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An Indiana House committee has voted to approve a bill that would permit online casino gaming, as well as double the state’s tax on mobile sports betting.
The House of Representatives Public Policy Committee voted 9-2 on Tuesday (January 28) to approve House Bill 1432, a comprehensive gaming bill that would allow the state's casino and racinos to offer online casino gaming with a graduated tax rate that would be more onerous for market leaders.
The bill includes a flat tax of 26 percent through July 2026, at which point the structure would change to a graduated tax of 22 percent for operators that brought in under $4m in online casino adjusted gross revenues up to 30 percent on operators who bring in more than $12m.
Each casino or racino would be eligible to utilize up to three online casino skins.
“I think it's important to remember that Hoosiers are already playing casino games online,” said Representative Ethan Manning, the bill’s sponsor and chairman of the Public Policy Committee.
“Just Google it. Anybody who's listening right now, you can pull out your phone search for Indiana online casino, and you'll be greeted with pages and pages of options, many of these operated by offshore companies. There are no consumer protections, no responsible gaming, absolutely nothing.”
Matt Bell, executive director of the Casino Association of Indiana, spoke in favor of the bill.
"iGaming is important to the casino industry,” he said. “It represents a new way to reach out to an audience that does not necessarily today patronize our properties.”
“This is about growing our market,” Bell added. “This is about an opportunity to meet players that we wouldn't normally meet within the walls of our casinos.”
On the sports-betting side, the bill would increase the state's tax rate on mobile sports betting from 9.5 percent to 20 percent of adjusted gross revenues, while keeping the tax rate on retail betting at 9.5 percent.
“At that rate, we're still basically in the medium as far as we look at states across the country and shouldn't impact player experience,” Manning said. “A couple of states have like, 51 percent rates, so we'll still be well below that for mobile.”
Manning also touted that the bill gave stronger authority to the Indiana Gaming Commission to deny licensure to companies who are doing business in illegal markets for internet gambling.
“How can we say that part of our goal is to eliminate or greatly reduce a known black market in iGaming, if we just turn our heads and ignore illegal gaming elsewhere in the gaming industry?” Manning asked. “So it clarifies that language the commission still has ultimate discretion as to whether or not to license someone.”
Also included in the bill is authorization for the Hoosier Lottery to offer online lottery draw games and digital lottery instant games, as well as permitting the state lottery commission to authorize lottery courier services.
The Hoosier Lottery spoke in favor of the bill, and a lobbyist for the Indiana Food and Fuel Association, which represents more than 3,000 convenience stores in the state, said that although retailers were still hesitant, they had received favorable reviews from other states with online lottery programs regarding potential cannibalization.
“I know it's been testified to several times that other states have shown no negative impact to brick-and-mortar retailers through iLottery sales, and to be candid, we've reached out to counterparts in other states, other associations, and they've largely said the same thing, that they cannot see any discernible negative impact to brick-and-mortar retailers,” said lobbyist Matt Norris. “But there's still some uncertainty and trepidation.”
Churchill Downs Incorporated was one of two incumbent casino operators in Indiana to speak out against the bill.
Oliver Barie, a lobbyist representing the company, said Churchill Downs was skeptical that the bill would have much impact on the illegal market.
“I think our confidence level on eliminating or even hindering the black market is just low to none,” Barie said.
“We see the cost of iGaming as follows: cannibalization of brick-and-mortar casino revenues, loss of brick-and-mortar casino jobs, loss of in-person hotel, restaurant and entertainment tax revenue, negative impact to ancillary businesses that rely on brick-and-mortar casinos and increased problem gambling and subsequent social mental health issues regarding cannibalization.”
Barie said that Churchill is part of a new coalition of casino operators that opposes iGaming expansion that also includes Cordish Companies, JACK Entertainment, Monarch Casino and Foundation Gaming Group.
The other speaking out in opposition to the bill was Penn Entertainment.
However, the company did so because of a second bill passed by the committee, House Bill 1433, which would allow for electronic pull-tab machines to be installed at charity gaming locations throughout the state, rather than because of iGaming.
According to the Indiana Gaming Commission, more than 1,100 locations in the state have “annual activity” charitable gaming licenses that currently allow for the sale of paper pull-tab devices and would allow for electronic pull-tab devices under the proposed law.
The Casino Association of Indiana opposes the charitable gaming bill, and Boyd Gaming also spoke out against it, but Penn was the only company to oppose the online gaming bill in addition as a result.
“E-pull tabs is still a live grenade in the process and is still out there,” said John Hammond, a lobbyist representing Penn, moments after the charitable gaming bill passed the committee unanimously.
"I know it's not a random-number-generated electronic game,” he said. “However, it does feel like one, looks like one, sounds like one. It's the old walks like a duck, it's a duck, and it's going to be a difficult thing for us to get our arms wrapped around.”
Indiana Representative Cory Criswell was critical of casinos for opposing the charitable gaming expansion given the disproportionate amount of revenue generated by the two activities.
"The local people who vote for each of us are the ones who support this, and your profitability is millions and billions of dollars throughout the whole world and the United States and in Indiana,” Criswell said. “And the profitability for this local bar-owner or charity organizations is going to be $20,000 to $40,000. It does not add up to me.”
A similar charitable gaming bill is set to be considered in an Indiana Senate Committee on Wednesday (January 29). A complementary online casino bill has not been filed in the Senate.
