Minnesota Senate committee advances sports betting bill, raises tax rate to 20%

The Senate Tax Committee of Minnesota has advanced legislation aimed at legalizing sports betting in the state. Spearheaded by Senator Matt Klein, bill SF1949 faced its second hearing in Taxes, marking another step in its legislative journey.

This legislative push is not new, as the bill had previously undergone deliberations in the committee last year. The hearing focused primarily on alterations to tax rates and the allocation of resulting revenues.

Senator Aric Putnam introduced an amendment during the session, which made several major changes concerning taxes and revenue distribution. Among these changes, the tax rate on net revenues from sports betting was revised to 20%, up from the previous 10%. Furthermore, the amendment delineated the allocation of revenues as follows:

• 20% for tax relief for charitable gaming organizations,
• 10% for treatment and awareness programs for problem wagering,
• 15% for Explore Minnesota Tourism to bolster large sporting events,
• 5% to the Minnesota Racing Commission for racetracks,
• 5% for the Minnesota State High School League to support youth sports and activities,
• and the remainder to be allocated to the general fund.

"The changes made in Senate Taxes Committee today have made this a better bill for Minnesotans,” Said Senator Klein. “I am thankful for the committee’s thoughtful consideration of this legislation and willingness to work toward the best balance of needs and interests.

“As a result of this work, we are now able to support our allied charities who engage in gaming so they can continue the good work they do for our state,” continued Senator Klein. We are also able invest in the state high school league’s ability to foster participation in a wider array of activities, attract more large sporting events to Minnesota, and continue to focus efforts on problem wagering awareness.”

Following the amendments, SF1949 received approval from the Senate Taxes Committee and was subsequently referred to the Senate Finance Committee for further review.

While the legislative process advances, Minnesota lawmakers are mindful of the looming deadline and the need to reconcile differing perspectives. Committees in both chambers must give the nod to any sports betting-related bill by Friday, March 22.

The bill, a companion to House File 2000, seeks to authorize both retail and online sports betting in Minnesota, bringing the state in line with evolving national trends. Mobile sports betting licenses would be reserved for the 11 state tribes, who could partner with operators such as DraftKings or FanDuel and open brick-and-mortar sportsbooks at their casinos. 

However, challenges persist, with contentious issues such as tax rates and revenue distribution requiring delicate negotiation. Moreover, recent changes to sports betting-related legislation in the Minnesota Senate could prompt pushback from both opponents and supporters, especially after the removal of in-game wagering from the measure.

The loss of in-play betting contributed to a drop in projected tax revenue from legal sports betting, from a previous forecast of around $40 million per year for the state to approximately $18 million, even with the higher tax rate.