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News Brief

Nov. 7, 2023 |  By: Rudi Keller - Missouri Independent

Players in Missouri gambling debate chase stakes worth billions


By Rudi Keller - Missouri Independent

Missourians spend billions every year in pursuit of instant riches.

They buy lottery tickets, play casino games and dab bingo cards. 

And increasingly in recent years, they play games of questionable legality in convenience stores, truck stops and small gaming parlors.

Everyone involved in the industry thinks people would spend more, if given the chance. None of the players pursuing those new markets wants anyone else sitting in on their game.

Major professional league teams, now banding together behind a sports wagering initiative petition, don’t want to be paired legislatively with promoters of legal video lottery games.

“The video lottery terminal issue is pretty contentious and has hair all over it and we’d rather that not that we not hold up progress in the state of Missouri because of some issues, some contentious issue that really, from our perspective, doesn’t have anything to do with legal legalizing sports wagering,” Mike Whittle, general counsel for the St. Louis Cardinals, said in an interview with The Independent.

The issue is that video lottery players are small-dollar gamblers, direct competition for slot machines and the small wagers gamblers might make during the course of a sporting event, said Andy Arnold, lobbyist for the Missouri Coalition for Video Lottery.

“The casinos don’t want to give any opportunity for anybody outside of a casino to have a gaming opportunity at all,” Arnold said “And even if they could participate in that opportunity, they want to control it all.”

Purveyors of the machines found in convenience stores and truck stops don’t want any change in the law to pass because it might put them out of business. Torch Electronics and Warrenton Oil are making large campaign contributions to influence the politics of gambling and using legal tactics to prevent a decision that would put a firm stamp of illegality on what are called “gray market” machines.

One path closed for Torch last month when Cole County Circuit Judge Daniel Green dismissed a lawsuit aimed at blocking criminal investigations of its machines by the Missouri State Highway Patrol. An appeal is pending, but it could only revive the case, not settle the issues involved.

A handful of criminal cases are pending, some involving Torch machines, but no trial is scheduled before spring.

That puts the issue of whether and how to expand gambling before lawmakers, and perhaps voters themselves through the petition process.

Sports wagering

Hundreds of people attending the AFC Championship game at Arrowhead Stadium in January tested the geofencing that blocks bets from people in a state where sports wagering is illegal.

There’s no chance Missouri will legalize sports betting before the regular NFL season ends – the legislative session opens Jan. 3 – and only movement at a speed beyond the current reputation of the General Assembly would have it in place before the next Super Bowl on Feb. 11.

For the past two years, the state’s casinos and major league teams have lobbied intensely for a sports wagering bill that divys up the market. A key element is requiring online providers to partner with a sports team or casino operator to serve the Missouri market.

The failure of that bill – passed repeatedly in the Missouri House only to die in the Senate – is causing Missouri sports franchises to prepare a go-it-alone initiative. Franchises from Major League Baseball, the NFL, Major League Soccer and the National Women’s Soccer League will decide in early December which of 12 proposals it will present for signatures, Whittle said.

We’ve always said we’d prefer a legislative solution to this thing,” Whittle said. “We’re not extremely optimistic that that’s going to happen. I mean, we’ve kind of seen that movie way too many times.”

Some of the proposed initiatives would allow casinos to obtain sports wagering licenses. Other versions would only allow the Missouri Gaming Commission to license sports teams and online vendors to offer betting on games.

The casinos, who still hold out hope for legislative action, haven’t been involved in drafting the initiatives, said Mike Winter, lobbyist for the Missouri Gaming Association, a trade group representing the state’s 13 casinos.

“We would like to see the legislature move forward and get a sports betting bill through the General Assembly and that’s what we’re gonna try to do again next session,” Winter said.

Since the U.S. Supreme Court struck down federal laws banning sports betting nationally in 2018, sports wagering has been legalized in every state adjoining Missouri except Oklahoma.

Sports wagering in Missouri promises to be a market with at least as much money available as is spent on the lottery or in casinos each year. The Missouri Lottery sold $1.8 billion in tickets each of the past three years, and casinos won $1.9 billion from players in the fiscal year that ended June 30.

Kansas recorded $1.85 billion of wagers in the first year of legalized sports betting. While a lot of that money was Missourians crossing the state line, the number of in-state sports betting accounts opened in the first few months was equal to one-quarter of Kansas’ adult population.

Kansas state coffers received $7 million in tax revenue from sports wagering. The fiscal note summary for the four sports wagering initiatives approved for circulation estimate Missouri would take in $6.4 million to $26.7 million by the fourth year of implementation.

State Sen. Denny Hoskins, R-Warrensburg, has been the main opponent of a stand-alone sports wagering bill. The problem, he said, is that it is a lot of money for the operators and very little for the state.

“When you talk to people they are like, ‘Oh, we’re missing out on all this revenue,’” Hoskins said. “Well, they’re looking at that total handle, but if you actually look at the tax revenues coming in on sports books, it’s just not very much.”

Backers of sports wagering will again oppose any effort to link passage to legalizing video lottery games, Winter said. 

“We’ve always had the opinion that sports betting and any discussion on VLTs or those type topics need to be separate discussions, and that’s still where we are on that,” he said.

Video gaming

The potential state revenue from video lottery games in bars, truck stops, veterans and fraternal halls is estimated to be five times larger than the highest estimate for the sports wagering initiatives. The bill filed this year by Hoskins projected $126.7 million a year for the lottery fund, plus about $30 million more for other funds.

Revenue at that level translates into $2.3 billion being spent on the games. If legalized, they would payout at least 85% of the amount bet. The state’s cut of the remainder would be 36%.

The games would be set apart from the rest of the establishment, in a fully enclosed room off-limits to anyone under 21. 

One limitation in Hoskins’ bill, which he intends to introduce again for the upcoming session, is that it does not allow video lottery games in convenience stores and other retail locations, including storefront gaming parlors, offering the gray market games.

The number of those games – and how much is being spent – is unknown, but clearly thousands, if not tens of thousands, are deployed across the state. 

Operators contend they are legal because a player can see, through a pre-reveal function and before committing their money, whether the next play of a game will be a winner. In the dismissed lawsuit, attorneys for the patrol argued that it was the enticement to chance that the play beyond would win that made the games illegal gambling devices.

The opening of a storefront parlor with pre-reveal games in Moberly in her district was news to Senate Majority Leader Cindy O’Laughlin, R-Shelbina.

“That’s just wrong,” she said. “I don’t know how we as a state can say if you’re going to run a casino, here’s all the things you need to do to be legal and then let this go on and proliferate all over.”

Taking on the gray-market games is a daunting task. Despite his position as the chamber’s top leader, former Senate President Pro Tem Dave Schatz was stymied in his efforts to outlaw the games in 2021 and 2022.

“You need somebody that is willing to take it on and push as hard as they can,” O’Laughlin said.

The court case left the games in limbo, with Torch and other vendors able to say their games are legal, Arnold said.

But the end of the case against the highway patrol could also spur a wave of enforcement, he said.

“If the patrol goes out and starts making seizures again like they did before, it could spur the guys that are running the gray games into trying to seek a change in the legislature to either A, legalize the game or B, stop the patrol or any state agency from being able to do anything regarding them,” Arnold said.

A standalone gaming parlor similar to the one in Moberly, and owned by the same retailer, is open in Warrensburg.  

“I don’t think that the mini-casino-only is what the voters approved,” Hoskins said. “So I do have concerns about what kind of machines are in there and how the owner believes that having a business that only has video poker machines and slot machines is legal under the Missouri Constitution and Missouri state statute.”

Political bets

In the high-stakes game of what new gambling will be legal and who will run it, each player except the major sports teams already has thrown in a big stack of chips.

Since the start of 2022, casinos have made $267,077 in political contributions reported through the Missouri Ethics Commission, much of it to the PAC controlled by the Missouri Gaming Association. Video game companies from Illinois, where video lottery is legal, have contributed $551,875.

Torch Electronics and Warrenton Oil, the two companies who unsuccessfully sued the Missouri State Highway Patrol, have contributed $740,012, much of it through PACs controlled by Torch’s lobbyist, Steve Tilley.

The professional sports teams are not significant contributors. No donations listing the Cardinals as a source were made in the past two years. The Kansas City Chiefs have donated $15,000 – $10,000 last year to the Republican committees supporting legislative candidates and $5,000 this year to Democratic committees with the same purpose.

The sports teams, however, are committing themselves to a multimillion dollar effort to collect signatures and then promote their ballot initiative. The teams are ready for that expense, Whittle said.

“We believe that it’s a way for us, as Missouri businesses that have a long history in the state of Missouri, to increase engagement with our fans,” Whittle said. 

Whether the casinos will help is unknown and depend on the language being offered to voters.

The antagonism among the players means thwarting the plans of an opponent is as important, if not more important, than winning.

Because backers of sports wagering won’t go along with video lottery, Arnold said, the stalemate will continue.

“Our attitude is, as long as you keep that attitude, we’re going to do what we can do to basically stop you from getting what you want,” he said.

The only reasonable way to break the impasse is to bring the interested parties together and force them to work it out, O’Laughlin said.

“If you want to try to get something done, you have to sit down with people and not make a big theater out of it, but try to figure out a path forward,” she said. “I am not for any of it, but it’s pretty hard to say you can’t have video lottery terminals while you’re also turning your heads to the fact that you have all of these other unregulated machines just popping up everywhere.”

Hoskins said he’s ready to join in talks with any of the players and has done so in the past.

“Every year, I hold out hope that everyone will come to their senses and we can come up with a good compromise,” Hoskins said.

One problem, he said, is that during negotiations, one group or another will declare that something being proposed is unacceptable. The interest groups should not be the ones deciding what is or is not acceptable in legislation, Hoskins said.

“I’ve been a big supporter of the idea that we, as senators, are the ones that have the votes in the room, not the casinos, not the professional sports teams, not the VLT operators, not anyone else,” Hoskins said. “And so ultimately, we’re the ones with votes and we’re the ones that need to make sure that we pass a bill that accomplishes everything and takes care of problem compulsive gamblers.”