What you need to know: Constitutional Amendment No. 2 (Sports betting)

By Brad Ziegler

The decision before voters who are considering how to vote on Amendment 2, which would allow the Missouri Gaming Commission to regulate licensed sports wagering in Missouri, is generating a lot of discussion, and a lot of investment in advertising on both sides of the issue.

Voting Yes

If Amendment 2 is passed, the state of Missouri would join seven of the eight states with whom they share a border, and a total of 38 states across the country, who allow online and/or live sports betting in their state. The rush of states to adopt sports betting was prompted by a Supreme Court ruling in 2018 that struck down a ban on sports betting across the country in every state other than Nevada. That ban had been federally imposed in 1992 by the Professional and Amateur Sports Protection Act, and all of the major professional sports leagues in the country had opposed any efforts by states who sought to overturn the law in the years following its passage, citing the importance of “protecting the integrity” of their various sports.

New Jersey was the state that was successful in challenging the federal ban on sports betting in the Supreme Court, and that decision opened the door for other states to quickly take steps to cash in on the opportunity to enhance their revenue with new gambling taxes and fees. Kansas joined the large majority of other states who were adopting measures to allow sports betting in 2022, and Governor Laura Kelly famously placed the first legal sports bet in the state, wagering on the Kansas City Chiefs to win the Super Bowl. Her early season $15 bet returned $150 after the Chiefs victory in Super Bowl LVII against the Philadelphia Eagles in February of the following year.

If you have heard any of the ads in support of Amendment 2, it is clear that the professional sports teams in Missouri have done an about face on the sports betting issue as they are all listed as supporters of the Amendment. Their support during the initiative petition drive, together with the huge investment by Draft Kings and Fan Duel, the two largest sports betting platforms in the country, has totaled more than $32 million so far. While major league baseball has traditionally prohibited in-stadium sports books, teams around the league have begun to incorporate them into surrounding ballpark villages as part of a push for year round revenue for the team. Arenas around the country that host professional hockey and basketball have taken this further and brought sports betting lounges onto their properties.

Amendment 2 has bipartisan support of the two candidates for Missouri Governor, Mike Kehoe and Crystal Quade, as both candidates expect large amounts of tax dollars to be generated for the state. Proponents estimate the tax windfall from legalization of sports betting in Missouri to total more than $100 million in the first five years.

Voting No

Opponents are quick to point out that the new 10% tax on sports bet revenues would only be imposed on net revenue after deductions for promotional and other expenses, including promotional deposits made to new account holders looking to get their feet wet in Missouri.

During February, 2023, Kansans placed $194 million in sports bets but only paid $1,134 in taxes due to the front loading of the promotional bets and other expenses by sports book operators. Promotional bets in Kansas are not taxable and as proposed in Missouri, promotional bets would only be taxable if they exceed 25% of all cash and cash equivalents received by the sports book.

Even if the tax revenue projections reach fruition, critics are concerned that the new windfall will never reach the school districts that are being held up as the primary beneficiaries. They cite the benefits to education promised by the lottery nearly four decades ago and point out that the state still ranks near the bottom of the country in its funding of education.

They are also concerned that the failure to provide the necessary identification of an agency to collect the proposed taxes and a mechanism to implement that collection puts the promoted benefits to the state in doubt. The Missouri Department of Revenue shared their concern about the collection process in their comments to the fiscal note that they provided to the state auditor’s office regarding the amendment.

Brick and mortar casino operators in Missouri like Caesars and Penn Entertainment also oppose Amendment 2, in part because the proposal would limit their ability to cash in on the opportunities offered by the amendment, as compared to their out of town online sports book competitors who will have no presence in the state.

Recent polls of Missouri voters show that a slight majority of those polled favor Amendment 2 but the number of undecided respondents leave the likely outcome of the vote on the amendment unclear.