Iowa Sports Betting Bill One Step Closer to Fruition

A bill making its way through the Iowa House is looking to make Iowa the next state to join the sports betting bandwagon. The bill, introduced by Rep. Ken Rizer, seeks to grant local casinos permission to offer sports betting if the US Supreme Court rules in favor of New Jersey in its challenge of the federal sports betting prohibition.

House Bill 592 was first introduced in January and quickly cleared a House subcommittee. The bill was introduced to the House Ways and Means Committee this week and is now known as House File 2448.

The current version of HF 2448 would allow people age 21 or older to bet on sports at licensed casinos either in person or “from any other location via a telephone-type device or any other electronic means.”

Casinos interested in offering sports betting would be required to apply for a license at an up-front cost of $25,000. After that, licenses would require a $15,000 annual renewal fee. The bill also calls for a 5% tax on the first $1 million of revenue and a 10% tax on the next $2 million.

Rep. Rizer has acknowledged that sports betting in Iowa is a contentious issue with people on both sides for or against the idea for various reasons. In an apparent effort to assuage some opponents’ concerns, Rizer said this:

“If we legalize it, I want it very tightly controlled. We don’t want a sportsbook on every corner.”

Rep. Jake Highfill, chairman of the House Commerce Committee that approved the bill earlier in February, noted that the bill is a work in progress and is likely to change as it makes its way through the legislative process. He also made it clear that mobile betting must be offered if the state wishes to effectively compete with black market providers.

The Iowa sports betting bill still has a long way to go if it is to become law and its future is uncertain, but it does have support from some key players. In addition to having several Iowan congress members on board, the bill also has the support of the Iowa Gaming Association.

NBA and MLB Oppose the Bill

Two of the major sports leagues opposing New Jersey in its effort to challenge the federal sports betting prohibition have also come out against the Iowa bill. However, the leagues are not opposed to the bill on moral or sports integrity grounds. What the leagues don’t like about the Iowa bill is the lack of an “integrity fee.”

The idea of an integrity fee first appeared in Indiana after the NBA and MLB provided input on a bill proposed there to legalize sports betting. Indiana Rep. Alan Morrison acquiesced to the leagues’ demand and amended his bill to include a 1% fee on all sports betting handle.

Proceeds from the fee would be diverted to the sports leagues, ostensibly to “help compensate for the risk and expense created and the commercial value” their products provides to sports betting operators. That all sounds very good, but there has already been considerable debate regarding the true motivations of the sports leagues.

A 1% sports integrity fee sounds innocent on its face, but the true cost of such a fee only becomes apparent when we consider that the fee would apply to the total value of all sports bets placed.

Existing Nevada sportsbooks only generate revenues in the range of 5% of total betting handle. A 1% fee on that would be the equivalent of a 20% or more tax on revenue. The major sports leagues stand to gain a lot of money if they are able to convince lawmakers around the country to impose the integrity fee.

League representatives told the Des Moines Register that the current sports betting proposal falls well short of what’s needed to protect the integrity of sports. MLB spokesman Pat Courtney said this:

“Sports betting legislation must include certain protections to mitigate risk to our game. We will continue to work with Iowa legislators to make sure these protections are incorporated into sports betting legislation.”

In response, Iowa Gaming Association president Wes Ehrecke explained that a 1% integrity fee applied to sports betting handle would likely make sports betting an unsustainable business for casinos. The IGA anticipates that 95% of all wagering handle would be returned to customers in the forms of winnings, which would leave just 5% for the casinos to divvy up between state taxes, federal taxes, business expenses, funds to support good causes and a little profit from whatever would be left over.