Missouri Sports Betting on the Agenda in 2019

A handful of Missouri lawmakers are planning on taking another stab at passing sports betting legislation in 2019. One bill has already been prefiled for the upcoming 2019 legislative session beginning January 9th, and lawmakers say other draft bills have been floating around as well.

While lawmakers sound confident, Missouri Governor Mike Parson is just neutral on the idea. A spokesperson for the governor’s office told the St. Louis Post-Dispatch that Gov. Parson won’t be leading the call for sports betting, but that he also is not opposed to the idea.

Looking at Missouri’s First 2019 Sports Betting Bill

The bill with the greatest prospects currently is SB 44, which was prefiled by Senator Denny Hoskins on Friday. If approved in its current form, SB 44 will authorize Missouri’s 13 casinos to offer in-person and online sports betting to customers physically present within state lines.

SB 44 also provides a reasonable tax and licensing structure: 12% on adjusted gross receipts, a 2% “administrative fee” and a $10,000 licensing fee. Once licensed, Missouri casinos with online sports betting will be on the hook for an annual $5,000 renewal fee.

Although SB 44 looks like a win for players at first glance, there are two spoilers in the bill. Most notably, the bill calls for an integrity fee of 0.5% on total betting handle. We have discussed at length the issues with integrity fees in previous posts, but the condensed version is that integrity fees are much larger than they appear.

Taxing operators a mere 0.5% doesn’t sound like much until we consider that amount is taken from total betting handle, not from net revenue. Sportsbooks typically only keep about 5% of betting handle (the total amount bet) after paying winners, so taking even just half a percent off the top amounts to a serious tax on actual revenue.

Another way to think of it is that for every $100 wagered, a typical sportsbook might keep $5 after paying out winners. Whatever sportsbooks have left after paying out winnings must then be divvied up among upkeep costs, paying employees, paying other taxes and then hopefully taking a little profit after all is said and done. In other words, sports betting is not a high-margin business.

Applying a tax on total handle has an outsized effect on how much money is actually taken form a sportsbook’s net revenue. Some pro sports leagues, for example, have been lobbying state legislatures for a 1% integrity fee. If sportsbooks only keep about 5% of total wagers on average, charging 1% is the equivalent of taxing sportsbooks roughly 20% on gross revenue.

The integrity fee called for by SB 44 is not as bad as it is set at 0.5%, but that’s still roughly equivalent to charging an extra 10% or so assuming Missouri betting sites end up with an average hold of around 5%.

The other problem area with SB 44 is a requirement included in the text that customers first visit one of Missouri’s casinos to register in-person before betting online. This provision places an unnecessary hurdle between potential customers and licensed betting sites, which in turn will make it that much more difficult to channel customers away from illegal offshore sportsbooks.

However, SB 44 still has a long trek through the legal process before it has any chance of becoming the law of the land. As SB 44 is pushed through the various committees and both chambers, lawmakers will have opportunities to debate the bill, suggest changes and possibly scrap it altogether in favor of an alternative bill.

Other tidbits found in the bill include:

  • Tasking the Missouri Gaming Commission with issuing licenses to qualified sports betting operators
  • Grants the Missouri Gaming Commission the authority to issue regulations related to proper advertising that is honest, that provides resources for gambling addiction and that does not target minors
  • The Missouri Gaming Commission is tasked with designating a state law enforcement entity with conducting investigations into suspicious betting patterns
  • Licensed operators must provide self-exclusion programs for customers who wish to restrict themselves from wagering
  • Operators must keep detailed records on all customers and on all wagers placed

Missouri Lottery May Also Want a Seat at the Table

State lawmakers are not the only Missourians with sports betting on their mind. In a separate story published on November 30th, the St. Louis Post-Dispatch noted that Missouri Lottery Director May Scheve Reardon attended the ICE Sports Betting USA 2018 conference in New York.

The Post-Dispatch was unable to reach Reardon for an interview, but it did speak with Lottery Commission Chairman Paul Kincaid. When asked about the trip to New York, Kincaid told the Dispatch this:

“The Missouri Lottery is not involved in either drafting or pursuing legislation on sports betting. However, the Lottery Commission is committed to finding ways to increase funding to education. Estimates show sports betting can provide the most benefit to education if both casinos and Lottery retailers are involved.”

Whether or not the Missouri Lottery play a part in sports betting remains to be seen. No legislation has been formally submitted to that end, but lawmakers have alluded to other proposals that may be considered in 2019.

At least one bill submitted for consideration last year sought to include casinos and the state lottery in sports betting. HB 2320 introduced by Representative Bart Korman in 2018 would have had the Missouri Gaming Commission issue sports betting licenses to state casinos and allowed lottery retailers “to utilize sporting events in lottery games.”

That bill died in committee last year, but a similar bill could easily resurface during the upcoming legislative session. Whatever happens next year in Missouri, lawmakers seem confident that sports betting will at the very least be a hot topic of discussion.