Future of sports gambling in Iowa

Jan 25, 2019  | 27 min  | Ep 4622 | Podcast

Podcast

As the legislative session warms up in Des Moines some issues are being placed on the front burner. For gambling interests, a sports betting expansion could be imminent. We sit down with Representative Bobby Kaufmann, Iowa Gaming Association's Wes Ehrecke and Gambling Law Expert Keith Miller on this edition of Iowa Press.

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For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond. Now celebrating more than 40 years of broadcast excellence on statewide Iowa Public Television, this is the Friday, January 25 edition of Iowa Press. Here is David Yepsen. 

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Yepsen: When the U.S. Supreme Court struck down a longtime gambling law related to sports betting experts predicted a wave of change across the country. Once restricted to the sports books of Las Vegas, the world of sports betting could be coming to your nearest Iowa casino or even closer. But what are the options on this issue in the 2019 legislative session? We have gathered a trio of guests to dive deeper. Republican Representative Bobby Kaufmann of Wilton Chairs the House State Government Committee. Wes Ehrecke is CEO of the Iowa Gaming Association representing Iowa casinos. And Keith Miller is a gambling law expert and law professor at Drake University. Gentlemen, thanks for being with us to talk about this issue. We appreciate you being here.

Thanks for having us.

Good morning.

Yepsen: Also joining the conversation are Iowa political reporters Erin Murphy, Des Moines Bureau Chief for Lee Enterprises and Kay Henderson is News Director for Radio Iowa.

Henderson: Professor Miller, briefly for viewers who have not been following this very closely, explain how the U.S. Supreme Court got us to this point.

Miller: It was a very important decision. May 14th of last year the Supreme Court, some people say they legalized sports betting, but that's not what they did. What they said was that Congress could not prohibit states from having sports betting if they wanted to. And since that time several states have jumped in joining Nevada, New Jersey of course, Rhode Island, Pennsylvania, Delaware, Mississippi, even New Mexico has a tribal casino. So what that means is there are going to be states looking to jump in on this and take advantage of that Supreme Court decision.

Henderson: Representative Kaufmann, I've been covering the legislature for a few decades and there have been bills before about sports betting. Tell us the odds that this will become law in Iowa in 2019? Or will it take a couple of years to build a consensus and a strategy for this in Iowa?

Kaufmann: I think the consensus has been building for years and I think one of the things that was preventing a bill from becoming law in years' past was the fact that we knew that the Supreme Court ruling might come down and we didn't want to preempt them and do something that would then be nullified by a potential ruling. And so I think for three or four years now, I have to give them a shout out, Representative Jake Highfill was championing this and the groundwork that was laid these last several years I think gives us a very good shot of getting this done this session.

Murphy: Mr. Ehrecke, what are we talking about here? What will this look like if this happens in Iowa, if sports betting is legalized? What will it look like to people who want to participate?

Ehre. Representative Kaufmann, how do you guarantee that this will be run with integrity? What sort of teeth are you expecting to put in any legislation that advances?

Kaufmann: Well, whoever ends up running this are going to have to give us assurances that they're going to be able to handle this with integrity and they're going to be able to handle this above board. And again I don't mean to be repetitive but that's what the subcommittee process is for, those questions are going to be asked in a very public forum where folks like you can come and print it, the public can come in and weigh on it and people that are interested in participating in this they can say hey, here's exactly how we're going to provide that security.

Henderson: Mr. Ehrecke, how do the casinos intend to guarantee the integrity of the games? Will you buy the data from the Major League Baseball, from the NFL?

Ehrecke: Well, certainly the integrity aspect of this, we have had many years of experience with the compliance and the regulation. We have to have that to assure public confidence. And with the Racing and Gaming Commission, with their reputation, high level of reputation for the oversight and the standards and the rules. So that is going to be in place and that is why we feel we're best positioned for that, to give the people the best public confidence and for great entertainment experience. Specific to the data that is needed, there are companies like Sport Radar, Bet Genius and others who provide this data, it has been public for years, to the media, to the fans and others. To have the major league suggest that it should be a monopoly on that data when they're actually partnering with Sport Radar and others to have that be available. And so we want to have the free enterprise system work and have an open, competitive marketplace to be able to go out and access that data from these companies that are global and have been doing this for many, many years with the sports books in Vegas.

Henderson: But how do you expect the Iowa Racing and Gaming Commission and its integrity or police officers, if you will, to police maybe a major league pitcher who tells his brother, hey place a bet on the next pitch I'm throwing because I'm going to throw a ball? How do Iowa regulators police that?

Ehrecke: They will. They have that wherewithal and working with New Jersey now that has been into this and especially with Vegas that has been in this for many years, this regulation has been established through the casino sports books to assure that those improprieties don't occur. It's actually the sports books that uncover fixing of games. A good example several years ago is the NBA referee Tim Donaghy who was throwing games. It wasn't the NBA that uncovered that, it was the sports books that saw those irregularities and got him indicted. And so that is the kind of efforts that the regulators, along with the people that have the expertise in the sports books, will assure with that integrity every day.

Murphy: Well, before we move on, Representative Kaufmann, when we talk about integrity and you mentioned Representative Highfill who worked on this bill in the past, he said the integrity fees that the sports leagues were asking for was a nonstarter, could not be in any bill that would succeed in the Iowa legislature. Do you have the same view?

Kaufmann: I have promised all stakeholders they will get a fair shake at the public hearing and so I don't want to tip the scale in anyone's favor.

Yepsen: Representative Kaufmann, isn't it an argument for the casinos running this thing? The Powerball had a little problem with its integrity, somebody rigging a game. Does that exactly encourage use of lottery to run sports betting in Iowa?

Kaufmann: I would be remiss if I didn't say people have brought that up to me and they are going to have to make a compelling case as to how those things have been fixed and how moving forward they would be best positioned to do this. It is incumbent upon all the stakeholders to be able to make this case public so everybody can be aware.

Murphy: Mr. Miller, is this a big moneymaking venture for either state through the taxes or through the casinos and profits from sports gambling?

Miller: No, I think in short and I think from the beginning that the Iowa Gaming Association and Wes have never presented sports betting as a way for the state to make a lot of money. It's not going to be a cash cow. Sports books are very low margin operations. The one industry group estimated that in the first year Iowa sports books if it were legal would take in around $80 million and people look at that and say, well that's a lot of money to tax. But the fact is that sports books historically retain only about 5% of that, the rest of it goes back to the successful betters. So if we take 5% if that $80 million figure is accurate, we're taxing $4 million. And in 2017 I think Iowa casinos paid more than $300 million in gaming taxes. And whatever tax it would be on $4 million is, every dollar helps, but it's not going to be a budgetary game changer.

Murphy: Mr. Ehrecke, we saw this last week Prairie Meadows thinking ahead to this possibility and entering into or looking into a partnership with a company that would help them create a sports betting area and there was a provision with I believe it was a 50/50 split in that partnership. Is that, are we going to see other casinos doing that? Did Prairie Meadows jump the gun here on something that may or may not be coming down the pipeline and may or may not be a great windfall for them?

Ehrecke: Certainly all of my member casinos, the 12 gaming companies and 19 casinos, are looking at establishing a sports book area and having various kinds of partnerships. William Hills, one of the leaders in that sports books expertise, and that's a good thing again for that integrity that we've talked about and having the compliance and the various things, they know that and they have done it for many, many years. So I would anticipate other companies doing the same thing and negotiating and they're doing that. The fact that they have announced this, that they're putting that in, they're optimistic as we all are that we can get something passed this year through the House and the Senate and to the Governor's office that would have this be available for people that enjoy watching sports and betting on sports and bringing it out of the shadows, as Representative Kaufmann said, that a lot of illegal activity has been occurring so now we can bring it in and have it be available in our casinos.

Murphy: And Representative Kaufmann, as Mr. Miller said, it's not a huge windfall for the state but there will be some money. Has that been determined where that will go? Will that go into the same pot that the current casino revenue, tax revenue goes? And will there be money for gambling addiction, for example?

Kaufmann: Because of the uncertainties I'm definitely not choosing strings to attach to it. But I know that as the process goes from subcommittee, which is five people, to committee which is over 20, to the floor which is 150 I'm sure there are going to be many, many people with ideas. Of course I will entertain all of them.

Henderson: Do you make America great again by letting the casinos strike deals with foreign companies on this?

Kaufmann: I think that the casinos, who they choose to do their data, I would concur with what Wes said, that the Racing and Gaming Commission does a very good job of policing the nefarious activity and I have a high level of confidence that if any bad actors were picked they would air them out.

Yepsen: Mr. Miller, question. What about the cost? What about addiction? Are we going to see an increase in gambling, addiction gambling problems? Are we going to have to earmark money as a state for additional treatment? Much of that is already done by the existing industries that are taxed. How about sports betting?

Miller: Sports betting is a problem because the demographic in our population that likes sports betting the most is a young demographic, from 21 to 35. Sports betting is their favorite type of gambling. Unfortunately that demographic is also at a very high risk of developing gambling disorders. And I think that we can’t be blind to that and it raises a couple of issues. One is we can't over glamorize or over market sports betting. And secondly I think it's critical that we establish money for research and prevention and treatment of gambling disorders. Often times in states money that is set aside for gambling disorder, treatment and prevention, is money that during difficult economic times begins to be reduced or even disappear and I think this is a public health issue that people need to be very aware of and we need to have that money secured so that we know we've got it.

Yepsen: Mr. Ehrecke, how do you address that?

Ehrecke: We have been proactive for many years, since the beginning of the casinos having this, to have a robust, responsible gaming initiatives. We helped fund the gambling treatment program 800-BETSOFF.

Yepsen: How are you going to do that on a mobile phone? I can go out and tell the casino I've got a problem, don't let me in here and they'll keep me out. What are you going to do with a mobile phone? How do you prevent --

Ehrecke: There can be buttons on the phone to have that same responsible gaming, they want help, they want it to time out and there's various ways of locking yourself out that are available. So some of those things might be included on these mobile apps for somebody that needs that help. That small percentage of people that experience a problem we want to make sure that they have the resources and the wherewithal through prevention, treatment and certainly awareness and we'll be very involved with that as we have been for many years.

Henderson: People have been wagering on sporting events, Professor, for quite some time illegally. What would motivate them to want to do it legally? Isn't there going to be a huge underground market for gambling for years to come?

Miller: Illegal marketing, illegal gaming rather, illegal sports books are not going to go away even if Iowa authorizes sports betting and establishes a platform for it in the state. It's not going to go away, what any state should want to do is try to develop a sports betting system that is attractive enough that people say, I don't want to do that illegal thing anymore, I want to migrate to a legal, regulated platform of gambling. But that also goes to how the system is set up. If you have a system set up where the sports books are heavily taxed, there are a lot of fees on them, then the products that they offer to betters won't be very attractive and the betters will look at that and say, I think I'll just stay with my neighborhood bookie who I meet at the barber shop on Tuesday afternoons and either get money or give him money and I'll stay with the offshore sports books. So it's a critical part of the regulation.

Yepsen: Mr. Kaufmann, you're a good republican, why not let the private sector continue this business?

Kaufmann: Well, I think that private sector often times has partnerships just like this and I think it's all the more reason for folks, all of my constituents that have reached out to me have said, hey we're doing this right now, we'd like a bill to be doing this above board.

Yepsen: So you think you can strike a blow against organized crime by legalizing the practice here in Iowa?

Kaufmann: I absolutely believe that, yes.

Murphy: And to Mr. Miller's point, that tax level was something that bounced back and forth between a pretty big range as low as 7% or 8%, as high as almost 20% I believe. How do you find that magic number too, as Mr. Miller alluded to, have a tax on it without driving away people from doing this legally and maybe they choose instead to stay in the shadows?

Kaufmann: Well, the Professor made an excellent point and that is if you would make the tax too high people are not going to come out of the black market. And so while I do believe there does need to be a tax on whoever ends up doing this, it is important that it remain low.

Murphy: How do the Iowa colleges feel about this, Iowa, Iowa State, the University of Northern Iowa, knowing that there will be people betting on their athletic contests? I checked with the Regents, they have not made an official stance on this, the Board of Regents. Representative Kaufmann, have you talked to leaders there to get a sense of how comfortable they are with this possibility?

Kaufmann: They have not reached out yet but I will definitely be inviting them to that subcommittee to give testimony on their thoughts on it and I think they would be just as interested as all the other stakeholders you've mentioned in ensuring that the Racing and Gaming Commission would police this properly to ensure that no bad actors were able to be involved.

Henderson: Do you anticipate saying it's only professional sports? It's only professional and college sports? Or Katy bar the door, we're going to start betting on the Wilton High School?

Kaufmann: So far it has been limited, for anybody that has talked to me about it, all the stakeholders, it has just been limited to professional and collegiate sports.

Yepsen: Mr. Ehrecke, what about it? Should we be going into your casinos and betting on University of Iowa football games?

Ehrecke: Sure, absolutely.

Yepsen: How about the Wilton High School football team?

Ehrecke: No, not at all, no high school. We don't think that should be a part of that. But certainly collegiate and professional. Again, to what we've been talking about before, people are already doing so. Prohibition has not worked to allow illegal activity to flourish in the past 26 years that only Nevada has had this. So now we can have this be regulated and if you don't they'll still go back and bet in there with their bookmaker, their illegal sites. So we have an opportunity now to have it be for both collegiate and professional.

Yepsen: Mr. Miller, your thoughts on this? Should we allow high school betting or university betting? Where do you draw the line?

Miller: Well, not high school. I think that no responsible person says that it should go below a collegiate level. I think the issue of whether to permit betting on universities in the state is an interesting point. New Jersey, for all of their success most recently with sports betting, they don't allow bets on the universities there, Seton Hall or Rutgers in the Big 10. I find that to be puzzling because the whole idea of having a regulated, legal market is that you're going to have integrity and you're going to have it out in the open. And to say well that's true but we really don't want it to sully our schools, I don't see the consistency there.

Yepsen: We've got less than a minute left. I want to completely switch gears, Representative Kaufmann. Your committee also has jurisdiction over the IPERS system. Will the legislature make any changes to the IPERS system?

Kaufmann: We will unequivocally not. I have stated that repeatedly and any groups, political groups that continue to push that narrative are lying.

Yepsen: What about for future employees? Do you anticipate going to a 401K system for them?

Kaufmann: Absolutely not.

Yepsen: Are you under pressure to make that change?

Kaufmann: I have not been under any pressure. I think that a lot of this has been inventing demons from political groups.

Yepsen: All right. Gentlemen, thank you. We appreciate you taking time to be with us and talk about these issues. And thank you for joining us. We'll be back with another edition of Iowa Press next week at our regular times. For all of us here at Iowa Public Television, I'm David Yepsen. Thanks for joining us today.

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Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. I'm a banker. I'm an Iowa banker. No matter who you are, there is an Iowa banker who is ready to help you get where you want to go. Iowa bankers, allowing you to discover the genuine difference of Iowa banks.

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