Feuding over who controls, profits from sports betting in Kansas stalls legislation

By: - September 6, 2020 4:00 am
Senate Vice President Jeff Longbine, left, says differences of opinion about legalizing sports gambling in Kansas would have likely blocked completion of a bill in the 2020 session. Here the Emporia Republican chats during a special legislative session in June. (Nick Krug/Kansas Reflector)

Sen. Jeff Longbine, R-Emporia, praised an expansion of the Rural Housing Incentive District program for potential benefits to Kansas main streets. (June 2020 photo by Nick Krug for Kansas Reflector)

TOPEKA — Kansas City Chiefs fan Rob Olson raised his voice during a Kansas Senate debate to let colleagues know how frustrated he was with inability of politicians, lobbyists and gambling executives to hammer out deal that would have allowed him to legally place a bet on the 2020 Super Bowl.

Absent such reform, Olson could have driven 170 miles from his home in Olathe to Lakeside Hotel and Casino in Iowa, which is among the few Midwest states to legitimize sports gambling since the U.S. Supreme Court cast aside a federal statute forbidding sports books in most places. That would have enabled him to join the estimated nine million Americans who legally put down money on Super Bowl LIV pitting the Chiefs against the San Francisco 49ers.

Olson’s favorite team won that game, but the Republican senator’s sense of jubilation soon faded as the 2020 Legislature proved itself unable to nail down a compromise bill to bring sports-book action to Kansas. Political and financial issues — not coronavirus — derailed attempts to deliver regulated and taxed sports gambling to Kansas.

Each Statehouse failure is cause for celebration among black-market bookies.

“I’m tired of people going to Iowa to gamble, to wager on the Super Bowl,” said Olson, who has urged political foes and allies to end bickering and make a deal. “We’re going to mess around here until we mess this bill up and then we won’t have another year’s opportunity of revenue.”

Indeed, the Legislature’s attempts to infiltrate the cash-saturated world of betting on professional and college sports have been a bust.

The Kansas Senate approved a bill granting new authority to operate sports books at the four state-owned casinos managed by private companies through contracts with the Kansas Lottery. That bill also would enable the Kansas Lottery to market lottery tickets online.

The Senate’s strategy was ignored by the contrarian House, which envisioned up to 1,200 lottery retailers dominating sports wagering in the state. The House’s alternative didn’t get out of committee before COVID-19 interrupted the legislative session. The threat of infection kept lawmakers away from Topeka and left no time to forge a deal among the state’s lottery and casino brass, the Legislature and Gov. Laura Kelly.

Rich rivalry

Unlike a Super Bowl that cannot by rule end in a tie, competition between elected officials and special interests frequently ends without a clear victor.

The gap between the House and Senate was significant enough for Senate Vice President Jeff Longbine, an Emporia Republican, to conclude a deal would have been unlikely even if the pandemic hadn’t slammed brakes on the session in March. There was a core disagreement on who would be the dominant force in the legal sports betting industry in Kansas. It was sort of an in-house feud between the four state-owned and privately operated casinos and the state-owned and state-operated Kansas Lottery.

“There were significant policy differences in the two bills,” Longbine said. “My guess is we were too far apart on major sticking points.”

There wasn’t consensus on how popular sports wagering could be in Kansas or on what the state’s cut of revenue should be. The Senate settled on a tax of 5.5% of revenue from in-person wagers and 8% for online bets, plus an extra 2% dedicated to a fund to care for gambling addicts. The House wanted the state to claim 14% of in-person and 20% of online revenue.

Senate President Susan Wagle, a Wichita Republican, says any law allowing legal sports betting in Kansas should set aside 2% of revenue to help treat gambling addicts. (Kansas Reflector)
Senate President Susan Wagle, a Wichita Republican, says any law allowing legal sports betting in Kansas should set aside 2% of revenue to help treat gambling addicts. (Nick Krug for Kansas Reflector)

The Senate bill would ban sports betting at greyhound and horse racetracks, which would spike an economic development opportunity sought by the House. The Senate didn’t want to pay professional leagues for access to “official” statistics, but the House remained in favor of that giveaway.

Of philosophical significance was the Senate’s preference for a firewall between the state government and the kind of financial risk accepted by sports bookies. The House plan would place state taxpayers on the hook for losses.

The Senate was loathe to place the Kansas Lottery in the role of regulator and operator in competition with state-authorized casinos in Dodge City, Pittsburg, Mulvane and Kansas City, Kansas.

House Majority Leader Dan Hawkins, a Republican from Wichita, said despite obvious challenges the tenor of Statehouse discussions on sports betting would have borne fruit.

“I think it would have gotten done if there hadn’t been a truncated session. Next year, I hope it does,” Hawkins said.

Casino plan

A Senate bill authorizing sports betting that surfaced in January followed extensive confidential negotiations that emphasized the economic interests of operators at the four state casinos — Kansas Star Casino in Mulvane, Hollywood Casino at Kansas Speedway in Kansas City, Boot Hill Casino and Resort in Dodge City and Kansas Crossing Casino and Hotel in Pittsburg.

Under the blueprint, each casino would be able to run two sports books each. Folks could place in-person or online bets through the casino apps. An authorized business could play host to customers placing bets by cellular telephone through the casinos. Their idea was to forbid the Kansas Lottery from moving ahead with a sports betting platform accessible 24/7 with a cellphone or a computer.

The Kansas Lottery would be allowed to sell lottery tickets online for the first time. The bill would be tweaked so that if fewer than two casinos engaged in sports book betting by July 2022, the Kansas Lottery would get a shot at offering internet gambling on sports.

The four state licensed casinos deserve first crack at sports gaming after investing $1 billion in gambling facilities in Kansas and producing $110 million in annual revenue for the state, said Matthew Bergmann, who represented the Boot Hill Casino and Resort and Kansas Crossing Casino.

“Sports betting has become an effective new customer acquisition tool, particularly when we are able to offer mobile wagering,” said Jeff Morris, an executive with Penn National Gaming, which operates the Hollywood Casino.

While other states move ahead with legal sports gambling, the House and Senate in Kansas have fought for two sessions without striking a deal on who controls and profits from cutting into black market bookmaking. (Sherman Smith/Kansas Reflector)
While other states move ahead with legal sports gambling, the House and Senate in Kansas have fought for two sessions without striking a deal on who controls and profits from cutting into black market bookmaking. (Sherman Smith/Kansas Reflector)

Fans of the so-called casino model, with the blessing of some members of Senate and House GOP leadership, concluded their best shot was to secure Senate passage of a sports betting bill early in the 2020 session. After the Senate staked out a position, their objective was to undermine any House alternative offered by Rep. John Barker, an Abilene Republican who chairs the House Federal and State Affairs Committee.

Barker’s strategy was to put the Kansas Lottery in the lead on sports wagering and let casinos and racetracks compete for these new gambling dollars in the same manner as retailers. In addition, his House bill was structured to allow internet-based lottery games.

“You could be able to go down and buy a lottery ticket and bet on the K-State-KU game, hopefully buy a loaf of bread and 10 gallons of gas or whatever,” Barker said.

Advocates of sports gaming planned for the two bills to be placed in a House-Senate conference committee for wheeling and dealing necessary to place an agreement on the governor’s desk. That debate was expected to be complicated by the governor’s preference for a robust iLottery operated by the Kansas Lottery.

The rebukes

Sen. Tom Holland, a Democrat from Baldwin City, said he was supportive of legal sports gambling in Kansas, but was convinced casino lobbyists led the Senate to a proposal too financially generous to those brick-and-mortar businesses. He said the state was “leaving money on the table.”

In addition, Holland said, the legislation included obligations of casino operators that should be negotiated by contract rather than embedded in state law. It’s impossible to operate an effective private-public partnership without opportunity to respond nimbly to shifting market conditions, he said.

“This is not a static environment,” Holland said. “We’re not going to know everything at the beginning of this journey into sports wagering. We’re not going to think of everything up front.”

Rancher Jeff Rutland, of Independence, used the words “irony” and “oddity” to refer to what could better be described as hypocrisy of companies hired by the state of Kansas to operate the four casinos. He watched for a decade at rejection of proposals to revise the 2007 law that set the foundation for development of casinos and granted dog or horse racetracks to install slot machines. All of the tracks closed and Rutland believes the 40% tax on revenue at the racetracks should be lowered. The casinos pay a 22% tax on revenue.

“The only opposition you will have to this amendment will be the state-owned casino groups because they simply don’t want the competition,” Rutland said.

Gov. Laura Kelly says she prefers Kansas adopt a sports gambling bill that grants the Kansas Lottery the authority to operate for the first time internet lottery gaming. (Sherman Smith/Kansas Reflector)
Gov. Laura Kelly says she prefers Kansas adopt a sports gambling bill that grants the Kansas Lottery the authority to operate for the first time internet lottery gaming. (Sherman Smith/Kansas Reflector)

The Kansas League of Municipalities complained the sports wagering bills floated in Kansas earmarked revenue for the state government, but none for cities and counties. The Humane Society Legislative Fund of Kansas recommended the legislation ban wagering on greyhound races if tracks opened in Kansas or if races in other states were broadcast in Kansas venues. The National Council on Problem Gambling urged lawmakers to direct at least 1% of revenue to addiction prevention and treatment services.

Senate President Susan Wagle, R-Wichita, said the bill should require 2% of sports betting revenue to be devoted to treatment of individuals with gambling addiction. She got that measure added to the Senate bill.

“When you increase availability of gaming, you’ll have increased addicts,” Wagle said.

Horizon line

Sports betting has been legalized in the District of Columbia and 21 states, including Iowa, Colorado and Illinois, and that number might have grown had the pandemic not wiped out opportunity in Kansas to work through bill-writing conflicts during the 2020 session.

While COVID-19 damaged the economy by igniting unemployment and weakening city, county and state tax collections, including lottery revenue, a projected state treasury shortfall of more than $1 billion in Kansas could serve as incentive for the 2021 Legislature to move factions toward compromise.

“We’re going to need more revenue,” said House Minority Leader Tom Sawyer, D-Wichita. “It’s unfortunate we couldn’t get it done. I’d like to see it move.”

House Minority Leader Tom Sawyer, a Wichita Democrat, says the 2021 Legislature needs to work hard on a bill to legalize sports gambling because the state government needs the new revenue. (Nick Krug for Kansas Reflector)
House Minority Leader Tom Sawyer, a Wichita Democrat, says the 2021 Legislature needs to work hard on a bill to legalize sports gambling because the state government needs the new revenue. (Nick Krug for Kansas Reflector)

While the Legislature took center stage on sports betting, the Kansas attorney general filed a lawsuit to reverse a U.S. Department of Interior decision clearing obstacles for the Wyandotte Nation of Oklahoma to build a casino on tribal land near Wichita.

Bill Friend, the tribe’s chief, said the suit brought by Attorney General Derek Schmidt was a waste of time. He said Kansas’ state-operated casinos and the tribal gaming facilities would soon have a competitor.

“They fought us for 14 years in Washington, D.C., to try to break what was our legal right,” Friend said. “We fought through the politics of it and all the money they spent on lobbying.”

The pressure for reform mounted just as Kansas fumbled the ball.

“This is a watershed moment for sports betting in the United States,” said Bill Miller, president of the American Gaming Association. “Roughly 100 million Americans will be able to legally wager on sports in their state by the end of the year.”

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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International. He has been recognized for investigative reporting on Kansas government and politics. He won the Kansas Press Association's Victor Murdock Award six times. The William Allen White Foundation honored him four times with its Burton Marvin News Enterprise Award. The Kansas City Press Club twice presented him its Journalist of the Year Award and more recently its Lifetime Achievement Award. He earned an agriculture degree at Kansas State University and grew up on a small dairy and beef cattle farm in Missouri. He is an amateur woodworker and drives Studebaker cars.

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