DES MOINES -- As legislators recently cleared the way for the state’s newest gambling expansion into online-based sports wagering, Sen. Joe Bolkcom waved his smartphone on the Senate floor and hailed the alluring device as Iowans’ new pocket casino.
“We’re getting ready to queue up the next generation of gamblers in Iowa. It will start with sports and lead to online slot machines that look a lot like your phone and who knows what else,” said Bolkcom, an Iowa City Democrat who is not infatuated by Iowa’s love affair with legalized wagering. “Where will online gambling lead us?”
The fate of Senate File 617 — legislation legalizing sports betting on professional and college athletics as well as daily fantasy sports sites — sits on Gov. Kim Reynolds’ desk awaiting action. But the debate over internet-based gambling already is in play regardless whether she gives her blessing or veto.
When it comes to gambling, Iowa’s elected policymakers have been all in, allowing the most gambling opportunities of any state in the nation that could include online sports wagering if the governor agrees.
Adding to the intrigue is the fact that the Iowa Lottery is waiting in the wings with a proposal for lawmakers to revamp its operations by authorizing the sale of lottery products online — moving beyond the traditional paper products purchased only with cash, given the societal shift, especially among young people, toward e-commerce. Likewise, casino operators see sports betting as a vehicle to draw a younger clientele to their 19 brick-and-mortar venues in Iowa.
If SF 617 is approved, the new law would allow Iowans age 21 or older to establish “virtual wallet” accounts at state-licensed casinos for the purpose of placing their online sports bets under the eye of government regulators and a taxing structure. Backers say sports betting already is going on illegally or through Las Vegas, and a growing number of states have come on board since a 2018 U.S. Supreme Court ruling cleared the way for them to legalize sports betting.
“The way that I looked at sports betting was that it’s being done already, everywhere,” said Sen. Liz Mathis, D-Hiawatha. “If you’re going to be making it legal, then why wouldn’t the state try to benefit from that and put it to good?”
Brian Carter, a Clive man who lobbies on behalf of the Iowa Conference of the United Methodist Church, said he fails to see a good side to an addictive activity that causes problems for Iowa families, and he is “telling people everywhere I can” to implore Reynolds to nix the “electronic market” that comes with online wagering.
“Sports betting isn’t going to be a big deal but if it goes online, that’s a big deal,” he said. “I believe it’s a step too far.”
However, Brian Ohorilko, administrator of the state Racing and Gaming Commission, said Iowans already have been engaging in state-regulated online wagering on pari-mutuel horse races since 2011. That’s when the commission was granted authority to license advance-deposit wagering companies to partner with casinos to offer electronic betting with no on-site registration requirement.
As envisioned in this year’s legislation, the state’s 19 casinos could apply for licenses to host sports betting on-site and online under the commission’s regulations.
Online gamblers in the first 18 months under the proposed law would have to clear age and geographic requirements to create their new accounts at a casino before they could gamble online with the money they deposit. On Jan. 1, 2021, that on-site requirement ends and registration could take place online.
Participants would be allowed to voluntarily set limits on their wagering and lawmakers provided more funding for gambling addiction treatment programs.
But longtime gambling opponent Tom Coates predicted online wagering would “tremendously ramp up” the number of family, personal and financial hardships associated with problem gambling.
”This is the coming thing. We’ve known for a number of years that this was the coming thing,” said Coates, executive director of Consumer Credit of Des Moines, a credit counseling service that has done debt counseling for more than 150,000 people over three decades — including up to 10 percent who were problem gamblers. “The majority of Iowans still are resistant to this online gambling bill, and perhaps that’s the reason why Kim is reluctant just to hurry and sign it.”
Coates said the current casino-based gambling model is stagnating and operators are looking to attract younger clientele who want fast-action entertainment.
He predicted a future effort will be made to bring popular video games like Fortnite under the definition of sports betting.
However, Ohorilko said that would not be the case based upon his reading of the legislation.
Iowa lawmakers opted not to make the state’s lottery part of the new sports-wagering opportunity, but Iowa Lottery Chief Executive Officer Matt Strawn has expressed concern that ticket sales will stall and revenue goals will not be met in the near future if legislators do not authorizing the sale of lottery products online like at least 10 other states have.
Strawn said the lottery posted a record year for sales in 2018 and this year is running ahead of projections. But he feared future sales will slow and proceeds to the state treasury will be affected unless the enterprise makes changes.
“Without the ability to modernize our products, we anticipate that lottery proceeds will only be able to continue at their current levels for a few more years and then we anticipate a downturn, due to the decreased use of cash and the overall trend toward e-commerce,” Strawn told lawmakers last session.
In an interview Friday, the lottery leader said the “fine points and details” of how his operation would offer e-tickets would have to worked out. But digital capabilities would provide more security and integrity and opportunities to promote responsible play.
He also said the new approach would allow the lottery to offer incentives through its 2,400-plus licensed outlets that would help drive foot traffic and economic activity to those retailers.
Reynolds’ spokesman Pat Garrett said the lottery has the governor’s backing, noting she “has confidence in Iowa Lottery’s ability to balance the growing demands of 21st century technology with the need for responsible gaming that is on par with the values of our state.”
Senate Majority Leader Jack Whiter, R-Ankeny, said the future of what happens with the lottery is “to be determined.” He said legislators were not comfortable with putting sports wagering in convenience shops and grocery stores alongside lottery products, but they want to maintain a viable operation that generated $87.1 million in state proceeds last fiscal year.
“We’ll certainly watch their business model and their receipts coming in over the next few years to kind of see what’s happening as everything changes in the economy,” said Whitver. “But I think once you do go to lottery tickets on the phone, that’s a much bigger step that will have to be a much longer and more thorough step before we’re even willing to go there.”
Sen. Tony Bisignano, D-Des Moines, said he would be willing to consider moving the lottery online, saying “we’re getting to the edge of that” as more consumers engage in e-trade.
But he agreed with the lottery’s position not to move ahead without the Legislature’s blessing, given Iowa’s experience with a TouchPlay experiment he noted still is a “sore subject” at the Statehouse years later.
After being directed in 2001 to generate more state revenue, Lottery officials developed a program that placed TouchPlay electronic game consoles resembling slot machines in scores of Iowa convenience stores and other retail outlets.
The lottery had the authority to launch TouchPlay, but public outcry prompted lawmakers to abruptly ban the game, which led to broken contracts and millions of dollars in legal settlements. By the time the game was shut down May 4, 2006, there were more than 6,700 devices in more than 3,000 locations statewide.
“Touch Play was a bridge too far at that point,” said Coates.
After the machines were banned over outrage about their widespread availability, dozens of plaintiffs lodged about $900 million in TouchPlay-related claims against the state. Iowa Attorney General Tom Miller said he and his staff researched, litigated and settled the claims for $18.4 million by 2010.
Mike Gronstal, now a lobbyist for labor interests who previously held top leadership positions in the Iowa Senate, said he understands the lottery’s position in pushing for online sales the past nine years. But he noted there was “pretty strong backlash” after the TouchPlay fiasco and “they still have a significant share of the marketplace with the really big prizes” that occasionally top $1 billion.
However, Strawn said the phenomenon of “jackpot fatigue” is undercutting the drawing power of lotto games like Mega Millions and Powerball that no longer get the notice they once did unless they climb to eye-popping 10-figure prizes.
“It is taking longer for jackpots to build, they are attracting less attention and they’re not generating the revenue that they once did,” Strawn noted, “and so it would be an antiquated model to rely solely on the unpredictable nature of jackpots to expect the Lottery to continue to hit the revenue goals that we believe that we can deliver for the state.”
Mathis said the state has to be mindful of people who get pulled into gambling problems, “but we do have to face the fact that the digital world is here and it’s only going to get larger.”
Bolkcom said his concern in establishing a new platform for what he considers “a predatory industry” is that lawmakers have helped guarantee that the number of Iowans with gambling problems or addictions will grow.
“People already are addicted to their phones just looking at Facebook and Twitter and their email,” he said. “If we get this interactive gaming thing going on where we’re winning and losing money, it will be a brand-new world of addiction.”
Eric Preuss, program manager for the Iowa Department of Public Health’s office of problem gambling treatment and prevention, said he doesn’t expect a significant uptick in problems associated with sports wagering because the activity already is going on with Iowans using offshore betting services or bookies.
“We’re already addressing those needs. We see about 8 percent of the people who come in for problem gambling treatment over the years already are coming in with a primary wagering of sports wagering,” he noted. “I think anytime you make it easier for people to gamble, we need to be prepared to help people respond and prepare.”
Preuss said it would be helpful if the new online platforms included information about the 1-800-BETSOFF hotline, responsible gaming and informed play that allow gamblers to voluntarily set wagering limits, reminders and warnings.
Overall, about 85 percent of Iowans who do gamble don’t have any problems, Preuss said, but there needs to be a “safety net” for those who develop addictions or might be at risk.
About 13.6 percent of adult Iowans are in the at-risk category, he said, and about 1 percent have a gambling disorder.
According to preliminary data from a 2018 survey of about 1,800 Iowa adults on gambling attitudes and behaviors conducted by the University of Northern Iowa Center for Social and Behavioral Research, about 90.2 percent have gambled in their lifetime with 73.8 percent having done so in the last 12 months and 45.8 percent in the last 30 days, Preuss said. About 130,000 adult Iowans engaged in sports betting in the past year, with 3 percent in the last 30 days.