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S.F. No. 1894 - Sports Wagering Regulation and Taxation - As Amended by the A-9 Delete-Everything Amendment
 
Author: Senator Roger C. Chamberlain
 
Prepared By: Stephanie James, Senate Counsel (651/296-0103)
Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 2, 2020



 

SF 1894 makes sports wagering legal when conducted by a licensed sports pool operator and establishes taxes for such wagering. SF 1894 allows wagering at tribal casinos, racetracks, and through a mobile application offered by a licensed sports pool operator.  SF 1894 establishes a new commission to regulate sports wagering. SF 1894 permits wagering on any sports as authorized by the commission, but precludes wagering on youth sports leagues and sports organized by high schools, middle schools, or elementary schools.

Section 1 [Definitions] defines terms for the chapter.

Section 2 [Minnesota Sports Wagering Commission] establishes the Minnesota Sports Wagering Commission to regulate sports wagering.

Subdivision 1 [Membership] specifies that the commission has five members appointed by the governor.

Subdivision 2 [Vacancies] specifies a process for the governor to invite recommendations from legislators for membership on the commission.

Subdivision 3 [Chair] requires the commission to elect a chair from its membership to serve a single four-year term.

Subdivision 4 [Term] sets membership terms at four years, and permits serving more than one term.

Subdivision 5 [Conflict of interest] precludes a person with a conflict of interest from serving on the commission, serving as director of the commission, or being employed by the commission.  A conflict occurs if a person has an interest in or receives compensation from an entity that is licensed by the commission.

Subdivision 6 [Compensation] provides that members serve in the unclassified service.

Subdivision 7 [Powers and duties] authorizes the commission to regulate sports wagering and requires the commission to take necessary action sufficient to administer and enforce the chapter.

Subdivision 8 [Rulemaking authority] authorizes the commission to adopt rules for the conduct of sports pools. Rulemaking under this section must follow the Administrative Procedure Act.

Subdivision 9 [Summary rulemaking] establishes a summary procedure for rulemaking.

Paragraph (a) permits the commission to use this summary rulemaking procedure to adopt rules in the period between enactment and up to 180 days after the first wager is made. 

Paragraph (b) provides that rules adopted through this summary process take effect on publication of the rule on the commission’s website.  The rules must provide for license applicants to be able to submit applications for licenses immediately.

Paragraph (c) requires the commission to issue a sports pool license to an applicant who meets requirements under statute and rule and permits the licensee to take wagers upon receipt of a license.

 Paragraph (d) precludes a sports pool operator who does not comply with statute and rules from conducting sports wagering until the commission determines the operator is in compliance.

Paragraph (e) specifies that rulemaking actions must be published in the State Register and provided to certain newspapers within 30 days of the effective date of the rules. The text of rules made through the summary process must be available in all sports facilities.

Paragraph (f) permits a person aggrieved by a rule to initiate a contested case proceeding conducted by the Office of Administrative Hearings.

Subdivision 10 [Commission orders] authorizes the commission to order compliance with sports wagering statutes and rules. The commission can petition a district court to enforce an order of the commission.

Subdivision 11 [Court orders] authorizes a district court, on petition by the commission, to order a person to appear before the commission to produce documents or to provide evidence for a matter under investigation or in question.  Failure to obey the court may be punished as contempt of court.

Subdivision 12 [Director] requires the governor to appoint a director to the commission with specified duties.  The director serves in the unclassified service at the pleasure of the governor.

Subdivision 13 [Delegation] permits the commission to delegate its duties to the director.

Subdivision 14 [Account] requires all fees imposed by the commission to be deposited in the state treasury and to be credited to a dedicated account in the special revenue fund.  Receipts in this account are available for the operations of the commission up to the amount authorized in appropriations by the legislature.

Subdivision 15 [Report] requires the commission to report to the governor and legislature annually by February 15 and specifies required content in the report.

Section 3 [Applicability] describes the interaction of this chapter with other laws that may control wagering.

Subdivision 1 [No effect on chapters 240, 349, and 609] specifies that this chapter does not affect existing laws relating to gambling.

Subdivision 2 [Local preemption] precludes local laws that regulate, prohibit, or tax sports wagering, and this chapter preempts local laws that conflict with this chapter.

Subdivision 3 [Permitted use] designates sports wagering at a sports pool operated by a licensed sports pool operator as a permitted use in commercial, retail, industrial, nonresidential, and mixed-use zoning districts of a municipality.

Subdivision 4 [Conflict with existing law] declares that this chapter preempts existing laws in conflict with this chapter.

Subdivision 5 [Severability] establishes that if one provision of the chapter is held invalid, other provisions remain in effect.

Section 4 [Sports Pool Operator Licenses] describes requirements for licensing of sports pool operators.

Subdivision 1 [Issuance], paragraph (a) authorizes the commission to issue licenses and renewals to conduct a sports pool. The commission is required to hear and promptly decide applications for licenses. A license is for one year and is renewed upon payment of a renewal fee.

Paragraph (b) precludes other agencies from granting, limiting, placing conditions on, or revoking a sports pool operator’s license.

Paragraph (c) declares that the sports pool operator license is required in addition to licenses required for eligibility to obtain the license.

Subdivision 2 [Eligibility] identifies those eligible to be licensed as a sports pool operator, as follows:  a federally recognized Indian tribe or group of tribes that operate a casino under a tribal compact with the state as of January 1, 2020, or a racetrack licensee operating as of January 1, 2020. 

Subdivision 3 [Forms] requires applications for licenses to be on a form prescribed by the commission and permits the commission to require applicants to provide documents.

Subdivision 4 [Fees] establishes a fee for a sports pool operator license.

Section 5 [Operation of Sports Pools] specifies parameters for the operation of a sports pool.

Subdivision 1 [Authorized wager] permits a licensed sports pool operator to accept any type of authorized sports wager on a sporting event that is not a prohibited sporting event. The operator may accept a wager from a person who is physically present on the premises of a licensed facility where authorized sports wagering occurs, or a wager made through a mobile sports wagering platform that is offered by a licensed sports pool operator by a person not physically present on the premises of a license facility who is registered in person with the sports pool operator at the operator’s casino or racetrack.  This subdivision allows a sports pool operator to offer two individually branded sports wagering interfaces, each of which has any accompanying mobile application bearing the same brand as the website for an online sports pool. A sports pool operator is permitted to provide certain incentives to encourage authorized sports bettors to wager.  A sports pool operator may establish an account for an authorized bettor into which the bettor may deposit funds and may use the account balance to pay for sports wagering, and into which the operator may credit winnings or other amounts owed to the bettor. A bettor may only establish the account in person at the operator’s racetrack or casino, and funds may only be deposited into the account in person.

Subdivision 2 [Prohibited wagers] prohibits a sports pool operator from accepting or paying on a wager that: (1) the operator knows or reasonably should know is being placed for a prohibited sports bettor; (2) is on a prohibited sporting event; (3) is on a sporting event for which the line was not posted; or (4) is on an election for public office.

Subdivision 3 [Vendor contracts] allows an operator to contract with an authorized sports wagering vendor to conduct aspects of the operation or to provide wagering equipment, systems, and items, or to offer services relating to the equipment. A vendor approved by the commission can provide goods and services at all sports pool operator facilities.

Subdivision 4 [Reserve funds] requires a sports pool operator to maintain a reserve fund. A sports pool operator must have $50,000 in the reserve fund before beginning operations. The commission is authorized to set an amount required for an operator to ensure that all payouts can be made.

Subdivision 5 [Wagering location and intermediate routing] requires a wager to be made from within the state unless otherwise authorized. Incidental routing of wager-related data outside the state does not affect the status of a wager.

Subdivision 6 [Prohibition of certain out-of-state wagers] precludes a sports pool operator from accepting a wager from a person not present in the state unless the commission determines that the wagering is not inconsistent with federal law or the law of the jurisdiction where the person is located when placing the wager or unless the wagering is conducted under a reciprocal agreement to which the state is a party that is not inconsistent with federal law.

Subdivision 7 [Pool cancellations] authorizes the commission to order the cancellation of an open sports pool and the refunding of wagers if the commission determines that the cancellation is necessary to ensure the honesty, fairness, lawfulness, or integrity of the wagering.

Section 6 [Revenue; Prizes; Taxation] provides the taxation structure for sports wagering revenue. 

Subdivision 1 [Taxation of sums received] imposes a 6.75 percent tax on sports wagering net revenue, defined in section 1 as the total​ of all cash received by a sports pool operator from sports wagering from all authorized​ sports bettors, less the total of all cash paid out as winnings to all authorized​ sports bettors. Provides that the tax is in lieu of income, sales, and charitable gambling taxes.

Requires sports pool operators to remit taxes to the commissioner of revenue no more than 15 days after the last business day of each month for revenues collected the previous month.

Subdivision 2 [General powers] provides that the commissioner of revenue has all powers for purposes of administering and enforcing the sports wagering tax as authorized under current law for all other taxes.

Subdivision 3 [Unclaimed prizes] requires that unclaimed sports wagering prizes or winnings are not unclaimed funds subject to disposition under chapter 345. Instead, a claimant may file a claim for proceeds with the sports pool operator from which the winnings originated. If a claim is allowed, the sports pool operator must provide the unclaimed winnings or prizes. The claim must be made on a form prescribed by the commissioner of revenue and include documentation established by the Sports Wagering Commission as necessary to establish the claimant’s right to the unclaimed prizes or winnings. Claims not satisfying the right to unclaimed property must be rejected. 

Section 7 [Records; Reporting] establishes record keeping and reporting requirements for sports pool operators.

Subdivision 1 [Records] requires a sports pool operator to maintain records in accordance with rules.

Subdivision 2 [Annual reporting] requires the commission to submit a report annually to the governor and to the chairs and ranking minority members of committees in the house and the senate with jurisdiction over state government and taxes that provides an accounting of all sports wagering activity conducted by licensed sports pool operators. The report must include amounts of wagers received, payouts, taxes owed or paid to the commissioner of revenue, fees paid to the commission, and recommendations for changes in the law.

Subdivision 3 [Monthly reporting] requires a sports pool operator to file a monthly report with the commission containing specified information and authorizes the commission to prescribe certain details of the required content of the report.

Subdivision 4 [Right of inspection] authorizes the commission and its designee to inspect the premises of an operator and to examine the books and other records of the operator at any time without a search warrant.

Section 8 [Enforcement] establishes the commission’s authority for enforcing this chapter and its rules.

Subdivision 1 [Reporting violations] requires an operator to report certain information to the commission when the operation has direct and verifiable knowledge of the information.

Subdivision 2 [Cooperation] authorizes the commission to share information with law enforcement, teams, governing bodies of sports, or regulatory agencies.

Subdivision 3 [Cease and desist letters] authorizes the commission to order that a person cease and desist in an act that has violated or is anticipated to violate sports wagering laws. The order must notify the person of a right to a hearing and must state the reason for the order. A hearing must be held within seven days after a request for hearing is received by the commission.  Within 20 days after the issuance of the administrative law judge’s report and subsequent exceptions and argument, the commission must issue a final order.  If the person does not request a hearing within 30 days of the service of the order, the order is final. If a person fails to appear at a hearing, the person is in default, the allegations shall be deemed true, and the proceeding may be determined against the person. Hearings are conducted according to the Administrative Procedure Act.

Subdivision 4 [Production of documents and information] requires applicants for license, licensees, and other people subject to the jurisdiction of the commission to take reasonable efforts to comply with the commission’s requests for information or documents within a specified time and to appear before the commission with requested documents or materials.

Subdivision 5 [Injunctions] authorizes the commission to bring an action in district court to enjoin actions when the commission has determined that a person has violated sports wagering laws or rules or orders of the commission, or is about to violate sports wagering laws or rules or orders of the commission. The commission need not demonstrate irreparable harm to obtain an injunction. The court may not require the commission to post a bond.

Subdivision 6 [Civil penalty] makes an operator liable for a civil penalty of not more than $1,000 per violation of a requirement in this chapter, up to $50,000 for violations arising out of the same transaction or occurrence.

Subdivision 7 [Criminal penalty] exempts a sports pool operator and an authorized sports bettor from criminal penalty under the criminal code or the tax code, if the operator is licensed and acts in conformance with this chapter and the wagering is conducted as permitted under this chapter. This section establishes criminal penalties for operating a sports pool without a license.

Section 9 [Recovery of Money Lost] exempts authorized sports wagering from a law that allows a civil action to recover on a losing bet.

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

Section 11 [Sports Bookmaking] is a conforming change to the criminal code to exempt the operation of or or participation in a sports pool conducted in compliance with chapter 240B from the definition of illegal sports bookmaking.

Section 12 [Sports Pools] is a conforming change to the criminal code to specify that sports pools conducted under chapter 240B and any associated equipment used in those sports pools are not prohibited.

 

 

 

 
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