Article written by BrownWinick 2019 Summer Associate, William “Billy” Daniel, and BrownWinick attorney, Matt McKinney
Governor Kim Reynolds signed SF 617 into law on May 13, allowing Iowa’s casinos to offer legal sports betting. This legislation was made possible by the decision of the United States Supreme Court in Murphy v. NCAA in May 2018 when the Court struck down the Professional and Amateur Sports Protection Act, which effectively banned sports betting nationwide other than in Nevada. With federal law out of the way, Iowa lawmakers took a close look and were able to pass a bipartisan bill through the Senate on a 31-18 vote and through the House on a 67-31 vote.
The Iowa sports betting law makes the Iowa Racing and Gaming Commission (IRGC) the regulators of sports betting and allows casino licensees to offer sports betting. Iowans who are 21 years old and older must go to a casino and set up their sports betting accounts prior to making any bets online or at the casino. The law allows for placing bets online through a licensed casino’s sports book app or website, but a person has to be accessing that app or website within the state of Iowa in order to place a bet. This system of betting will utilize advance deposit wagering, where an individual is allowed to create and fund an account ahead of time and then make bets using the funds in their account. Once an account is set up, the individual is free to bet on college, professional, motor race, and Olympic sporting events that are offered by the casino’s sports book, but a casino is not allowed to offer or accept bets on minor league or high school sporting events. Also excluded from any possible wagering are bets on individual players from Iowa’s in-state college teams or on players playing against an in-state team for that specific game. These types of bets are called “prop bets” and involve, for example, wagering on whether a University of Iowa individual basketball player scores more than 10 points in a specific game. These prop bets on in-state college players and their opponents are disallowed, regardless of what state the game is taking place in, but bets on the outcome of Iowa’s colleges’ games are allowed.
The bill also allows for Daily Fantasy Sports (DFS) games to be offered. DFS involves creating a “team” of individual players across an entire league, such as the NFL, and measuring success based on the performances of the individual players selected in one day’s slate of games. DFS games are also under IRGC regulatory and supervisory control. Unlike sports betting, a license to offer DFS is not limited to casinos; any entity may apply for a license to offer DFS. This allows the major online platforms such as DraftKings and FanDuel to begin operations in Iowa. However, no DFS bets may be placed on collegiate sports until May 1, 2020. This provides for first evaluating the system and determining any problems that could be associated with implementing DFS at the college level, due to the same concerns over placing bets around individual player performances.
The financial impact of sports betting and DFS to the State of Iowa lies in the ability to regulate and tax the activities. The tax rate for both types of sports betting is set at 6.75% of the profit from the activities, and the State will also collect both initial and renewal licensing fees from licensees of both activities. Along with taxes and licenses, casinos are also required to pay an additional .75% (on top of the 6.75% to the State) to its Qualified Sponsoring Organization (QSO), which is the charitable entity that holds the gaming license and contracts with casino operators. This helps sports betting revenues stay within the community by having the QSO grant funds to local nonprofits using the money received from the profits of the casino.
As with any expansion of gambling, concerns were raised by Iowans regarding problem gambling. More specific to sports betting were concerns over athletes (specifically college athletes) and coaches placing bets. On the problem gambling side, licensees are required to prominently display the phone number for the problem gambling hotline, 1-800-BETS-OFF, on all betting platforms, including the casino floor and the mobile app for sports betting. Further, casinos are required to follow responsible gaming initiatives such as prominent posting of all sports betting rules and adherence to the State’s self-exclusion program, where problem gamblers can register with the IRGC and voluntarily ban themselves from casinos and their sports gambling websites. Licensees are also required to take reasonable steps to keep athletes, coaches, athletic trainers, and other officials directly involved with the athletic teams from placing bets on sporting events. This is also accompanied by an affirmative obligation on licensees to report any suspicious activity to the IRGC regarding the integrity or outcome of the sporting events, which the IRGC will then report to the appropriate entity.
While this information is all that is known at this stage, the IRGC is still tasked with writing the rules for the operation of sports betting and DFS. The IRGC estimates that the rules and regulations for sports betting will be ready in early August before the NFL and NCAA football seasons kick off. In the meantime—while the IRGC is writing the rules—potential licensees may apply for their sports betting license. The typical licensing process, including background checks and agreement approvals, will take place throughout the summer in order to have licensees approved before the tentative August start date. There will be four different licenses: a casino sports betting license (for the Iowa casino to offer sports betting), a vendor license (for an outside company to run a casino’s sports book), an advance deposit sports wagering operator license (for an outside company to run the casino’s mobile app), and a license for DFS operators. Casinos will have to pay an initial licensing fee of $45,000 in order to obtain the casino sports betting license and provide sports betting. The other licenses will all vary in costs and requirements. The IRGC is going to move forward in granting these licenses this summer, in order for Iowans to be able to place bets as soon as the regulations are completed.
Iowa is now set to join the ranks of states offering sports betting following the Supreme Court’s decision in Murphy, bringing the total up to 16 U.S. jurisdictions (including Washington D.C.) that have legalized the activity. This is an exciting time for casinos and sports fans in Iowa, and those wishing to place bets on their favorite sports teams will only have to wait a little bit longer for the IRGC to have everything in place.