Iowa legislators are poised to approve a statewide sports betting program this year. It remains to be seen whether revenue from the new industry will benefit citizens across the state, or only a select few.
We are generally supportive of the plan to legalize sports betting in Iowa, after a U.S. Supreme Court ruling last year lifted federal restrictions on such activities. Many Iowans already place illegal wagers on sports matches, and the opportunities to do so will only grow with the expansion of online gambling.
It makes good sense for Iowa policymakers to bring the underground industry into the light and capture some much-needed tax revenue along the way, but lawmakers will wrestle with several important issues before their bills are finalized.
We are somewhat disappointed, though not surprised, to see lawmakers plan to house the entire sports betting system within Iowa’s existing casinos. It’s likely to be a lucrative gift to an already profitable and influential industry.
If that is a foregone conclusion, lawmakers must take steps to ensure the economic benefits of sports betting are not unfairly concentrated in the 15 Iowa counties with state-sanctioned casinos. A large portion of would-be gamblers come from the other 84 counties, and their home communities deserve a fair share of the spoils.
It’s a particularly pertinent concern in Linn County, one of the communities where voters have approved a casino referendum but still don’t have a casino. The Iowa Racing and Gaming Commission narrowly voted in 2017 to deny all three proposals for casinos in downtown Cedar Rapids, to the dismay of many local residents and government figures.
Gambling in Iowa is heavily restricted because stakeholders worry overbuilding casinos would eat into existing facilities’ market share, which the industry calls “cannibalization.”
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However, since legal sports betting does not yet exists in Iowa, there is no market to cannibalize. With that in mind, lawmakers should give serious consideration to opening up the new market to more locations.
Under bills in the Iowa House and Senate, casinos could apply for sports betting licenses, allowing them to take wagers on-site or online. The Senate version would require gamblers to establish an account in-person at a casino before betting online during the first 18 months of the program.
A suitable compromise would be to authorize a new class of gambling centers in the form of sportsbooks — separate establishments from brick-and-mortar casinos where gamblers can place bets and watch games. They could be satellite offices operated by existing casino companies, or licensed to industry newcomers.
As another way to spread out the economic boon from sports betting, policymakers should revisit the formula for distributing revenues to non-casino counties.
Casinos are required by law to dedicate some gaming revenue to community development projects, but counties without legal gambling are getting a bad deal. We know casinos draw patrons from beyond their counties, and online sports betting will be even more geographically dispersed.
Last year, counties without casinos received $9.3 million in grant funds through the County Endowment Fund, a little more than $100,000 for each of the 84 counties on average, according to Iowa Community Foundations’ annual report.
Nonprofit entities affiliated with existing casinos awarded over $85 million in grants over the same timespan, most of which goes to projects within the casinos’ counties of operation. That’s a little more than $5 million for each of the 15 counties on average.
To better illustrate the disparity, consider that Riverside Casino, about 40 miles south of Cedar Rapids, logged more than 1.5 million admissions in 2017, even though Washington County only has about 22,000 residents. While casinos don’t keep detailed records about patrons’ hometowns, it’s a safe bet that a large share of Riverside gamblers call Linn County home.
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Nevertheless, the Washington County Riverboat Foundation delivered $6.4 million in grants last year, while Linn County received only about $150,000 from the statewide County Endowment Fund.
If state regulators won’t let Linn County have a casino, the least legislators could do is serve us an appropriately sized slice of the pie — revisit the revenue formula, and entertain the idea of stand-alone sportsbooks in communities like ours.
Past experience suggests that once sports betting begins, it will be politically difficult to make any substantial changes. It’s important that lawmakers get it right the first time.
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