Minnesota Race and Sports Wagering
There were many failed attempts in the 1960s to legalize pari-mutuel wagering on horse racing in Minnesota. Then, in 1978, legislators decided to put the question before the voters and missed passage in the House by a few votes. The question finally made the ballot in November 1982, and a constitutional amendment allowing pari-mutuel wagering on horse racing was approved by a 2/1 majority by Minnesota voters. During the 1983-1984 legislative session, legislators enacted Minnesota Statutes, Chapter 240, which authorized the legislature to legalize and tax ontrack pari-mutuel betting on horse racing. The Minnesota Racing Commission (MRC) was created to license racetracks, betting and occupational entities and to regulate horse racing and wagering. The bill imposed a tax of 1.75% on the first $48 million of annual wagering handle and 6% of handle over that amount, a 40-cent admissions tax, and one-half of the breakage to go into the state's general fund. The Minnesota Breeders' Fund would be given 1% of the total handle to be awarded as incentives to the state's breeding industry. Canterbury Park, the first racetrack, opened in 1985.
Even though pari-mutuel wagering on horse racing came to fruition, it was at a time when most horse racing throughout the nation was beginning to see a decline in attendance and, subsequently, daily handle. The initial tax structure was targeted by the racing industry and Canterbury Park as onerous; they argued that other states were providing financial relief to their racetracks by lowering their taxes. It took the industry until 1988 to get legislators to agree, and a significant tax reduction from the existing effective tax rate of 4.4% was approved. The final agreement modified the tax basis from total handle to total takeout, including breakage, and eliminated the admissions tax and the 50% breakage tax. The tax rate on the takeout was set at the general sales tax rate of 6%. The net effect was to reduce the effective tax rate to around 1.2%. The tax change also included a requirement that Canterbury Park increase the share of total takeout for purses from 5% to 8.4% of the first $1 million in average daily handle.
In 1989, out-of-season simulcasting was legalized; however, Canterbury racetrack had filed for bankruptcy that same year. The following year the track was bought by Detroit investors, who partnered with Ladbrokes International to manage the track, and winter simulcasting was first offered.
In 1991, legislators had passed a "teleracing" bill, which allowed for up to four (Class E licensed) offtrack betting venues throughout the state linked by computer to Canterbury and operated by the track. Each venue could have dining and bar facilities and a capacity of 500 people. In November 1991, the MRC approved the Ladbrokes request for telephone betting on both live and simulcast races at Canterbury. Telephone betting, where players establish accounts with the track to use for bets called in to the track, was deemed to be authorized by the 1983 pari-mutuel laws.
However, the shift toward remote betting from home telephones and OTB facilities was immediately halted when Rep. Jim Rice of Minneapolis filed suit, arguing that when the original amendment in 1982 was adopted voters intended only to permit the legislature to legalize "ontrack betting," and that an OTB law and telephone betting went beyond their approval. The 1991 law had attempted to skirt the constitutional issue by defining "ontrack" wagering as "conducted at a licensed racetrack or at a [licensed offtrack betting facility]" with a wagering system "electronically linked to a licensed racetrack." In March 1992, the Ramsey County district court agreed with Rice's argument and invalidated the OTB law and the telephone betting rules. In July 1992, the Minnesota Supreme Court upheld the decision. In May 1994, legislators passed an amendment to the state's constitution to legalize offtrack betting, but the measure was rejected by voters at a November referendum later that year.
In August 1992, Canterbury submitted a request to the MRC to authorize 151 simulcasting days and no commitment to hold live horse racing days. The MRC did not approve simulcasting at the track for 1993, and Canterbury closed its doors on December 31, 1992.
Canterbury was sold in 1994 to a business group from Minnesota's horse industry. The group, a father and son, were largely motivated to buy the track to continue live racing and horse breeding in Minnesota. The track operated as a simulcasting-only facility for the rest of 1994, and had a 51-day live season in 1995 featuring both thoroughbred and quarter-horse racing. The owners changed the name of Canterbury Downs to Canterbury Park.
In 1996, the horse racing industry benefited again from a sizable tax break, which made the first $12 million in takeout each year exempt from the state pari-mutuel tax. At the time, Canterbury Park's takeout was averaging around 20%, so the tax break effectively exempted the first $60 million in handle from taxes. Canterbury's total handle since reopening did not reach the $60 million level until 2001.
In 1999, the legislature passed a bill (HF1825, Chapter 206) amending Chapter 240.30 of the statutes, which permitted a licensed racetrack to operate a card club in addition to live racing and simulcasting. The law specified that 10% of the rake, up to $6 million, be set aside for purses, with 10% of that amount to be paid to the MRC for purse supplements from the Minnesota Breeders' Fund. Once the rake exceeds $6 million, the purse set aside increases to 14%. The legislation goes on to allow the racetrack and the horsemen's organizations to negotiate different percentages. Passage of this legislation resulted in an increase in horse racing purses, which was its original intention. Canterbury Park opened its card club in April 2000, and a second card club was opened in July 2008 at Running Aces Harness Park.
Even though recent polls have indicated that over 70% of state residents supported racinos, and November 2010 election results favored pro-racino candidates, lawmakers have been unsuccessful in passing legislation allowing slot machines at Canterbury Park and Running Aces Harness Park. The most recent attempt was in February 2013, with the introduction of HF988, which, had it passed, would have authorized gaming machines at Class A licensed racetracks hosting a minimum of 50 live racing days. The bill provided for racetrack compensation based on a percentage of gross gaming machine revenue generated at the track: 60% on the track's first $125 million of annual revenue, 55% on annual revenue between $125 million and $200 million, and 45% on annual revenue above $200 million. In addition, the racetrack was required to pay 1% of this compensation to the city and county in which the racetrack was located.
In the 2012 legislative session, HF2795 was passed (Chapter 279), which contained a number of amendments to pari-mutuel wagering and card club provisions. The bill allowed for transmission of simulcast horse racing to Indian lands, provided that there was a written agreement and the agreement was approved by the MRC. The term of the agreement could be for up to five years. The bill also increased table card game limitations, except poker tournaments, so that the maximum number of playing tables increased from 50 to 80 and the highest wager from $60 to $100, or $300 in games where there is only one wager allowed. The Act was signed by the governor on May 4 4 2012.
In June 2012, the MRC approved a historic agreement between Canterbury Park and the Shakopee Mdewakanton Sioux Community (SMSC), which included a purse enhancement program funded by the SMSC with a $75 million commitment over the term of the agreement, which is 10 years, and a joint marketing agreement, which will provide Canterbury $8.5 million over the same timeframe. The joint marketing agreement included Canterbury's opposition to racino legislation and other new forms of gaming.
In February 2013, the Minnesota Horsemen's Benevolent and Protective Association (MHBPA), whose members are thoroughbred owners and trainers, asked the MRC to revoke Running Aces Harness Park's gambling license. The MHBPA contends that the track was not in compliance with state law when, in August 2012, it stopped paying the mandated 3% of card table revenue to Canterbury Park to increase purses. Running Aces says it stopped making payments after the SMSC Tribe, owners of Mystic Lake, gave Canterbury Park $75 million to increase purses provided they would abandon the drive to add slot machines at racetracks. Running Aces believes the Mystic Lake deal voided their contract with Canterbury Park.
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