Sports wagering, video lottery compete for attention in Missouri Senate hearing

In Jefferson City, the fight over whether or how to expand gambling – sports wagering, video lottery games, or both – is a test of political power.

But prevailing in the political contest isn’t important to April Kabrick, a co-owner of Boozers Bar & Grill in Liberty. She just wants to keep her restaurant in business without breaking the law. And she sees video lottery as a new source of revenue.

“Video lottery would be a game changer for us,” Kabrick told the Senate Appropriations Committee during a hearing Wednesday morning. “We have been trying to get this for several years.”

The committee heard testimony on three bills – one that would legalize sports betting, one that would legalize video lottery games and one that would allow both. The committee took no votes, and Chairman Lincoln Hough, R-Springfield, said he needed to consult with members to decide which of the bills should move forward.

Sports wagering is moving faster in the Missouri House, where a vote on two bills heard Feb. 8 is set for Thursday in the House Emerging Issues Committee.

Almost every state on Missouri’s border allows sports wagering, and hundreds of thousands of Missourians already have accounts with legal sports books. But because of geofencing, which is the ability to block activities online based on the location of the device being used, state residents must visit one of those adjoining states to place a legal bet.

From the start of the NFL season – which corresponded with the legalization of sports wagering in Kansas – through Dec. 31, roughly 8.7 million attempts to make a bet from within Missouri were blocked. If approved this year, Missouri’s sports wagering law would take effect in late August, just as the 2023 NFL season is starting.

‘Crowd out the illegal market’

The two bills with sports wagering heard Wednesday are nearly identical in their provisions. Casino companies and major sports teams back the standalone version sponsored by Sen. Tony Luetkemeyer, R-Parkville, and told the committee that they did not like the idea of it being combined with video lottery, as it is in the bill sponsored by Sen. Denny Hoskins, R-Warrensburg.

Legalizing sports wagering will help end the illegal market and keep Missourians who want to bet within the state’s boundaries, Luetkemeyer told the committee.

The goal, he said, is to “compete with and eventually crowd out the illegal market.”

The sports wagering provisions of the Senate bills heard Wednesday and the House bills up for a committee vote have the backing of all major league sports franchises in the state and most of the casinos. The bills would allow anyone over 21 to download a sports wagering application to their phone or computer and place bets from anywhere within the state. 

The net revenue after paying winners and accounting for customer incentives would be taxed at 10%. At that tax rate, the bills are estimated to generate $22 million to $30 million annually for state education and veterans programs. 

Casinos pay 21% tax on the net revenue from slot machines and table games. Sen. Mike Cierpiot, R-Lee’s Summit, asked why the rate on sports wagering should be lower than on other gambling.

Casinos know they will always win more from gamblers on slots and table games than they pay out, said Mike Winter, lobbyist for the Missouri Gaming Association. Sports wagering is less certain.

“This is not a high profit business,” Winter said. “We are essentially trying to get bets on both sides. There is a different theory on table games and slot machines. Those are predictable outcomes.”

Other identical or nearly-identical provisions in the bills include: 

• A deduction from net revenue for promotional costs such as free bets intended to draw gamblers. Luetkemeyer would phase out the deduction over four years, while Hoskins’ bill allows it permanently.
• Exclusive rights to major sports teams to control advertising of sports books within a designated territory around their stadiums.
• An allowance for each of the state’s casino companies to offer up to three betting platforms, or skins, and each major sports team to contract with one additional platform.

‘Gray-market’ machines

The video lottery provisions in Hoskins’ bill are almost identical to the standalone language in legislation offered by Sen. Karla May, D-St. Louis. The terminals would be allowed in bars, liquor stores, restaurants, truck stops and fraternal organizations.

The estimated revenue from video lottery games dwarfs the amounts the state could realize from sports wagering. May’s bill would generate about $141 million annually for state education programs and another $20 million for local governments. The estimates are nearly the same for the similar provisions of Hoskins’ bill.

Allowing regulated and taxed video lottery games would be a new source of revenue and crowd out the machines offering cash prizes that have proliferated in convenience stores and other locations in recent years, May said.

“We’ve got big businesses that want sports books,” May said. “We need to help small businesses.”

That was the message from Kabrick, who said she has not allowed the “gray market” machines into her business because she is worried about being prosecuted for illegal gambling. Along with the licenses for her business, she said, she has a realtor’s license and is certified to be a substitute teacher.

“We can’t compete with businesses that have decided to implement the gray machines,” Kabrick said. “The people want it. They are going to do it. We have to do something or we are just going to go out of business.”