bars is a good step, Aldridge said, because it gets them out of the view of children.
But he’s not convinced, he said, that there is an overall benefit from legal video gaming terminals.
“I ultimately want to get rid of all of them,” Aldridge said.
In October 2021, the Osage Nation announced it would build a casino near the Lake of the Ozarks. Since then, the tribe has purchased and cleared a 28-acre site. An application is being prepared for submission to the Interior Department to accept the property into trust.
Once that is done, the tribe says in a news release, it will begin construction on a $60 million complex with a casino, bar, restaurant and meeting space. Later phases will include a hotel for casino guests.
Under state law, casinos are allowed only within 1,000 feet of the Missouri and Mississippi rivers. The number of casino licenses was capped in 2008 at 13, but the Osage Nation facility would operate under federal law.
Two Republican lawmakers who represent the lake area, Sen. Justin Brown of Rolla and Rep. Jeff Knight of Lebanon, filed proposed constitutional amendments that would allow a 14th license and reserve it for a project on the Osage River near the lake.
The Osage Nation facility will be allowed to offer games like bingo, both traditional and electronic versions, as soon as the property is accepted into trust. To offer casino games like blackjack and slot machines, or sports wagering if legalized, the tribe must sign a compact with the state defining contributions to state programs and other jurisdictional issues.
Rich Chrismer, a spokesman for the Osage Casinos project said it is moving ahead on schedule.
“The tribe has a proven track record on projects like this in Oklahoma and looks forward to bringing that success to the state of Missouri,” Chrismer said.
The state can get a better deal in the compact if a competing casino is allowed nearby, Knight said.
If the tribal facility can avoid the casino tax of 21%, Knight said, it provides an unfair advantage.
“I am opposed to people not paying taxes,” Knight said. “Whenever all your other competitors in the state are and you are not, it creates a problem.”
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