A lawsuit a Minnesota tribe filed late last year against the state regulatory agency that oversees horse racing and betting has implications for ongoing attempts to bring sports betting to Minnesota.
Shakopee Mdewakanton Sioux Community v. the Minnesota Racing Commission asks the state Court of Appeals to cancel a decision by the commission to allow one of the state’s horse racing tracks to expand its card room offerings. The same legal challenge could force the commission to rescind a seven-year-old approval of video-assisted gaming used by both of the state’s horse racing tracks to increase the revenue that supports racing.
If successful, the challenge would not only block an expansion of gambling at the tracks, but it would also reduce what is already offered.
While the legal case does not involve sports betting — which remains illegal in Minnesota — it does highlight the rift between tribal gaming and the state’s two horse tracks over their shares of gambling. It is that same rift that has so-far blocked a deal for sports betting, though backers pledge to try again when the 2024 legislative session begins Feb. 12.
Running Aces has a hotel, casino and harness racing track just north of the Twin Cities in Columbus. The casino games are meant to raise revenue that can be used to enhance track purses.
The track had asked the racing commission to allow it to increase its use of a system that uses video terminals for some of its blackjack games. The system, built by a company called Interblock, allows a live dealer to deal cards to up to 11 players. Those players, in turn, use the terminals to place bets and request additional cards. Running Aces calls the system Stadium Gaming. The casino at Canterbury Park thoroughbred racing track in Shakopee calls them touchscreen games.
Because state law and tribal compacts allow only tribal casinos to offer video games of chance, including slot machines, the tribe argues that the Interblock system is not allowed. However, both casinos have been using the system — Running Aces since 2017 — and the request of the racing commission last year was only to increase the number of tables using the system from three to four.
In a letter to the commission last July, the Shakopee Mdewakanton Sioux Community said those prior approvals were illegal and should be reversed.
Anderson’s letter quotes from the commission’s own 2029-20 annual report that states that the Legislature should update statutes to help the commission navigate new gambling technology.
“… electronic gaming technology is outrunning existing regulatory capacity, and new legislative guidelines and rules may soon be needed,” the report stated.
The tribe also argues that the latest approval violates the statutory cap on the number of gambling tables at 80, because each of the 11 betting stations at an Interblock table operates as though it is a separate gambling table.
Running Aces first requested the additional Interblock table for Stadium Gaming in July. At that time, the racing commission delayed a decision to allow commission staff to consult with the tribes, a requirement of state law that says state agencies must undergo tribal-state relations training and hold annual consultations with tribal leaders. Agencies must also consult with tribes on pending decisions that might directly affect them. A meeting between the commission chair and executive director and Shakopee Mdewakanton Sioux Community leaders took place Oct. 4.
Running Aces renewed the request for the fourth table at the Oct. 19 meeting. While commission executive director Kyle Gustafson suggested delaying the decision again to allow for the consultation process to continue, the commission moved ahead with a vote on a motion made by Lisa Goodman, then a Minneapolis city council member, and seconded by Raymond Dehn, the former north Minneapolis state House member.
The tribe, which operates the Mystic Lake Casino in Prior Lake, had objected to the additional table at the July meeting, arguing then that the games are either video table games or video games of chance that are the exclusive offering for tribal casinos.
“The Community explained to the commission that Interblock and other video table games negatively impact Tribal Casinos, which are in direct competition with Running Aces and other Card Club, and requested that the commission deny Running Aces’ request,” the court filing states.
Taro Ito is the president and CEO of Running Aces, which has been permitted by the appeals court to be an official party to the suit. Ito said the Interblock stations use a real dealer who activates the dealing of cards to the various gamblers at each station. While there can be up to 11 players, versus up to seven at more-familiar felt table gambling tables, Ito said the games are fundamentally the same. Not only can a single dealer work with more players, Ito said the Interblock games appeal to some gamblers who prefer not to interact with other card players.
Horse racing has been struggling in Minnesota and elsewhere, and both track owners and legislators who support them have been searching for ways to increase revenue which, in turn, supplements the purses offered to race winners. More income from purses helps horse owners cover the expenses of raising, training and racing horses.
It was a 1982 constitutional amendment that permitted pari-mutuel wagering on horse races. Canterbury Park opened in 1985; Running Aces followed in 2008. Cardrooms meant to supplement betting on races and to provide revenue for purses were legalized in 1999. What are termed house-banked card games, which let betters play against the dealer rather than only against other players, weren’t allowed until 2012.
DFL leaders of the Legislature have pushed bills that would legalize sports wagering, but their bills give it exclusively to tribal gambling operations that would likely contract with the big national sports betting companies to operate the system. The state would tax only bets placed outside of tribal government jurisdictions.
Supporters of that plan say the tribes are governments that use proceeds for tribal programs and have long experience running gambling in Minnesota. The tribes are very wary of any non-tribal gambling expansion, worrying that expanded commercial gambling would reduce tribal proceeds.
In a 2022 interview, Bemidji State University professor Anton Treuer said tribal casinos in states with significant commercial gambling produce far less revenue than casinos in states like Minnesota produce. One reason is the geographic isolation of many reservations.
Sports betting does not produce enough extra revenue to cause tribal leaders to take a deal they consider unhelpful to their interests.
“Anytime the state changes the gaming landscape, tribes must carefully consider whether such proposals strengthen, or in fact threaten, tribal sovereignty and self-determination,” Minnesota Indian Gaming Association executive director Andy Platto told a Senate committee last May.
But because of the narrow one-seat DFL majority in the state Senate and because at least two DFL members have opposed any expansion of gambling because they think it preys on lower-income Minnesotans and communities of color, supporters of sports betting need GOP votes. To get those votes, sports betting backers must provide some help from financially strapped Canterbury and Running Aces. Cutting the tracks in on the sports betting business is opposed by the tribes and their DFL supporters and could not pass either chamber.
This week, one of the lead sponsors of the bill in the state Senate said he is still working on a deal, one that would negate the need for GOP support and, in turn, end the chances for financial aid to the two racing tracks.
“However, I continue to work with both parties to find a bill that could pass in a bipartisan vote as well,” Klein wrote.
But Sen. Scott Dibble, one of the two DFL senators opposed to any gambling expansion, including sports betting, says he remains a “hard no.”
A last-minute offer last May was described as a compromise by Klein. The tribes would retain exclusivity, but the state would set aside some of its tax revenue from sports betting to help the tracks. A $20 million distribution in the early years would then become a $3 million-a-year share in later years.
“That would not be adequate to produce the level of support to keep horse racing viable in the face of the expansion of gambling that mobile sports betting would produce,” Canterbury Park CEO and chairman Randy Sampson told the Senate committee in May.
Increasing that share of tax revenue sharing was blocked by the tribes. Sports betting earns less than some in the public might think. Most of the money bet is returned to players as winnings, and much of the net proceeds go to the big national sports books like DraftKings, FANDUEL and BETMGM that would operate the betting platforms for the tribes.
Tribal leaders have taken a position that tribes have exclusive rights to the new games and that if the tracks are helped from the state’s taxation, the share will not rival what the tribes themselves might earn from new gaming.
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