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Neighbors Growing Together | Aug 16, 2018

Iowa free to legalize sports betting, but it won’t happen soon

By Rod Boshart and Erin Murphy, Lee Des Moines Bureau | May 16, 2018

DES MOINES — Iowa is free to legalize sports gambling, thanks to a U.S. Supreme Court ruling delivered Monday.

Some proponents are lamenting a missed opportunity to have legal sports gambling in Iowa already on the fast track.

The U.S. Supreme Court paved the way Monday for states to legalize sports betting in a defeat for the major American sports leagues, endorsing New Jersey’s bid to allow such wagering and striking down a 1992 federal law that prohibited it in most places.

Iowa was among 18 states that introduced legislation to allow sport gambling if the court ruled this way, and one key state lawmaker said there was sufficient support for the bill to pass. But the Iowa Legislature adjourned earlier this month without adopting it, so sports wagering will remain illegal in Iowa — at least for now.

“The story today is that Iowa is behind the 8-ball, and that is not a good position to be in relative to this market,” said Jeff Danielson, a Democratic state senator from Waterloo and a supporter of sports betting and fantasy sports betting. Danielson was among those who urged the Iowa Legislature and governor to approve legislation during the recently concluded 2018 session so Iowa was prepared for Monday’s expected court outcome.

Instead, the earliest Iowa could legalize sports betting is during next year’s legislative session, which will begin in January. Danielson said even with broad, bipartisan support a bill would be unlikely to pass until later in the session.

That means in all likelihood Iowans will not be able to legally gamble on sports until, at the earliest, after some of the sports calendar’s biggest annual betting events: the 2018 NFL season and 2019 Super Bowl, and 2019 NCAA men’s basketball tournament.

“We’re excited to see the U.S. Supreme Court ruled as we expected them to do,” said Wes Ehrecke, a representative of the Iowa Gaming Association, which represents 21 state-licensed casinos that likely would become the hub of sports betting once Iowa adds it to its menu of legal gambling opportunities. “The timing would have been great to have had this done four weeks ago.”

Jake Highfill, a Republican state legislator from Johnston who oversaw the sports gambling bill during the 2018 session, said he was confident he had bipartisan support to pass the measure and he expects to push the issue early when the Legislature next convenes in January.

“It’s about time. Let’s get this done. It’s been a stupid law for a very long time, and I’m ready to get this thing moving,” Highfill said.

Danielson was less optimistic about the legislative prospects, saying he did not see evidence of broad, bipartisan support for the proposal, and that many legislators remain opposed based on moral grounds.

“Pardon the pun, but we face long odds,” Danielson said. “I think people are allergic to evidence on this issue.”

Danielson said he remains a supporter, however, and will continue his work in 2019 to pass legislation to legalize sports gambling.

The Supreme Court’s inaction before Monday prevented many state legislators from supporting the bill this session, multiple sources said.

“I don’t think legislators wanted to go home and explain a vote to expand gambling when they didn’t even know if they could do it,” said Keith Miller, a professor in Drake University’s law school and an expert on gaming. “So now that’s out of the way.”

Gov. Kim Reynolds said Monday she did not expect a special session to consider a sports gambling proposal, but that she will work with legislators during the coming months and potentially address the issue next year.

Iowans also will go to the polls in the meantime to decide 100 House races and 25 Senate races this November, which could make the issue a lower-tier campaign issue and subject to new legislators in key committee or leadership positions depending on the outcome of November’s general election.

On Monday, the U.S. Supreme Court upheld the legality of a 2014 state law permitting sports betting at New Jersey casinos and horse racetracks and voided the federal Professional and Amateur Sports Protection Act. Some states see sports betting, like lotteries, as a potentially important source of tax revenue.

The ruling takes the United States a step closer to legal sports betting in numerous states, perhaps nationwide, rather than just in select places such as Nevada, home to the gambling capital Las Vegas. The current illegal sports betting market is worth billions of dollars annually.

The proposed legislation in Iowa would have placed sports betting under the direction of the state’s casinos, and the activity would be regulated by the state’s Racing and Gaming Commission.

Bettors would be allowed to wager on professional and college athletics. Properties that wish to host sports betting would be required to pay a $25,000 license fee, and a tax of 9 percent on sports betting revenue would be applied. The proposed legislation also would legalize mobile sports betting.

Miller said the rate of taxing sports gambling revenue and demands from professional sports leagues could remain hurdles for any Iowa legislation. Some lawmakers may want to tax sports gambling revenues at the same rate as casino revenues. Miller said that’s not feasible because sports gambling is not a huge moneymaker for casinos, in part because of the uncontrolled nature of the gambling. Slot machines and table games, for example, pay out over the long term at a mathematically consistent rate. But unexpected events and other uncontrollable factors make sports gambling more volatile.

And the professional sports leagues have sought a portion of the revenues and what they call an “integrity fee.”

Highfill adamantly opposed both measures.

“The leagues are going to be very creative in trying to get a piece of the money,” Miller said. “Rep. Highfill has been really emphatic in his view; it will be interesting to see if he can maintain that.”

Experts say legalized sports gambling likely would add foot traffic to Iowa casinos, including the potential for many people who do not currently visit and gamble in them.

Legal sports betting would generate $80 to $90 million in new, annual tax revenue for the state of Iowa, according to an Innovation Group survey. While that is a significant amount of money, it would represent a relatively small drop in the state’s annual $7 billion-plus budget.

Danielson and Highfill said legalizing sports gambling would bring current bettors out of the shadows. Americans illegally wager $150 billion on U.S. sports annually. Of the $4.7 billion wagered on the 2017 Super Bowl, for example, 97 percent was illegal, according to estimates from the American Gaming Association.

Tom Coates, an official with Consumer Credit of Des Moines who has been a leading gambling opponent in Iowa, said he expects a major push to legalize sports and fantasy sports betting in Iowa as part of an effort by the gambling industry to move into the online competitive interactive gaming market full tilt.

“I’m kind of half surprised that they didn’t pass it like some other states did to get themselves geared up and ready,” said Coates. “The casinos are pushing hard for it and so I’m sure that their army of lobbyists and money will fully on display this next legislative season.”

Coates said casinos face “discouraging” demographics with an aging player base mostly wagering on slot machines at brick-and-mortar locations and they are hungry to tap into a market of younger players who start out registering to place sports bets at the casinos with the path headed toward online betting via computers, phones and other electronic devices.

“They’ve been looking for some way to reach out and grab the younger people. Sports betting will start but I don’t think it will end there,” he said.

“This is a big nose of the camel into the tent, yes absolutely,” said Coates, one of Iowa’s leading gambling opponents. “The ultimate goal is online gambling of all stripes with games that are highly addictive that would increase dramatically the amount of addictions and debt that the people of this state and across the country would eventually have to bear up and the social costs would be pretty staggering.

“We’ve been able to avoid the online gambling, but the casinos have been salivating over this for a long time and every year that goes by and more of their current clientele die out or can no longer hobble in or get rolled into the casino to play the slots, they think about it more and more,” he added.

“We will see a huge push and it would take a lot of gumption to stand up to the kind of army of lobbyists that will be hired to push this thing through next year,” Coates said. “It doesn’t just stop here. This is just the beginning of the online gambling and once it gets full bore and you get enough people addicted and enough money is flowing around, you won’t be able to stop it.”

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