For now, Minnesota is losing bet on charitable e-gaming

  • Article by: STAR TRIBUNE EDITORIAL
  • Updated: March 26, 2013 - 10:59 AM

But there’s still time for charities, regulators to ramp up operations.

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Photo: An electronic pull tab game.

Photo: Marlin Levison, Star Tribune

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Minnesotans who remain frustrated by the pace of electronic gaming expansion earmarked to finance the Vikings stadium can take some comfort in one certainty: The regulatory climate here — much like the weather — is very different from what one finds in Florida.

In case you missed recent news from the sunny South, Florida’s Lt. Gov. Jennifer Carroll resigned March 12 amid a state and federal investigation into an Internet sweepstakes company that ran a quasi-gambling operation. Before Carroll became lieutenant governor, she served as a consultant for the firm Allied Veterans of the World.

Allied operated as a charitable nonprofit for veterans, but authorities allege that it exploited a loophole in Florida law in building a $290 million illegal gaming operation that donated only $6 million. Lawmakers are now considering a ban on the state’s 1,000 online cafes, whose customers buy Internet or phone cards that allow them to play games much like slots or video poker.

The mess in Florida is relevant here because regulatory oversight in Minnesota is being blamed, in part, for the slow introduction of new forms of charitable gambling tied to public financing of the Vikings stadium.

State gaming officials defend their deliberate approval process, pointing out that proper vetting of manufacturers and distributors of new e-pulltab and e-bingo games is essential to maintain clean and credible charitable gaming in the state.

So who’s to blame for the fact that only about 200 bars and restaurants have introduced e-gaming, with expected incremental revenue of just $1.9 million for the year, when projections as recently as last fall were that 2,500 locations would generate $17.1 million for the stadium project in 2013?

The nonprofits that run the state’s 2,800 charitable gaming operations are at least partly responsible. They had been hoping for meaningful tax relief from the Legislature and wanted e-gaming expansion, but many remain bitter that they received only minor tax breaks in return for the state’s staking a claim on an anticipated $36 million in new revenue from e-gaming to pay off stadium bonds. And some charities have been hesitant simply because e-gaming represents significant change for their organizations and the bars and restaurants they count on as partners.

At the same time, the stadium bill passed despite widespread skepticism at the Capitol about the expected pace of e-gaming regulatory approvals and about the revenue estimates. As the Star Tribune’s Jean Hopfensperger reported Sunday, regulators relied heavily on advice from gaming firms in making revenue projections, while the charities were largely out of the loop. That contributed to the high estimates.

What’s clear now is that the pressure is on state regulators, the charities, and the bars and restaurants to ramp up their efforts. A key threat to the charities if they don’t deliver is that lawmakers could eventually decide to allow the state lottery to introduce new e-games in bars and restaurants — a development that could leave the charities behind the curve in an increasingly digital world.

For now, though, we urge patience. Gov. Mark Dayton has said that stadium bonds will not be sold before August, and the state can manage the timing to deal with the revenue shortfall from charitable gaming. In addition, the stadium bill established blink-on taxes on luxury seats and a sports-themed lottery game as backup plans, although both of those alternatives are far from perfect.

There were some signs of regulatory progress last week. The state’s Gambling Control Board approved the first e-bingo games linking players statewide. Officials believe those games, with jackpots of up to $75,000, could be especially popular and draw new customers.

This page lobbied for the Vikings stadium deal, but also for more dependable public financing supported by general sales or income taxes. Based on what we’ve seen to date, it’s likely the state will have to look for alternative funding, but the slow launch of e-pulltabs and e-bingo and the overly optimistic revenue projections make it difficult to predict when and how much.

State officials will know a lot more about the long-term prospects for e-gaming by the end of this year. Once those numbers are analyzed, the legislative oversight committee called for in the stadium legislation will need to make reasonable projections for the growth of charitable e-gaming and, if necessary, craft a solution to solve the problem.

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An editorial of the Star Tribune (Minneapolis.) Follow the editorial board on Twitter and on Facebook and on Instagram.

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