All eyes in the gaming industry are on Missouri to see if it will become the 39th state to legalize sports wagering. On Nov. 5, Missourians will vote on six amendments, one of which brings legalizing and regulating sports wagering to the ballot. Missouri Amendment 2, the Sports Betting Initiative, proposes an addition to the state lottery portion of the state Constitution to legalize and regulate sports wagering.
While Missouri legislators have proposed bills to legalize and regulate sports wagering after the federal ban on sports betting expansion was overturned in 2018, lawmakers have failed to come to any agreement to progress legal sports wagering forward. In fact, a House bill to legalize sports betting was first introduced in Missouri in January 2018 prior to the federal ban being overturned. Since 2018, various bills aimed at legalizing sports betting have failed to take off, but now the issue is being placed in the hands of Missouri voters.
Amendment 2: The Sports Betting Initiative
The upcoming ballot will present voters with a summary of the proposed amendment (Amendment 2) to the Missouri Constitution asking that they vote yes or no to:
- Allow the Missouri Gaming Commission (MGC) to regulate licensed sports wagering, including online sports betting, retail sports betting on gambling boats, retail sports betting in professional sports betting districts, and the issuance of mobile licenses directly to sports betting operators.
- Restrict sports betting to individuals physically located in the state and over the age of 21.
- Allow license fees prescribed by the MGC and a 10% wagering tax on revenues received to be appropriated for education (after expenses incurred by the MGC and required funding of the Compulsive Gambling Prevention Fund).
- Allow for the General Assembly to enact laws consistent with Amendment 2.
The ballot goes on to state that, if affirmed, the legalization of such gaming is expected to generate tax revenue up to $28.9 million annually, the bulk of which would go toward funding educational institutions. And while Amendment 2 would be a clear expansion of gaming licenses that may be awarded by the MGC, it would also allow for expanding tax revenue for education through a 10% wagering tax on the adjusted gross revenue received from sports wagering.
In states where sports betting is already legal, tax rates range from 6.75% to 51%, with a national average of 19%. Sports betting tax revenue in Missouri would be appropriated first to cover reasonable MGC expenses, then up to $5 million to the Compulsive Gaming Fund (Fund). Lastly any remaining revenues would go exclusively to educational state institutions (elementary, secondary and higher).
Amendment 2 also addresses deductions for promotional play. About half of the 38 states with sports betting allow for deductions for promotional credits — Amendment 2 would as well, meaning that the taxed adjusted gross revenue would not include the cost of “free play” or “promotional credits,” subject to a 25% cap on such deductions. Opponents to Amendment 2 argue that the 10% tax rate is too low, especially with consideration of promotional credits, and fear it will not provide enough revenue to the Fund and education. For comparison, Iowa has the lowest state sports betting tax rate of 6.75% but does not allow deductions for free play. To account for potential months where the gross receipts are a negative figure (due in part to such deductions), Amendment 2 provides that no sports wagering tax would be due from the licensee and any gross negative receipts would be carried over and calculated as a deduction in future months until being brought to a zero balance.
Notably, Amendment 2 does not legalize certain fantasy sports contests, it precludes prop bets involving individual college athletes in regard to sporting events involving Missouri college teams, and a professional sports team must approve sports wagering within the district where they play home games (this does not include online wagering). Other highlights of Amendment 2 include license fees of $250,000 and $500,000 for retail and mobile sports betting licenses, respectively, and provisions requiring the use of official league data for tier two sports wagers under certain circumstances.
Various industry stakeholders have opposed Amendment 2. Opposition efforts have expressed concern that the educational funding proposal is misleading. They also criticized the structure of the proposed licensing, including online gambling platforms being permitted to obtain licensure without affiliation to a Missouri casino, as Amendment 2 would authorize the issuance of two mobile licenses directly to sports wagering operators. In contrast, while the tax structure proposed by Amendment 2 may not be the most aggressive, proponents of Amendment 2 have argued that it is projected to generate significant income towards state educational institutions and the tax rate (along with promotional deductions) is competitive and generally favorable to sports betting operators. And with past Missouri bills left stranded on the floor of the Senate, Amendment 2 would at least allow for revenue to be generated in-state while it is currently being lost to four neighboring states where sports betting is legal.
What next?
If passed, Amendment 2 mandates that sports wagering shall begin no later than Dec. 1, 2025, but not before a date set by the MGC. If the majority votes in favor of Amendment 2, such amendment will take effect 30 days after the election, and the MGC would likely create further rules and regulations to regulate sports betting in the state. Regardless of where the vote lies on Tuesday, it seems clear from the past six years that Missouri is not giving up on legalized sports betting anytime soon.
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