Missouri lawmakers hope to legalize sports betting in 2020

In this July 30, 2018, file photo, the Wild Wild West, a part of Bally's casino, launches sports betting in Atlantic City, N.J.

As neighboring states like Iowa, Illinois and Arkansas legalize sports betting, some state lawmakers hope this is the year Missouri gets in the game.

Since the Supreme Court lifted a nationwide ban on sports betting outside of Nevada in 2018, 20 states have legalized sports books in some form. Some Missouri lawmakers started pushing for legalization as soon as the ruling came down but haven't been able to get it across the legislative finish line in the past two sessions.

Legalization is back on the table this year. The House Committee on Government Oversight heard two bills Tuesday that would legalize sports betting in Missouri. While most lawmakers and witnesses who spoke favored legalizing betting, there are still some points of contention for casinos, sports leagues and some lawmakers.

The bills, proposed by state Reps. Cody Smith, R-Carthage and Phil Christofanelli, R-St. Peters, would allow sports betting online and in casinos and would establish similar regulations. Still, the bills divided sports leagues, which preferred Smith's bill, and casinos, which preferred Christofanelli's.

A key difference between the bills is that Smith's requires sports books to use official league data for bets that aren't based on the final outcome or score of a game, like prop bets, if the league asks the books to use official data. Christofanelli argued books should be able to negotiate in an open market what data they want to use.

Jeremy Kudon, a lobbyist representing the MLB, NBA and PGA Tour, said the one-source data provision in Smith's bill would protect the integrity of the games. Kudon said Christofanelli's bill is a "love letter to casinos," while Smith's bill recognizes all stakeholders in the process, including the leagues. The St. Louis Blues and St. Louis Cardinals also sent lobbyists in support of Smith's bill.

"Data is to sports betting what cards are to blackjack, or what that little metal ball is to roulette," Kudon said.

Mike Winter, executive director of the Missouri Gaming Association, said 14 of the 20 states with legal sports books don't require them to use official league data.

Kudon said the leagues support Smith's bill, even though it does not include a 5 percent royalty to leagues the MLB and NBA have been pushing in states considering legal sports books.

"I just hope the casinos are as open to a compromise," Kudon said.

Andy Hume, an executive associate athletic director at the University of Missouri, said sports betting is a unique challenge to college athletics because there are people wagering a lot of money on games played by athletes "that don't make a lot of money."

MU has advocated for an "integrity fee," a royalty payment to sports leagues out of betting revenues. Hume said the university will have to take on additional costs monitoring betting and training student athletes about the dangers of getting involved in betting.

Merideth argued the NCAA will generate more revenue as a result of gambling, noting the March Madness tournament draws attention from people who aren't fans of basketball but who have bet on a bracket pool.

The other major differences between the two bills are the taxes and fees. Smith's bill would set the tax rate at 9 percent, while Christofanelli's would set it at 6.75 percent to be competitive with states like Iowa and Nevada. The tax would be applied to adjusted gross revenue, so the books would pay it, not the bettor.

Smith, who has been working on his bill for three years, said his rate was set based on other states, and he's open to changing it.

"Generally speaking, I am a proponent of lower taxes, so I feel a little awkward on the other side of this," Smith said.

The casino representatives said a lower tax rate benefits them and also helps states compete with other states. The one state Penn National operates in with a high tax rate is Pennsylvania, George said, which taxes a total of 34 percent. Sports gaming is volatile month-to-month, so there are some months books will lose money even before tax. Still, with a lower tax rate, books will be profitable over time, he said.

Tax rates among Missouri's neighbors vary, but even Illinois' 15 percent and Arkansas' 13 percent rates are well below Pennsylvania and eastern states like Delaware and Rhode Island that tax half of sports betting revenues. Iowa has one of the lowest rates in the nation, matching Nevada's 6.75 percent rate, according to the National Conference on State Legislatures.

In the six months since Iowa has had legal sports betting, the state has seen $270 million in wagers, generating $1.5 million in tax revenue. Legislative research estimated Smith's bill, with the higher tax rate, would generate $8,423,447-$20,919,845 in gaming funds when it's fully implemented in 2025, while Christofanelli's bill could cost the state $310,307 or generate revenues up to $15,010,520.

The difference in estimated revenue largely comes from the difference in the tax rate, but they also have different fees.

Christofanelli's bill would charge:

- $50,000 for an online book to apply for an operating certificate, $20,000 each year to renew it.

- $50,000 for a casino to apply for a sports betting certificate.

- A $20,000 annual administrative fee for all license holders.

- A $10,000 fee every five years to reevaluate the certificate.

For Smith's bill the fees are:

- $25,000 for an online book to apply for an operating certificate, $50,000 each year to renew it.

- $25,000 for a casino to apply for a sports betting certificate.

- A $50,000 annual administrative fee for all license holders.

- A $10,000 fee every five years to re-evaluate the certificate.

Some lawmakers on the committee were critical of parts of the bill, specifically that it doesn't include funding for gambling addiction treatment, and it would require people to register in person at a casino before betting online.

Some states, including Iowa and Illinois, require people to register for online sports betting accounts in person at a casino. Smith and Christofanelli's bills would require the same. George said the casino industry considers that "best practice," but state Rep. Dirk Deaton, R-Noel, saw it as an unnecessary burden for Missourians who don't live near a casino.

"There's Missourians that live three and a half, four hours from a casino, so you're necessarily excluding those," Deaton said. "(If) there's something that's going to be allowed in the state, it seems the opportunity ought to be equally accessible to all Missourians."

Reps. Peter Merideth, D-St. Louis, and Maria Chappelle-Nadal, D-University City, insisted any sports betting system should set aside funds for gambling addiction treatment, like money is set aside from casino admission fees. Sports betting would be even less regulated than casino gambling because people could place bets from their couches instead of having to go to a casino, Merideth said.

Though there is already a large illegal sports betting market, opening it up will increase the number of people exposed to sports betting, Merideth argued. That will lead to more people being addicted to sports betting, which will ultimately cost the state money, Chappelle-Nadal said.

Merideth also suggested putting a sports betting proposal on the ballot instead of having the Legislature set it up. All major expansions of gaming have come from a popular referendum, Merideth said, and it would ensure sports betting is something Missourians want. Christofanelli opposed that idea, saying the Legislature was elected to enact the will of the people and if his constituents don't like sports betting, they can vote him out of office in November.