One last shot at Amendment 2 before next Tuesday’s vote on it. And a warning that this amendment might have far-reaching results that have gone unnoticed.
Unfortunately, these considerations are being offered to late to be circulated enough to make a difference. But let’s put the issues on the record. Or at least, this person’s perspective. Disagreements are welcome in the box at the end of this entry. We’ll talk about the casino industry’s efforts and we’ll discuss some sports teams questionable claims late in this post.
A key part of the proposed amendment is the sports wagering tax rate—10% —a back door tax cut of about 25% for all forms of gambling.
And here we must note that later we will discuss a clause in the proposed amendment that can lead to later mischief that will further disadvantage the state and its people.
The industry-supported legislation has never defined sports wagering as a special category.is listed as just another kind of game of skill. In the lengthy list of those allowable games, it has been inserted after “Double down stud” or “any video representation of such games.”
It is that last clause that nobody has talked about. But it’s important for future developments in the casino industry. Here’s why.
People are not going to casinos as they once did. The generation that has spent hours at the slot machines and the tables is dying off. Admissions are almost half what they were a dozen years ago or so. As this trend continues, the casino industry must find ways to get customers to play these games. If they won’t go to the casinos, the casinos must—in effect—take the games to the consumers. This amendment is a template for later proposals to expand remote wagering to other forms of gambling.
This amendment legalizes remote betting in our casinos for the first time. Some of our casinos already have tested a version of remote gaming within the casinos, calling it “hybrid gaming.” In those casinos, customers who can’t find room at their favorite gaming table have gone to a nearby computer terminal, have set up their account, and have placed bets at the table as if they were there.
The tests haven’t generated much revenue. But the system has been tested. No matter what the industry calls it, whether it’s fifty feet from the table or fifty miles from the sportsbook, it’s remote wagering. Don’t be surprised if casinos become more involved with it. And that phrase is going into the constitution if voters approve Amendment Two.
We are not sure if that phrase in the amendment will mean casinos can offer remote betting on table games and slot machines without more legislative action. But it would not be in the proposal if the industry did not have a reason for it being there.
The Casino industry cleverly set the parameters for the discussion of sports wagering early:
—We can’t do sports wagering at 21% (the rate the state established more than three decades ago for table games and slot machines (incidentally, about 85% of casino revenues come from the slots).
—Sports wagering is different from other forms of gambling and needs special treatment.
Neither statement is true.
The industry has consistently claimed sports wagering is unique and requires its own special betting area and its own special tax rate, the latter reason justified differently year-to-year in bills introduced in the legislature. The first bills proposed a tax rate of 6.25% (the lowest in the nation), 6.75% (the present low), 8%, and 10%. The industry has seemed to have trouble sticking to its story when advocating a tax rate of less than 21%.
A couple of years ago the Senate tried to make the rate 12% and there was talk that the casinos would compromise on 15% because it was the average of the states around us. We’ll get to that in a little bit.
The truth is that sports wagering is just another item on the gambling menu and its presence on that list supports that point. But the casinos have tried to get the legislature to believe it is special. And they want voters in a few days to believe it, too, so they can get a cut in overall tax rates (by our calculation) of about 25%.
The industry has never produced any independent studies in any legislative hearing we have attended, to justify the claim that sports wagering is a fragile flower needing lots of TLC, including the low tax. None of the pro-amendment advertising has offered any justification for it either. And the voters, who understandably don’t closely follow the policy-making, or lack of it, by the legislature are left to make decisions based on thirty-second television commercials of questionable verity.
One industry argument has been that casinos will spend a lot of money establishing a unique area where the sports wagering can take place, an argument that falls apart because all forms of gambling have THEIR unique betting areas. It’s why you can’t roll dice at a blackjack table. You can’t play poker at the roulette wheel table. You can’t play craps at the poker table and you can’t bet on where the ball will land on the big wheel at the Texas Hold ‘Em table.
There is nothing inherently unique in sports betting, regardless of industry claims. It operates the same way as other forms of wagering. The consumer has money; the casinos have a system that will take all of it through time. The player at the poker table places a bet. So does a bettor in the sports betting area. The casino processes the bets, paying the winners and keeping the losers’ money. At the end of the day, the casino proceeds go into the same bank account with the proceeds from table games and slot machines.
Every year, the industry seems to have changed its justification for a sweetheart tax rate, raising a simple question that should been asked but never was: “How can the industry’s claims be trusted if it cannot stick to its own story?
In 2019, the industry demanded a 6.75% rate because “that’s what they charge in Las Vegas.” A quick review of the Nevada gaming laws showed something the industry avoided telling our lawmakers: that 6.75% ALL forms of gambling in Nevada. The industry also neglected to tell the legislators that the Nevada gaming law allows no deductions and no carryovers of casino losses from one month to the next, as is proposed in Amendment 2. It was pointed out that the Nevada template would mean that Missouri would have two choices: either lower its present tax rate to 6.75 so all forms of gambling would be treated uniformly or to charge sports wagering a 21% tax.
Here are other reasons offered for a low tax rate:
—The casinos need to keep the extra money to properly promote and advertise this unique form of gambling. A representative of Penn National Gaming told a House committee in 2022 that a higher tax would hinder Missouri’s ability to compete with illegal gaming sites. He said, “When you are able to spend more in marketing, you are able to drive more in volume and revenues.”
The position of the industry that money should be taken away from the education fund and from home dock cities to subsidize promotions and advertising was questionable when the industry was generating revenues of about $1.7 billion at the time. Wouldn’t you think the industry should pay for its own promotions and advertising?
A critic argued that there is no reason the state should subsidize advertising for an industry of that size by reducing funding for the school systems and home dock cities (ten percent of the gaming tax goes to the thirteen host cities of Missouri’s casinos). Additionally, major betting companies already were advertising on professional sports broadcasts and have stepped up their advertising since.
The proposal for using money traditionally earmarked for the education fund to publicize and promote sports wagering included no accountability language that would have required casinos to show the money actually had been used as proposed instead of just pocketed.
They also claimed the money not given the state in taxes was needed to convince Missourians to quit using illegal betting sites. We’ll touch on that a little bit later.
—The casinos originally claimed the house advantage in sports wagering is “only” four percent (in 2023 the industry testified it was five percent). But a study done for the UNLV Center for Gaming Research indicates that four percent is higher than most popular table games, sometimes double or more, and the industry has never asked for a favorable tax rate for table games.
In truth, the house advantage for sports wagering is more than four or even five percent, as the casino industry has claimed in some later legislative committee hearings. The website legalsportsreport.com charts statistics month-by-month in every state from the first month sports wagers were made in that state. As of last Sunday night, the webpage calculated $408-Billion dollars had been wagered in states allowing casino gambling on sports. The casino advantage worked out to 8.6%, more than double what the industry told legislators, and adding up to $35.1 Billion dollars.
Delaware, which has the highest tax on casino revenues, had the highest house advantage—25.1 to 46.5. Delaware taxes casinos at a 50% and we’ve not heard any organized opposition to it.
Another excuse has been that Missouri needs a low tax rate to compete with surrounding states. Kansas is at 10. Iowa’s rate on casino earnings is 6.75, and according to an industry spokesperson. Missouri needs to have a low tax to keep Missourians from going to another state to place their sports bets.
The industry has presented no independent studies indicating casino customers care about the amount of taxes the casinos pay. In reality, the so-called competition rests on a simple question: Does Missouri have legal sports wagering? If Missouri legalizes it, Missourians presumably will place bets here because they don’t have go to some other state.
The industry also claimed it needs to have a much lower tax so it can pay for building sportsbook facilities within the casinos. If ninety percent or more of sports wagering will be done remotely, there’s not much reason for an elaborate sportsbook. And, besides, building a sports betting facility in a casino should be considered a normal business expense with its own tax implications at the end of the business year.
This amendment has been called a “compromise between the stakeholders”—the six professional sports teams, the casino industry, and the remote betting industry” by St. Louis Cardinals president Bill DeWitt III.
But there are far more stakeholders than that. None of their representatives were invited to work on this “compromise.” Where were representatives of public education, host cities, veterans, the Access Missouri Scholarship Program, the National Guard program that provides veterans’ funeral escorts, people who develop gambling problems (we have seen several studies indicating those problems will triple with sports wagering), or even the Missouri Gaming Commission?
Here’s an answer: They were not invited because they were not considered participants in drafting gambling policy. Instead, they are industry targets whose only usefulness is based on how much money the industry can take from them or keep from programs benefitting them.
There’s one more stakeholder. The legislature, hired by the citizens to protect their interests. But the legislature has been MIA in protecting its constituents. The “compromise” is not a compromise at all. It was, instead, an agreement to have the legislature give each of the stakeholders what they want. When the legislature fumbled several chances to satisfy the teams and the casinos, Amendment 2 was created.
It’s important as we reach the conclusion of these discussions to ask, “How did we reach this point?”
One reason this issue is on the ballot is that the legislature refused to resolve a competing issue—the legality of the gambling machines in many of our convenience stores, Video Lottery Terminals.
Supporters of video lottery terminals, while professing that they are legal, want the legislature to make them legal. The casinos see them as competing for their slot machine revenues and have not allowed an up-or-down vote on the VLT bills. Supporters of the VLTs have filibustered the sports wagering legislation, demanding VLT legalization legislation be part of any sports wagering measure. The stalemate, especially in the Senate, has been a key factor in the pretty disgraceful deadlocks there that have resulted in historically-low levels of bill passage during the last three sessions.
The legislature lacked the courage in the face of extensive and aggressive lobbying by the casino industry to establish policies protecting the state’s interests and year after year considered the industry proposals without question. Only once that I recall did I hear a legislative committee member seriously press the chief industry lobbyist on some of these issues—Senator Denny Hoskins who was the leader in the unsuccessful efforts to legalize VLTs—was told he was out of time before he had finished his questioning. The replies he had received were vague at best.
A couple of years ago, I talked to the sponsor of a bill raising the tax rate to ten percent. A year earlier he had sponsored the industry’s bill that set the rate at eight percent. “What’s magical about ten percent?” I asked. “Last year it was only eight.”
He responded, “I figured that if ten was good enough for Jesus it was good enough for me.”
I was stunned for a second or two, and when I recovered my composure, I asked, “Jesus had twelve disciples not ten. Can I get you up to 12?”
All I got in response was a smirk.
I found his responses to my questions arrogant, disrespectful, and dismissive. While I would not use the same phrases to characterize those who have advocated for this legislation, I think it is accurate to say there has been a certain confidence on their part that no outside opinions would be tolerated in the annual legalization efforts.
The legislature’s refusal to challenge industry-backed bills year after year is an indication of who has been in charge of things in the Capitol on this issue. Its inability to deliver what the industry—and in the last few years, the pro sports teams—wanted means the issue is likely to be put into the Missouri Constitution next week and the legislature will not be able to change things to protect the interests of the people of Missouri very easily.
I expect the mugging of Missouri and its people to succeed next Tuesday. And we can thank a few generations of the people we think represent us at the Capitol for aiding and abetting it through their inaction.