The politics of legalising sports betting in the 12 states which haven’t yet done so are complex. Minnesota’s idea of legalization has been entangled in a maze involving state legislators, racing commissions, and US federal courts. Players include lawmakers, tribal leaders, private equity and horsemen. Clarity on this issue is a long shot at the moment.
On Thursday, 18 April, the House Commerce Finance and Policy Committee voted in favor of an amended bill to ban historical horse race (HHR), machines at tracks. This issue doesn’t have anything to do with legal Minnesota sports gambling, but this was the second attempt to muddle the road to legal betting.
Running Aces, an harness racetrack north of Twin Cities filed a suit against three tribes casinos on Tuesday (16th April). This filing represents a match-up in the battle for legalized online sports betting. Legislators have been trying for years to reach a compromise in a state that grants gambling exclusivity only to federally recognized tribes. In the past three weeks legislative actions have been replaced by other forms of political activity.
Running Aces is owned by Black Diamond Commercial Financial. The company claims the tribes are illegally providing banked cards games, giving them unfair competitive advantages against Running Aces. This gives them “unfair competition over Running Aces in order to attract patrons that would have otherwise played at Running Aces”.
According to The Minneapolis Star-Tribune, Running Aces CEO Taro ito issued a statement: “All we ever wanted was to be treated fair, to compete on an even playing field, to take advantage of the improvements in the pari-mutuel industry, and to operate without the fear of being removed.”
In multiple US States, the horse racing industry (or pari-mutuel betting) has been linked to legalized sports gambling. Illinois, Louisiana Massachusetts, and New Jersey lawmakers are among the ones who have permitted “racinos”, or gambling venues, at racetracks. The addition of gambling facilities at racetracks provides an additional revenue source for the industry.
Minnesota, however, is just one of a dozen or so states where federally recognized tribes are granted exclusive gambling rights. Indian Country, in most states with tribal gambling, will defend its sovereignty by any means, even if it involves opposing laws that would encroach on their gambling monopoly. According to the tribes, allowing HHR machines would undermine exclusivity, and by extension tribal sovereignty.
To balance commercial gambling with tribal gaming, you need a delicate hand.
Minnesota solves the charitable gaming problem
Zack Stephenson, who has been the main author of Minnesota’s sports betting legislation over the past several sessions, resolved one problem earlier this year when he mediated a deal with the state’s tribal groups and charitable gaming. In exchange for maintaining the current status of pull-tab machines, $40 million in gambling revenues will go to charity gaming.
In 2023, the legislature passed a bill that allowed for a “open-all” function on machines. The tribes claim that this would be nearly the same as slot machines.
Stephenson had to change his wagering bill when he cut the deal. The tax rate proposed was increased from 10% to 20%. Prior to this, HF 2000 had set aside several millions of dollars in horse race purses. This number has been reduced to $625,000. Tracks say that it is not enough, and this bill will “eviscerate the racing industry”.
Stephenson has not proposed any casino style gambling on the racetrack.
Minnesota Racing Commission goes rogue
In response to Stephenson’s revised rules, the Minnesota Racing Commission (MRC), has “legalised” HHR machines on two of Minnesota’s tracks: Running Aces Park and Canterbury Park.
Tribes claim that the machines are too similar to slot machines. Stephenson called this move illegal by the Racing Commission and filed almost instantly a bill to ban these machines. The bill, called HF 5274 was the one which moved forward on Thursday morning. Minnesota Indian Gaming Association Executive Director Andy Platto, who testified on behalf of the tribes and supports the bill, said that “the racing commission does not have the power to expand gambling”. He also stated that “the legislature should be ashamed” that their role was being taken over by the race commission.
Platto continued by saying that tribes had an “inherent governmental gambling right”. Both tracks have representatives testifying that they need funding for their industries, that a ban on HHR would hurt them and that it is unfair to cut them off from legal sports betting.
It appears that the HHR Bill is being rushed to the floor of Congress. Commerce Finance and Policy Committee declined to forward the bill on to Economic Development Finance and Policy committee to discuss further. The request was made by Representative Jon Koznick, who said he was trying to slow down the process. However, his motion, which failed 7-4, did not succeed.
Koznick stated that it was “bad legislation” to “abuse our power”, and there’s “no need to use this bill to influence someone else”.
To become law, the HF 5274 bill must be passed by the entire house of representatives and the senate prior to the 20th May adjournment.
The tracks also mention “illegal” cards games as “harming” to them
In the lawsuit, filed on Tuesday, it is alleged that three casinos owned and operated by two tribal groups – Grand Casino Hinkley Grand Casino Mille Lacs Treasure Island — were offering card games of Class III for which their respective tribes had not signed a compact.
In the early 1990s, the Mille Lacs Band of Ojibwe & Prairie Island Indian Community signed a compact with Minnesota in order to provide blackjack and other gambling forms. According to the filing “no Class III card games are covered”.
According to the complaint filed, since 2020 the Grand Casinos have been illegally offering Mississippi Stud and other games such as three-card, four-card, Let it Ride, Ultimate Texas Hold ‘Em, Let it Ride, etc. Prairie Island offered these games as well, but in October 2023 they were legalized by a Federal Register compact amendment.
The Indian Gaming Regulatory Act, or IGRA, governs Indian gaming. It allows Class III games if a tribal compact is signed and a state consents. The state in this instance explicitly allowed blackjack. In this case, the state did not expressly agree to other card games. Although the language in compacts seems to permit all Class III card games, as defined by IGRA but most tribes do not offer additional games.
Hamish Hume is the attorney who represents West Flagler and Associates, in their battle with the US Department of Interior regarding a Florida gambling extension. He also represents Running Aces. He claimed that tribal gambling offerings are in violation of the RICO Act (Racketeer-Influenced and Corrupt Organisations Act).
Tribes are asking the US District Court for the District of Minnesota for the court to declare the gaming illegal, to award triple damages, to impose an order to stop the game and to reimburse the attorney fees of the racetrack.
The legal wagering debate is likely to be a major loss.
This isn’t the only lawsuit involving gambling in Minnesota that has been filed over the past year. Last October, the Shakopee-Mdewakanton Community filed a lawsuit against the Racing Commission to stop the expansion of gambling on the tracks. The community filed a second lawsuit earlier this month, asking the court of appeals in the state to overturn the MRC’s decision to allow the HHR terminals on the tracks.
The MRC ruling, as well as the suits filed by tribes and tracks, have muddied the road to legal betting. Who knows what will happen next, but with the legislative schedule running out of time the Minnesota legal sports betting debate is likely to be the one that suffers.
