South Dakota sports betting backers see expansion to mobile phones coming
"I’m ashamed [of our reliance on gambling]," one Brookings lawmaker said during floor debate in opposing HJR 5006. "And we definitely don’t need to advance [online sports betting].”
PIERRE, S.D. — Although luck has run out on one attempt to legalize mobile sports betting across South Dakota, proponents of bringing the practice to the state have a few other options in the leadup to the next election.
The issue is of particular interest in Sioux Falls because Grand Falls Casino operates a sports betting operation on the South Dakota border, about a 10 minute drive from city limits. Once a driver connects with an Iowa cell tower they can place a bet on their phone.
Following an intense House floor debate on Thursday, Feb. 16, over a resolution looking to bring mobile sports wagering to the voters via a 2024 ballot amendment, lawmakers voted 41-28 to stop the proposal — which scraped out of committee in a 7-6 vote one day earlier — in its tracks.
Had it passed through the legislative process and garnered the support of the voters, House Joint Resolution 5006, brought to the floor by Rep. Greg Jamison, of Sioux Falls, would have allowed mobile sports wagering under two conditions: a mobile betting site would have to partner with a licensed casino, and its servers would have to be located in Deadwood, the home of the state’s small sports wagering industry.
But lawmakers sporting concerns over the addictive nature of the practice had different plans.
“I just cannot support an expansion of what we already have,” said Rep. David Kull, of Brandon. “I think we already have a problem.”
Still, with the rapid growth of sports betting around the country — both in legislatures and in popular media — attempts to update state law are not going away anytime soon, whether that’s in the form of a second sports gaming law set to be considered this coming week or through an industry-led petition drive later this year.
Part of the message is that, whether or not lawmakers like it, gambling is already occurring.
“The money that is generated today is getting lost out of state,” Jamison said near the closing of his floor remarks.
Sports wagering grows in prevalence, revenue nationwide
In the years since a 2018 Supreme Court decision returned the consideration of legalized sports wagering to individual states, more than half of the states have adopted some form of the practice through laws or referenda, with around two-dozen states allowing online wagering on wildly popular, billion-dollar platforms like DraftKings, FanDuel, BetMGM and more.
Two years ago, a ballot amendment supported by 58% of voters made South Dakota one of 11 states that continues to restrict app-based betting but allows sports wagering in person.
Still, with the practice only allowed within Deadwood casinos and certain tribal contexts, revenue has been paltry, with just under $50,000 in taxes collected from July 2021 through June 2022, the smallest haul in any state with legal gambling.
Yet Garrett Gross, the president and co-founder of the Dakota Gaming Group and the operator of BETKOTA Sportsbook, says that does not mean South Dakotans are rejecting sports betting altogether. Instead, potential revenue is flowing out of the state in different ways.
“South Dakota needs to reevaluate how gaming works and get with the times specifically with technology and how it impacts the marketplace,” Gross said.
For residents living near state borders, two neighbors of the Rushmore state — Wyoming and Iowa — allow online sports wagering; in December 2022 alone, these states collected $135,000 and $1.3 million in tax revenue, respectively.
And, in terms of illegal gambling, potentially thousands of sites allow “offshore” wagering, with payments transferred through Venmo, CashApp or other user-to-user payment methods, skirting tax collection and oversight.
“As much as the opponents will, I'm sure, attack gambling as something they don't want to see in South Dakota, the ship has sailed on this,” Bill Van Camp, a lobbyist with the South Dakota Retailers Association, said during the House Commerce and Energy committee hearing on Wednesday, Feb. 15.
But Norman Woods, the executive director of the Family Heritage Alliance, a conservative advocacy group in the state opposed to an expansion of gambling, took issue with some of the black-market argument’s premises.
“I don't think anyone would contest the idea that if you turn something from illegal to legal, more people are going to do it,” Woods said.
South Dakota falls behind despite history of gaming
In the 1986 election, South Dakotans amended the state constitution to allow gambling in the state through the video lottery.
According to Gross, it was the third state to legalize commercial gaming, following only Nevada and New Jersey.
“South Dakota was a leader in gaming,” Gross said. “Now here we are 35 years later, and South Dakota is not in that leadership role.”
Despite the criticism of the state losing out on potential revenue from the rapidly growing sports gambling industry, lawmakers and advocacy groups opposed to the expansion of gambling in the state note that video lottery is already a huge revenue creator for the state.
From July 2021 through June 2022, the South Dakota lottery earned the state general fund $171 million, the largest single revenue category outside of sales tax and an income stream almost entirely funded through video lottery losses.
“I’m proud of my state for many different things, but frankly I’m ashamed of our reliance on gambling. We take money from addicts, and then we tell people, you see those ads, ‘The lottery is good fun,’” said Rep. John Mills, of Brookings. “I’m ashamed and I think it’s time to change. And we definitely don’t need to advance [online sports betting].”
Mills and several other lawmakers during floor debate referenced a study by WalletHub, an online statistics aggregator, that placed South Dakota at second in the country among “most gambling-addicted states.”
“I don’t want to grow to be number one,” said Rep. Carl Perry, of Aberdeen.
Gross questioned WalletHub's ranking processes and data sources on the issue.
Opponents further argue that opening up this already addicted population to a different form of gambling isn’t smart, especially since they claim mobile sports wagering is highly compulsive.
But thinking of legalized sports wagering as furthering addiction is wrong, Gross said.
“Offshore websites and unlicensed operators don't care about any addiction issues that happen with sports betting,” he said. “The new technology that is built into the apps that companies all use, they have safeguards built into them.”
He further criticized the state for spending just $30,000 per year on treating gambling addiction, an annual transfer from the South Dakota Gaming Commission to the Department of Social Services required by a 2006 law.
But the South Dakota Lottery also makes an additional $214,000 available to the department each year, though a 2021 report laying out state-by-state gambling treatment resources indicates that the department spent about $187,000 of the total available dollars in the 2021 state fiscal year.
Industry-led petition, most likely option, could carry downsides
So far this session, several attempts to change the state’s approach to gambling have been repudiated: not just the House Joint Resolution 5006 but also raising video lottery bet limits and funding awareness of the negative effects of gambling, though that proposal was criticized as a duplication of efforts already underway.
One proposal remains: Senate Bill 209, facing great odds with the results of prior legislation in the chambers of the South Dakota State Capitol.
The bill, sponsored by Sen. Ryan Maher, of Isabel, would allow certain establishments licensed to sell alcohol to become licensed gambling affiliates, greatly expanding the prospect for in-person sports wagering across South Dakota.
Should Maher’s bill fail to get through the Senate Commerce and Energy committee at its scheduled hearing on Feb. 21, there is another option.
“If you want to put something in our constitution, if you’re these big out-of-state corporations that want to cash in on this, go circulate your petition and do it like everybody else,” Rep. Scott Odenbach, of Spearfish, said on the House floor in opposition to expanding sports wagering.
Gross said that’s exactly what these companies will do; the 33,000 signatures needed to refer a ballot amendment would require “a couple of sunny days in Sioux Falls.”
But, according to proponents of the lawmaker’s version of the ballot amendment, opponents may not like the result of a ballot drive hosted by large gambling corporations, who will get full control of the language facing voters on Election Day in 2024.
“All the new rules and regulations that would come out of this can be developed here, in the proper fashion so they make sense to us,” Rep. Greg Jamison argued during debate over his resolution. “As opposed to an industry bringing an amendment to the voters.”
Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or email@example.com.