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Oct. 14, 2024 | By: Rudi Keller - Missouri Independent
By Rudi Keller - Missouri Independent
It’s time to bet the over-under on how much will be spent this year on gambling ballot measures in Missouri.
A good mark might be $60 million. Online bookies poured $32 million so far into the Amendment 2 campaign to legalize sports betting, and a casino company grumpy about the deal countered with $14 million to defeat it.
The campaign for Amendment 5, to authorize a new casino at the Lake of the Ozarks, adds $9.4 million — bringing the total to more than $55 million.
Winning for Missouri Education, the Amendment 2 campaign funded by DraftKings and FanDuel, has already set a record for the most money donated to a ballot measure campaign. The previous record was $31 million raised by supporters of a 2006 proposal to protect stem cell research.
The initiative campaign began with vocal support from major professional sports teams but none have contributed any cash for the effort.
“It is a large state, with a lot of TV markets, so it certainly takes resources to get your message out,” said Jack Cardetti, spokesman for the campaign. “But the most important thing is that you have a good message and a good initiative for voters.”
Caesars Entertainment is the casino company that dislikes the proposal enough to spend big against it. Caesars employs 2,000 people in Missouri and has a branded online sports betting platform that competes with FanDuel and DraftKings.
The proposal will mainly benefit the online platforms that have no significant presence in the state, said Brooke Foster, spokeswoman for Missourians Against the Deceptive Online Gambling Amendment.
“Obviously they’re not opposed to sports betting,” she said of Caesars’ opposition to Amendment 2. “If it were written in a way that would actually benefit Missouri and Missourians in a more substantial way, it would be different.”
The Amendment 5 campaign cost is being split between Bally’s Corp., which hopes to get the new license, and developer RIS Inc., which holds the land to build it.
“For us, without any organized opposition that we’re aware of, it’s simply a matter of educating the voters about what our amendment does,” said Ed Rhode, a consultant working with the YesOn5 committee. “And what we’re seeing is the more educated they become about this issue, the more likely they are to support it.”
Whether the broadcast spending on the gambling measure exceeds spending by statewide candidates would be an interesting side bet. So far, candidates for statewide office have spent $13.1 million on broadcast time, as tracked by The Independent, while the gambling campaigns have spent $13.7 million.
All three major efforts focus their messages on one issue – education funding.
Winning for Missouri Education promises that sports wagering will net more than $100 million for education programs over the first five years.
“Legalizing sports betting will generate tens of millions of dollars every year for our classrooms, helping increase teacher pay,” one ad states.
The Caesars-funded opposition challenges the sincerity of that promise, arguing write-offs and other carve-outs mean the result will be insignificant.
It is “Lottery 2.0,” one ad states.
“Teachers were told the lottery would raise a lot of money for schools, but that didn’t happen,” the ad begins.
The casino at the Lake of the Ozarks is also selling educational benefits and does so by including language directing all the tax money to early childhood literacy programs in public schools.
The $14.3 million estimate for revenue is “53% more funding for childhood literacy across Missouri, without raising taxes,” the campaign’s ad states.
As the election nears, Winning for Missouri Education is adding a new message — sports betting is already occurring and Missouri isn’t getting any benefit. Hundreds of thousands of Missourians already have accounts with online platforms. All it takes to place a legal bet is cross into a state where it is legal — a list that includes every state bordering Missouri except Oklahoma.
“Let’s fund education is the more effective argument,” said Terry Smith, a political science professor at Columbia College.“The argument that is less explicitly made, but I’ve heard from a lot of people, is that people are going to gamble on sports, and right now Kansas and states that we border are making all the money. Why shouldn’t we get our share?”
If voters legalize sports betting, the Missouri Gaming Commission could issue up to 14 licenses for online wagers. Six would go to the major sports teams, six would go to the casino operators and two would be reserved for online bookmakers.
Each of the 13 casinos and each of the sports teams could also operate an in-person, retail sports betting operation on their properties.
The push to legalize sports wagering in Missouri began after the U.S. Supreme Court struck down the federal law against wagering on sporting events in 2018. More than 35 states have legalized some form of the gambling since the court decision.
In the bill that was the closest lawmakers ever got to a resolution of the issue, there were no licenses for independent online bookmakers like DraftKings or FanDuel. Instead, the online platforms would have had to provide products branded to a sports team or casino.
The online platforms generate the cash. An economic study produced for Winning for Missouri Education estimates that $21.8 billion will be wagered during the first five years after legalization and more than 98% of the bets will be placed online.
That same study pegs the net to the state over that period at $134 million. Revenue in the fifth year is estimated at $38.7 million, about $10 million more than the maximum annual revenue projected by the fiscal note for the ballot measure.
Questioning the quality of those revenue estimates is a major thrust of the opposition campaign. The proposal before voters sets the tax at 10% of the net revenue — the money lost on wagers that don’t pay out.
But before the tax is applied, the operators would be able to deduct promotional giveaways — the inducements such as free bets to join a platform — as well as applicable federal taxes. Before any money gets to education programs, the initiative sets aside $5 million annually to support help for problem gamblers.
The figures presented in the economic study result in an effective tax rate of 1.4% of actual losses in the first year and 6.9% in the fifth year. As Missouri nets $134 million, those figures show the gambling operators would keep $86 million in tax savings due to write-offs.
“We want the state to be getting lots of revenue off this,” Cardetti said. “But to get people over from the illicit sports betting market or from going over to other states, those promotional credits in the early days are important, but they end up netting the state more revenue in the long run.”
Kansas, which legalized sports betting in September 2022, has received $19.4 million in tax revenue on $4.4 billion wagered, according to data from the Kansas Lottery.
The promotional credits would be capped at 25% of the amount wagered, Cardetti noted, a limit that is not in place in Kansas.
The ads that emphasize Missouri could receive no net revenue from sports wagering is based on the fiscal note estimate, Foster said. The range listed there is zero to $28.9 million annually.
“It’s basically taxpayers subsidizing their marketing,” she said. “Because that’s a marketing tool for them to give you $1,000 to match what’s in your account. But then they are, on paper, in the red.”
Caesars opposes the amendment in part because it does not allow the company to offer online platforms branded to its Missouri properties — Harrah’s Kansas City, Isle of Capri in Boonville and Horseshoe St. Louis at Lumiere Place.
“If we’re going to expand, it needs to be a little more equitable, as far as what the companies actually get,” she said. “But also, they have a concern that’s secondary, which is that there may be some fall off on the business that they’re able to do.”
The opposition campaign is just one company whining they don’t get a big enough slice, Cardetti said.
“The opponents of Amendment 2 are flawed, hugely flawed messengers,” Cardetti said. “Most Missourians can see right through a ‘No’ campaign when they realize that it’s almost entirely funded by one of the largest casino companies in the world.”
If Amendment 5 passes, it would authorize the MIssouri Gaming Commission to issue one new casino license at a location on the Osage River between Bagnell Dam and its confluence with the Missouri River.
The original law authorizing casino gambling, passed in 1992, limited it to locations on the Mississippi and Missouri rivers. An initiative backed by casino operators passed in 2008 to cap the number of licenses at 13, equal to the casinos then existing or licensed for construction.
There’s no guarantee that Bally’s would receive the license or that the location owned by RIS will be awarded the license. But with local backing and everything ready for an application once the measure passes, it has a big head start.
The investment won’t just be a casino, Rhode said. It will be a destination facility at a normally seasonal tourism location, bringing people at otherwise slack times.
“Having a multifaceted tourism attraction at the lake, which includes a casino, a spa, hotel, convention center and other benefits, is going to be a year round economic boon to that region,” he said. “We’re talking $400 million in investment and 500 permanent jobs.”
One casino is almost certain to be built near the lake. The Osage Nation launched a project in 2021 to have a property in Miller County taken into trust as ancestral lands where it could operate a casino and convention center.
Despite the direct challenge from Amendment 5, the tribal government has not tried to stop it.
The fiscal note for Amendment 5 estimates that it would add about $14.3 million to the state treasury each year. Each casino’s net winnings are taxed at 21% and there are no deductions for promotions such as free bets.
The Mark Twain casino in Hannibal has the smallest annual revenue and paid $7 million in fiscal 2024. The Ameristar casino in St. Charles had the largest revenue and paid $58 million.
“This is not us making up a number,” Rhode said. “This is the state auditor assigning this number so that number is what it is. We feel confident in sharing that number.”
Forty years ago, Missouri also had two gambling proposals on the November ballot.
One established a state lottery, the other authorized parimutuel wagering on horse races. The lottery was passed by lawmakers to follow a move by 10 other states in the early 1980s to authorize lotteries.
The need for new money in education programs was a major selling point for the lottery, Smith said. The nation was coming out of a major recession that had sapped revenues and there was little appetite for raising taxes.
But the bill creating the lottery didn’t earmark the money. Instead, it went into the general revenue fund, where it was only a small portion of the whole. The general revenue fund pays for public schools, higher education, state prisons, Medicaid and a host of other programs.
“If all of a sudden there was an increase in the amount of revenue that was dumped into the K-12 budget and there was no change in the rest of the budget, that’s one thing,” Smith said. “But that history tells us that’s not how it’s going to work.”
The foundation formula is the name of the main state aid program for local schools. When the lottery sold its first ticket, in fiscal 1986, the foundation formula appropriation was $823 million. The following fiscal year, when the lottery contributed $80 million to general revenue, the general revenue transfer to the school fund increased by $73 million.
Throughout the late 1980s, as national figures showed Missouri near the bottom in per-pupil spending and teacher pay, complaints grew that the lottery had not produced the promised results for education.
That led to a 1992 ballot measure earmarking all lottery revenue for education programs. In the first fiscal year that was in effect, the earmarked funds were used for programs supporting minimum teacher salaries and the Career Ladder stipends.
The following year, in fiscal 1995, the foundation formula received its first appropriation of earmarked lottery funds, $33 million. That was about 25% of all lottery revenue that year. The foundation formula appropriation total was $1.4 billion.
Today all net revenue from bingo, the lottery and casinos is earmarked for education. In the current year’s budget, the lottery is providing $329 million and casino taxes are tapped for $457 million for the $4 billion foundation formula.
Any revenue from Amendment 2 will be an insignificant addition and have no impact on teacher pay, Foster said.
“If you want sports gambling, say that, but don’t put out television ads that have teachers saying teachers are going to get raises,” she said. “We did the math, and even if it was that top $28.9 million, there’s around 900,000 public school kids in Missouri, so that’s 30 bucks a kid.”
Under existing provisions of the constitution, any new revenue from either gambling measure must be used for education programs. The sports wagering amendment does not define which programs the money will support while the Osage River casino proposal adds the earmarking to literacy programs.
The new revenue from sports wagering will make a difference, Cardetti said.
“Not a penny of benefit is going to Missouri, despite the fact that we know thousands of Missourians are already making bets,” he said. “This is the way that we can bring these revenues back to the state of Missouri and regulate something that Missourians are already doing today.”
The good news from history for the promoters of Amendment 2 and Amendment 5 is that Missourians have rarely met a gambling proposal they didn’t like.
Since 1980, 10 gambling questions have appeared on the ballot and only two — to allow betting on simulcast horse races and authorize a casino at Rockaway Beach on Lake Taneycomo — have been defeated.
In the August St. Louis University/YouGov poll, 50% of voters surveyed said they supported sports wagering after reading the Amendment 2 ballot language while 30% were opposed. The poll did not ask about Amendment 5.
None of the past gambling campaigns had the kind of well-funded opposition that Amendment 2 has drawn. The ads from both sides are filling broadcast airwaves, streaming services and platforms such as YouTube and Facebook.
“We’re using very similar messages that we do on TV and on radio, but now people’s viewing habits are so different and diverse that you’ve got to go meet people where they are,” Cardetti said.
The anti campaign is having an impact, Foster said.
“It’s definitely tightened,” she said. “It’s margin of error type close, so we’re really pleased to see that.”
The opposition ads clearly state the target is Amendment 2 but the message of skepticism about gambling revenue going to education is having a spillover effect on Amendment 5.
“I bet that they don’t like us or our messaging,” she said.
The opposition to Amendment 2 is making backers of Amendment 5 work harder, Rhode said.
“We’re definitely seeing a little bit of confusion among the voters,” he said. “But the more that we are out there educating voters, you know, sort of what this amendment does, we find the support coming our way.”
The message that the six major professional sports teams back Amendment 2, and that it will keep revenue at home, is just being rolled out to supplement the education message.
“It makes absolutely zero sense that we have a public policy in the state of Missouri that actively pushes people to go spend money in other states,” Cardetti said.
The opposition campaign would have a tougher sell if that was the message to promote sports wagering from the beginning, Foster said.
“That would be much stronger,” she said. “But the argument ‘let’s make gambling more accessible” is going to hit a lot more roadblocks than ‘let’s give this free money to kids.’”
There are downsides to sports wagering that have not been part of the debate. Earlier this month, The Guardian reported on threats and abuse targeting college athletes who don’t achieve the individual statistics that are fodder for wagers.
And Smith said he’s not entirely comfortable with the bet-from-anywhere nature of sports wagering.
“I’ve observed a lot of young people who are addicted to their phones,” Smith said. “And you know, this is one more piece of candy for them that they might not be able to resist.”
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