SF 1894 establishes a framework for conducting wagering through a sports pool and for taxing such wagering.  SF 1894 permits wagering at casinos, racetracks, and through a website or mobile application.  SF 1894 permits wagering on any sporting event permitted by the newly created Minnesota Sports Wagering Commission, except competitions at the precollege level.

Article 1 - Regulation of Sports Wagering

Section 1 [Definitions] defines “individual wager,” “line,” “electronic sports pool,” “money line,” “on-site sports pool,” “parlay card wager,” “proposition wager,” “sporting event,” “sports pool,” “sports pool operator,” and “sports wager.”

Section 2 [Minnesota Sports Wagering Commission]

Subdivision 1 [Authority created] establishes a Minnesota Sports Wagering Commission to regulate sports wagering.

Subdivision 2  [Membership] specifies that the commission consists of five members appointed by the governor.

Subdivision 3 [Compensation] specifies that members of the commission serve in the unclassified service.

Subdivision 4 [Powers and duties] authorizes the commission to regulate sports wagering and requires the commission to adopt rules for the conduct of sports pools.

Subdivision 5 [Orders] authorizes the commission to order compliance with sports wagering statutes and rules.

Subdivision 6 [Court orders] authorizes the district court to order a person to appear before the commission or to produce documents or to provide evidence for a matter under investigation or in question. Failure to obey the court order is contempt of court.

Subdivision 7 [Delegation] permits the commission to delegate its authority to a director.

Subdivision 8 [Report] requires the commission to submit an annual report to the governor and legislature on its activities, receipts, and disbursements, and recommendations for changes in the laws relating to sports wagering.

Section 3 [Director] requires the governor to appoint a director to the Minnesota Sports Wagering Commission with specified duties. The director serves in the unclassified service at the pleasure of the governor.

Section 4 [Licenses]

Subdivision 1 [Forms] requires applications for a license or renewal to be on a form prescribed by the commission. The commission may require an applicant to submit documents the commission deems necessary.

Subdivision 2 [Fees] permits the commission to change a license fee for the costs associated with the application or renewal process.

Section 5 [Sports Pool Licenses]

Subdivision 1 [License required] precludes operation of a sports pool without a license. This requirement does not apply to a private social bet.

Subdivision 2 [Sports pool operator license] permits the issuance of sports pool licenses only as follows:

1. to a federally recognized Indian tribe or group of tribes located in this state, to conduct wagering on tribal land;
2. to a class A licensee of a racetrack; currently, the holders of this kind of license are Canterbury Park and Running Aces; and
3. to a provider of an electronic sports wagering platform, to operate a sports pool through a website or mobile application. Only a track or tribe licensed under this section can be licensed to provide this mobile platform.  The platform must be operated on a device owned or possessed by the wagerer.

Subdivision 3 [Equiment and software licenses] requires a license to provide equipment or software for use in operating a sports pool.  Makes Nevada licensees eligible for this license.

Subdivision 4 [Third-party agreements] specifies that nothing in the chapter prohibits a licensee from entering an agreement with a third party to manage or operate an on-site sports pool, a mobile pool, or both.

Section 6 [Conduct of Sports Pools]

Subdivision1 [Tribal casino and racetrack premises only] permits wagers in a sports pool to be received only at the following locations (in addition to through an electronic sports pool): 

1. in a casino operated under a tribal-state compact; or
2. at a licensed racetrack.

Subdivision 2 [Reserve funds] requires a sports pool operator to maintain a reserve fund of a specified amount and authorizes the Minnesota Sports Wagering Commission to maintain other accounts to ensure that payouts are made.

Subdivision 3 [Types of wagers allowed] permits wagers of any type authorized by the commission.

Subdivision 4 [Types of wagers prohibited] precludes the following wagers:

1.  a sport or event not authorized by the Minnesota Sports Wagering Commission;
2.  a wager placed on an event by a person that is prohibited from wagering in the next section of the bill;
3.  nonsports, including on the outcome of an election for public office;
4.  a wager on a virtual event; and
5. a wager on a sporting event for which the odds or point spread is not posted.

Subdivision 5 [Pool cancellation] authorizes the commission to cancel a sports pool and refund wagers if necessary to ensure fairness, lawfulness, or integrity of sports wagering or of a sporting event.

Section 7 [Restrictions on Who May Participate in a Sports Pool] precludes the following people from wagering in a sports pool:

1. a person under 18 years of age;
2. sports pool operators;
3. a person with more than five percent ownership in a sports pool operator;
4. an employee of a sports pool operator or an entity that is managing or operating a sports pool under agreement with a licensed sports pool operator;
5. a person who is participating in the sporting event as a player, coach, or official, or who is an owner, employee, or officer of a participating team or of the league or organizer of the event;
6. an immediate family member of a player participating in the event;
7. a person who possesses nonpublic information about a player’s ability to perform;
8. an officer, director, or employee of the Minnesota Sports Wagering Commission;
9. a person placing the wager on behalf of another for compensation;
10. a person convicted of a crime related to sports wagering.

Section 8 [Acceptance of Wagers] precludes the acceptance of wagers made with a method of payment that has not been approved by the Minnesota Sports Wagering Commission.

Section 9 [Recovery of Money Lost] precludes the loser of a legal sports wager from suing for recovery of losses.

Section 10 [Commitments for Gambling Debt Void] adds legal sports wagering to the list of exemptions from a statute that voids agreements involving betting on credit.

Section 11 [Effective Date] makes Article 1 effective on September 1, 2020, or the day after wagering on sporting events is made legal.

 Article 2 – Taxation of Sports Wagering

Sections 1 to 4 provide for addbacks and subtractions for losses and gains, respectively, from the business of conducting a sports pool. As provided in section 7, sports wagering net revenue is in lieu of Minnesota income, sales, and charitable gambling taxes. Gains and losses from the business of conducting a sports pool would be subject to federal income tax, and because federal taxable income is the starting point for Minnesota taxable income, gains and losses included in federal taxable income must be subtracted and added from Minnesota taxable income in order for those amounts not to be included in the calculation of Minnesota income tax. 

Section 1. [Nontaxable sports wagering losses. Requires the addition of losses from the business of conducting a sports pool for purposes of calculating Minnesota individual income tax.

Section 2. Exempt sports wagering income. Requires the subtraction of gains from the business of conducting a sports pool for purposes of calculating Minnesota individual income tax.

Section 3. Nontaxable sports wagering losses. Requires the addition of losses from the business of conducting a sports pool for purposes of calculating Minnesota corporate franchise tax.

Section 4. Exempt sports wagering income. Requires the subtraction of gains from the business of conducting a sports pool for purposes of calculating Minnesota corporate franchise tax.

Section 5. Collection; disposition. Requires one-half of one percent of net sports wagering revenue deposited in the general fund to be transferred to the special revenue fund and appropriated to the commissioner of human services for the compulsive gambling treatment program.

Section 6. Definitions. Defines terms relevant to the article, some of which also appear in Article 1. In pertinent part, “sports wagering net revenue” means the total cash received by a sports pool operator from sports wagering, minus cash paid out as winnings. Cash received by the sports pool operator for activities other than sports wagering and cash received as promotional credits, free bets, or other incentives are not included in the calculation.

Section 7. Tax on sports wagering net revenue. Imposes a 6.75% tax on sports wagering net revenue. Provides that the tax is in lieu of income, sales, and charitable gambling taxes. Provides that sports wagering net revenue taxes owed are the personal debt of the person required to file a return and that records concerning the administration of the sports wagering net revenue tax are public information. Authorizes taxpayers to claim refunds owed for excess taxes paid and authorizes the commissioner to grant extensions for filing returns and paying taxes for up to six months. Requires that tax revenues be deposited to the general fund.

Section 8. Sports pool operator reports and records. Requires sports pool operators to file a monthly report with the commissioner of revenue showing all sports wagering activity in the month. Requires sports pool operators to maintain business records supporting the reported sports wagering activity and preserve the records for at least 3½ years. Records are subject to inspection by the commissioner at a reasonable time without notice or warrant. Authorizes the commissioner to require audits of sports pool operators on sports wagering activities and requires the commissioner to prescribe audit standards. Audits must be performed by an accountant licensed under chapter 326A. 

Section 9. Other sections apply. Applies the provisions in the charitable gambling chapter pertaining to time limits for assessing tax, civil penalties, tax-related criminal penalties, and interest to the newly established chapter for sports wagering taxes.

Article 2 is effective 90 days following final enactment, which would include enactment of Article 1.