Indiana online gambling bill — with sports betting tax hike — moves

On January 28th, Indiana’s house public policy committee advanced a significant piece of legislation aimed at legalizing online gambling within the state. Known as HB 1432, this bill represents a potential breakthrough in ongoing discussions about legal online gaming in Indiana, gathering what appears to be broad support. Nevertheless, various challenges lie ahead in its path to fruition.

The bill was passed by a vote of 9-2, with two members excused from the session, and will now proceed to the ways and means committee for further examination. Stakeholders express optimism that HB 1432 will successfully navigate the House, but anticipate that securing passage in the Senate may prove more complicated.

In addition to HB 1432, Indiana’s legal online gambling landscape is further complicated by another piece of legislation, HB 1433, which aims to legalize electronic pull tabs for local bars and taverns. This dual focus on different forms of gambling introduces a layer of complexity that may impact legislative decision-making.

A representative from Penn Entertainment publicly voiced opposition to the online gaming bill, characterizing the pull tabs initiative as a “live grenade.” Lawmakers expressed confusion over this sentiment, highlighting that the proposed electronic pull tab games would be restricted to local venues, potentially generating annual revenues of $20,000 to $30,000 for small businesses.

“It frustrates me that any casino can get up here and testify against e-pull tabs,” asserted one lawmaker, referencing the substantial profits accrued by larger casino operators in Indiana and elsewhere.

Addressing the Concern of Revenue Cannibalization

The discussion surrounding electronic pull tabs is just one aspect complicating Indiana’s online gambling conversations. Industry representatives from Penn and Churchill Downs (CDI) echoed a concern regarding “cannibalization,” referring to the potential siphoning of revenue from traditional land-based casinos to online platforms. This narrative began in Maryland last year with the Cordish Companies and has since resonated in legislative hearings in other states, including Louisiana.

However, the argument becomes complex as all three companies involved operate digital gambling platforms across the United States. While Cordish lacks any properties in Indiana, Churchill Downs voiced its concerns about the impact of online gambling despite previously running an online sports betting operation, which it ceased in 2022. Notably, CDI continues to provide digital pari-mutuel betting and operates an online casino in Pennsylvania, which raises questions about their opposition to online gaming in Indiana.

Meanwhile, Penn Entertainment is active in the digital realm, offering online sports betting and casino services through its partnership with ESPN in 20 states.

“Cannibalization is real,” acknowledged John Hammond, a representative from Penn, during the committee discussions. In contrast, Boyd Gaming, another regional casino operator, expressed support for HB 1432, bolstered by its national partnership with FanDuel, allowing for a more positive outlook on online sports betting and casino operations.

Navigating Problem Gambling and the Illegal Market

Apart from the perspectives of operators, advocates for problem and responsible gambling highlighted the risks associated with making online gambling readily accessible. Brianne Doura-Schawohl, representing the Campaign for Fairer Gambling, cautioned against legalizing online gambling without first addressing the pervasive illegal market and enhancing initiatives aimed at responsible gambling.

Data shared by John Pappas from GeoComply indicates that Indiana is already contending with over 50 illegal gambling sites and that there have been more than 500,000 searches for “online casino gambling” from within the state since January 1st. Stakeholders argue that regulating the online gambling market is essential in combating illicit operations.

“A regulated online industry provides the state with the necessary tools to enforce its laws against illegal operators,” asserted Brandt Iden, head of government affairs at Fanatics Betting & Gaming. He emphasized that states with legal, regulated online casinos have successfully taken action against illegal entities, such as Bovada and MyBookie.com, which have been forced to cease operations following regulatory interventions.

The bill sponsor, Ethan Manning, reinforced the notion that legalization serves as a “new delivery method” for the existing illegal online gambling market within Indiana.

Proposed Increase in Online Sports Betting Tax

Before the testimony, Manning introduced three amendments, including a notable increase in the online sports betting tax from 9.5% to 20%. He contended that this hike “shouldn’t impact the player experience.” However, some industry operators voiced concerns about the implications of such a tax increase and requested that it be reconsidered during the legislative process.

In addition, the amended bill specified that any operators involved in illegal markets would be barred from participating in Indiana’s regulated environment. It also provided provisions for the Pokagon Band of Potawatomi Indians to engage in online casino operations. Alongside these amendments, a funding increase proposal from online casino revenue to support local cities and counties, as well as the state’s fire pension, was also included and approved.