Iowa Faces Hurdles To Legalize Online Casinos

Written By Adam Hensley on July 25, 2023 - Last Updated on July 26, 2023
Retail casinos must sign off for Iowa to legalize online casinos.

If you’re looking to wager with online casinos in Iowa, you’ll need to wait.

Iowa had a chance to legalize online casinos earlier this year, but the measure didn’t pass. That doesn’t mean that The Hawkeye State’s efforts to legalize the industry are dead, though.

There’s a lot that must happen, but it also took significant efforts to make sports betting legal in the state.

With online casinos, however, one large obstacle stands in the way: land-based casinos.

Iowa still hopeful after failed attempts to legalize online casinos

The potential to legalize Iowa online casinos is there, but it will take several steps to get it done. HSB 227 had a slight chance to pass in the last session of the Iowa General Assembly, but it lingered in committee.

Its sponsor, Rep. Bobby Kaufman, wasn’t optimistic it would make it out of the House. He had also submitted a bill during the COVID-19 pandemic. Retail casinos had closed their doors for a brief time to halt the spread of the virus, and lawmakers seemed eager to give Iowans a chance to continue gambling. That bill failed to pass as well.

Iowa Gaming Association Executive Director Wes Ehrecke told PlayUSA that he viewed Kaufmann’s latest attempt as a way to raise awareness on the subject, not necessarily to make a change overnight.

“I think Kaufmann is doing what he did last year to heighten awareness. There’s a lot of new legislators and this provides more opportunities for education on the issue.”

It’s worth noting that at the National Council of Legislators from Gaming States meeting this summer, there were a number of discussions about online casinos and which states would legalize them. Iowa made the list of Light & Wonder’s Howard Glaser, along with Illinois, Indiana, Maryland, and New York.

“I can’t tell you which of those states is going to pass iGaming next, but that’s the group. Between one and some number next year.”

All Iowa casinos must be on board

In an interview with PlayUSA, Kaufmann said all of Iowa’s casinos need to be on board for any sort of a change in the current landscape to happen.

That’s a difficult task to accomplish. There’s a variety of thoughts surrounding online casino gambling. And there are concerns about online wagering taking a significant chunk of change from retail gambling efforts, Kaufmann said.

“We need to get all the casinos on board. Until that happens, the chances of it passing are zero.”

The assumption that online casinos would cannibalize retail locations isn’t far-fetched. Take Iowa sports betting, for instance. Online betting dominated wagering at retail sportsbooks in FY 2022-23, accounting for 90% of the handle.

A 2022 study, however, by Washington State’s Dr. Kahlil S. Philander examined states with legal online casinos. His research found that after states legalized online casinos, their retail casino gross gaming revenue either rose or stayed constant with previous figures. Kaufmann would be well-served to share that data with all the casinos in the state.

Plus, it’s another source of tax revenue, so most Iowa lawmakers should be in support of online casinos. The Iowa sports betting tax rate is one of the lowest in the country, at about 6.75%. In FY2022-23, Iowa sportsbooks brought in a little over $13 million in tax revenue. Most of that revenue is coming from online betting.

It’s a long journey from bill to law

Legalizing online casinos would go through a similar process as sports betting … or any other law, for that matter.

The first step is introducing the bill. Once that happens, either the Senate president or speaker of the House assigns the bill to a specific committee. With an online casinos bill, it would probably go to the Ways and Means Committee.

Then, it must pass through a subcommittee before the full committee votes on it. If the majority of a committee approves the measure, it goes to the floor of that body. It can undergo a hearing or a floor vote at that point. In Iowa, Republicans have the majority in both chambers, so they decide if a bill receives a hearing or a floor vote.

Before Iowa Gov. Kim Reynolds will have a chance to sign a bill into law, it must pass the other chamber as well. Of course, if that chamber changes anything or adds amendments, then it has to go back to the original chamber for another floor vote.

If Reynolds refuses to sign a bill into law, there is still a chance the bill can stay alive. Two-thirds of the members in each chamber would have to be in favor of passing the bill once more.

Next steps for Iowa online casinos to be legalized

As Kaufmann said, all Iowa casinos must want to expand the industry online. As long as the proponents are in the minority, it won’t happen.

Right now, seven states offer legalized online casinos. And that list will continue to grow, just as legal sports betting continues to spread across the country.

Don’t expect online casinos to legalize overnight in Iowa. Midway through 2022, Reynolds signed off on a two-year moratorium on new retail casino licenses. In other words, casino gambling isn’t expanding until 2024 at the earliest. There could be an opportunity next year to legalize online casinos as new retail casinos are approved.

In addition to online casinos, there have been talks about plans for a Cedar Rapids Casino.

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Adam Hensley

Adam Hensley is a journalist from Des Moines, Iowa. His byline has appeared in the Associated Press, Sports Illustrated and sites within the USA Today Network. Hensley graduated from the University of Iowa in 2019 and spent his college career working for the Daily Iowan’s sports department, both as an editor and reporter.

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