Messy Minnesota: Track sues tribes, further muddling path to legal wagering

The latest news came on Thursday (18 April) when the house commerce, finance and policy committee voted to move forward an amended bill that bans historical horse racing (HHR) machines from tracks. The issue isn’t directly related to legal Minnesota sports betting, but it was the second move this week muddling the path to legal wagering.

On Tuesday (16 April) Running Aces, a harness track north of the Twin Cities, filed a lawsuit against three tribal casinos. The filing is a tit-for-tat in the fight for legal online sports betting. In a state where federally recognised tribes have gambling exclusivity, lawmakers have long been trying to broker a deal. But in the last three weeks, legislative action has given way to other kinds of politicking.

Running Aces, owned by private-equity firm Black Diamond Commercial Financial, claims that the tribes have been illegally offering banked card games that give them “unfair competitive advantages over Running Aces to attract many patrons who would otherwise have played at Running Aces, thereby depriving Running Aces of substantial revenue and profits”.

Running Aces CEO Taro Ito released a written statement, according to the Minneapolis Star-Tribune: “All that we have ever sought was to be treated fairly, compete on a level playing field, take advantage of improvements within the pari-mutuel environment and operate without fear of being eliminated.”

How horse racing, legal wagering are related

The horse racing industry, or pari-mutuel wagering, has been tied to legal sports betting in multiple US states. Lawmakers in Illinois, Louisiana, Massachusetts and New Jersey are among those that have allowed for “racinos” at horse racetracks. Having gambling venues at the tracks provides a new revenue stream for a struggling industry.

But Minnesota is one of about a dozen states in which federally recognised tribes have exclusivity for gambling. In most tribal gaming states, Indian Country will protect its sovereignty at nearly any cost, including opposing legislation that encroaches on its gambling monopoly. Allowing HHR machines, in the tribal estimation, challenges exclusivity and, by extension, tribal sovereignty.

Balancing commercial and tribal gambling requires a deft hand and a lot of nuance.

Charitable gaming issue solved in Minnesota

Earlier this year Representative Zack Stephenson, the author of Minnesota sports betting legalisation bills over the last several sessions, solved one issue when he brokered a deal between the state’s tribes and the charitable gaming sector. The net result is that $40m of gambling revenue will be sent to charitable gaming in exchange for the status quo on pull-tab machines.

The legislature in 2023 passed a law that would allow for an “open all” feature on the machines. Tribes argue that would make them nearly identical to slot machines.

When Stephenson cut that deal, he had to make other changes to his betting bill. The proposed tax rate was doubled from 10% to 20%. HF 2000 previously had earmarked several million dollars for horse racing purses. That number was reduced to $625,000. The tracks say it’s not enough and the bill would “eviscerate” the racing industry.

None of Stephenson’s proposals would allow for any type of casino-style gambling at the tracks.

Minnesota Racing Commission goes rogue

The Minnesota Racing Commission (MRC) responded to Stephenson’s revisions by “legalising” HHR machines at the state’s two tracks, Running Aces and Canterbury Park.

The machines too closely resemble slot machines, the tribes say. Stephenson called the move by the racing commission illegal and almost immediately filed a bill that would ban such machines. That bill, HF 5274, is the one that moved forward Thursday morning. The tribes support the bill and Minnesota Indian Gaming Association executive director Andy Platto testified that the racing commission “does not have the authority to expand gambling” and that the legislature “should be ashamed that your role is being hijacked”.

Platto went on to say that the tribes have an “inherent governmental right to gambling. The tracks do not.” Representatives from both tracks testified that their industry needs funding, that banning HHR will hurt them, and that cutting them out of legal sports betting is unfair.

The HHR bill appears to be getting fast-tracked to the house floor. The commerce finance and policy committee declined to send the bill to the economic development finance and policy committee for further discussion. Representative Jon Koznick made the request, saying he wanted to slow the process, but his motion failed, 7-4.

Later in the hearing, Koznick said it’s “bad legislation to abuse our power” and that there is “no reason to use (this bill) to influence another”.

In order to become law, HF 5274 must pass the full house and senate before the legislature adjourns 20 May.

Tracks also say “illegal” card games “harming” them

The lawsuit filed Tuesday describes a situation in which three casinos owned by two tribes – Grand Casino Hinkley, Grand Casino Mille Lacs and Treasure Island – have been offering Class III card games their tribes have not compacted for.

The Mille Lacs Band of Ojibwe and Prairie Island Indian Community in the 1990s compacted with the state of Minnesota to offer blackjack and other forms of gambling. But, according to the filing, “no other Class III (card) games were covered”.

Since 2020, according to the complaint, the Grand casinos have illegally been offering Mississippi Stud, three-card poker, four-card poker, Let it Ride and Ultimate Texas Hold ‘Em. Prairie Island also offered the games, but they became legal offerings in October 2023 when a compact amendment was published in the Federal Register.

Indian gaming is under the purview of the Indian Gaming Regulatory Act (IGRA), which allows for Class III gaming if a tribe compacts for it and a state agrees. In this case, the state explicitly agreed to allow blackjack. It did not explicitly agree to allow other banked card games. Language in the compacts does seem to allow for all Class III games as defined by IGRA, but most tribes have not offered additional card games.

Hamish Hume, the lawyer representing West Flagler and Associates in its battle against the US Department of the Interior over a Florida gambling expansion, is representing Running Aces. He wrote that the tribal offerings violate the RICO (Racketeer Influenced and Corrupt Organisations) Act.

The tribes want the US District Court for the District of Minnesota to declare the games illegal, award treble damages, impose an injunction to stop the games and repay the track’s attorney’s fees.

Legal wagering debate most likely to suffer

The lawsuit is not the first or only one involving Minnesota gambling in the last year. The Shakopee Mdewakanton Sioux Community sued the racing commission last October to prevent an expansion of gambling at the tracks. It filed another suit earlier this month asking the state court of appeals to reverse the MRC decision to allow HHR terminals at the tracks.

Whether filed by the tribes or tracks, the lawsuits, along with the MRC decision, are muddling the path to legal wagering. What happens next is anyone’s guess, although with time running short on the legislative calendar the debate about legal Minnesota sports betting is what is most likely to suffer.

Original article: https://igamingbusiness.com/sports-betting/minnesota-sports-betting-path-muddy/