Legislature plans restrictions on electronic pull-tabs
A finish-line addition to this year's tax bill will clamp down on electronic pull-tabs, which have become a cash cow in Minnesota since they were legalized to pay for the Vikings stadium in 2012.
The session's big tax bill will put new restrictions on the games, but backers say that'll be at the expense of charities.
Electronic pull-tabs were legalized to pay the taxpayer's share of a new NFL stadium. After initially foundering, e-pull-tabs have become a $6.3 million-a-day business in Minnesota. They paid off the stadium debt and filled state tax coffers.
But lawmakers have put the brakes on what has been exponential growth of the games. A provision in this year's tax bill will prohibit some of their supposedly most attractive features, so-called “open all” games that allow a single touch to reveal all of a player's prize chances at once, as well as second-chance provisions.
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It's the latest skirmish in the long-running battle over gambling in Minnesota and who runs it.
“The fact of the matter is that the courts of have ruled that these things cannot mimic slot machines,” said Gov. Tim Walz.
Tribal gaming agreements give them the right to certain forms of gambling, like slot machines. But the difference with e-tabs can be subtle — even too subtle for some people.
This year's tax bill will draw that line more clearly, although the consequences are a matter of fierce debate as lawmakers wrap up their annual session today.
Electronic pull-tab fans say the changes to the way they're played will make the games less attractive and be a serious setback for state charities and the more than $120 million a year that they give away.
“We talk about e-tabs doing the great things for our community. St. Paul Park food shelves that we're giving thousands of dollars to a year. Food recovery. We're supporting our communities,” said Ray Kane, gambling manager for the Lions Club in St. Paul Park and Newport.
The electronic games also attract younger and more female players, keeping Minnesota's traditional charitable gambling industry alive, according to Jon Weaver.
“This is a very social activity. You go to the bar, you're with your friends you're with your spouse, you play these games. You're there not to win a million dollars. You're there to have fun, hang out and socialize,” Weaver said.
His company, Pilot Games, is a major supplier of the games and equipment, which he says are very different from casino gambling machines. They don't accept or pay out cash. They play through a fixed set of prizes that players can actually tally up, not hitting jackpots at random. Potential prizes are a few hundred bucks.
But they're also big business: projected to have about $2.3 billion in sales this year, e-pull-tabs have now eclipsed the paper version of the game and become a statewide phenomenon.
That's already drawn fire from Minnesota's Native American gaming industry, which initially agreed not to oppose the e-pull-tabs and let them pay for the Viking stadium. The tribes have since been fighting the way e-pull-tabs operate in court but haven't convinced judges the games are an infringement on tribal rights.
A lot of the profit generated by e-tabs also goes to bars that host them and the developers that offer the games. Reform is needed, said Rep. Zack Stephenson, DFL-Coon Rapids.
“When you wager a dollar on electronic pull tab, only three cents of that dollar goes to the charitable mission. That's it. Right now, companies, developers, including the developer who has an 80 percent market share in this state of games, charge 31 percent to the charities,” Stephenson said.
The new measure puts a cap on that fee, offers millions of dollars in tax breaks to charities and cuts costly audits in some cases.
Advocates say the game play change will be akin to touching a multi-digit security code on your phone, instead of opening it instantly with Face ID. Opponents say it's more like going back to the days of flip phones, and nobody will be interested. Experts guess the changes might reduce e-tab gambling by anywhere from five to 20 percent, but some guess it could also make the games more attractive.
For now, nobody knows.
Versions of the games are phased out and replaced constantly, but new faster-play options will be banned starting in August. Existing games can stay in bars through 2024, which means this battle over electronic pull-tabs can be fought all over again next February, when — just to complicate things even further — lawmakers are likely to resume debate on legalizing sports betting.