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Iowa casinos roll snake eyes in April; With sports bets idle, debate turns to esports

Iowa casinos roll snake eyes in April; With sports bets idle, debate turns to esports

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Boyz II Men will perform on the Rhythm City Casino Resort Event Center stage at 8 p.m. Sunday, June 27, 2021.

DES MOINES — The Iowa Racing and Gaming Commission’s revenue report for April from the 19 state-licensed casinos is littered with zeros.

The month’s unprecedented financial wipeout for casino gambling activity statewide came after Gov. Kim Reynolds included in-person gaming operations in her public health emergency order in March closing a number of businesses around Iowa — some until at least May 15.

Idling Iowa’s 19 licensed casinos to adhere to social distancing guidelines and limiting large gatherings effectively for at least two months — from mid-March until May 15 — took the industry from a promising fiscal year aided by the start of legal sports wagering to one that is running about 13% below the first 10 months of fiscal 2019.

And there are prospects for deeper losses for this month even if the governor allows the facilities to reopen under limitations similar to other activities shuttered by the pandemic, said state commission administrator Brian Ohorilko.

“All 19 casinos have shown a loss and will likely show a loss year over year,” said Ohorilko, who noted the losses vary among the facilities from about 7% to 20%.

In April 2019, Iowa-based gambling casinos reported adjusted gross receipts of nearly $123.4 million and paid more than $27.6 million in state taxes. But last month, those 19 operations — which already had topped the $1 billion mark this fiscal year — had no casino revenue.

The new sports betting option that approached $60 million a month during the fall football and winter basketball period dropped to a wagering handle of $1.5 million and $155,331 in receipts as college and professional sports shut down and betting options virtually disappeared.

“It’s having a dramatic, adverse impact to our industry,” said Wes Ehrecke of the Iowa Gaming Association, an umbrella group for the 19 casinos. He said the shutdown also has had a ripple effect for the Iowa-based businesses that do $250 million annually supplying products and services to the casinos, the nonprofit charitable organizations that get about $90 million yearly through the state licensing arrangement and some 8,000 employees who have been temporarily furloughed due to the business closings.

“We are looking forward to the day that we can get reopened and even if it’s with caveats,” said Ehrecke, who noted the casinos have prepared comprehensive protocols and procedures that would be used as guidelines for sanitizing and disinfecting facilities and engaging in social distancing in restaurants, gaming floors and lodging facilities should Reynolds and commission staff give approval.

The COVID-19 outbreak first confirmed March 8 in Iowa has “significantly hurt” the gambling industry, Ohorilko noted, as it has the rest of Iowa’s economy. But he said some of the casinos were able to take advantage of the federal Payroll Protection Program loans and managed to get some forbearance from their lenders in deferring payments. So “at this point, they’re all hanging in there.”

“We have 19 casinos in Iowa and we expect that we’ll have 19 casinos when this opens up,” he said. “It’s certainly been very difficult for this industry, but the market here in Iowa has been very stable and predictable outside of this pandemic.”

Ohorilko noted there’s no reason to believe that couldn’t restart, though it’s as unknown just what a new market might look like.

One possible change being looked at by gambling interests in Iowa is finding a way to tap into the rising popularity of esports — a form of sports competition involving video games — as a revenue generator.

During its April teleconference meeting, the commission tabled a request from DraftKings, an online fantasy sports contest and sports wagering provider for online fantasy sports wagering, for the approval of electronic sports for contests on a fantasy sports platform.

The esport competitions can involve professional video game players competing individually or in teams. The Iowa Gaming Association also has interest among casino sportsbooks in taking electronic sports wagers, Ehrecke said.

Currently, Ohorilko said the only type of fantasy sports contests and sports wagering in Iowa are physical sporting events “and so esports had not been something that was approved.”

He said the initial informal legal guidance given to the commission was that esports may not be something that meets the statutory provisions of an authorized sporting event, but he noted the discussion was on “a real cursory level” and more research is being done to determine whether 2019 legislation legalizing sports wagering and fantasy sports allows sportsbooks to accept wagers on what is classified as an “other event.”

The commission staff is in the process of reviewing the request and would take action at its June 4 meeting.

Remington Parker, communications associate for DraftKings, indicated in an email that DraftKings was in the process of revamping its existing products and expanding its offerings to more unconventional sports leagues and entertainment content. But when asked about the proposal made to the state gaming commission, Parker said “following internal conversations, unfortunately we will not be commenting at this time.”

According to a draft of the April commission meeting minutes, Assistant Iowa Attorney General Jeff Peterzalek told the commission that esports does fit within the definition of fantasy sports contests and could be allowed — but does not have to be.

He recommended that if the commission decides to allow esports, members should consider each application individually to determine if it meets staff approval. Fantasy sports contests and sports wagering are covered by two different sections of Iowa law.

“Esports has continued to evolve in a very popular way and so, as a result, it’s something we’ve been getting questions about — can we wager on this? And so that is why we want to try to bring it forth for that approval process or at least for the consideration of that,” Ehrecke said.

Ohorilko said his staff is looking at what other states have adopted regarding esports, which he said would be subject to stringent controls and integrity monitoring, age restrictions and involve only team events but not individual performances.

“I think the different licensees are definitely trying to find anything that they can to offer,” Ohorilko said. “At this point, at least in Iowa, there really hasn’t been any changes with respect to what has been allowed per statute and what has been authorized by the commission. At this point, everything has been the same. Now we’re seeing a lot of other states that are authorizing more games. Esports is really something that has taken off in the last few months. It’s no surprise that it’s being offered and has become more popular as other wagering opportunities aren’t available.”

Tom Coates, executive director of a credit counseling service in Des Moines and a leading gambling opponent, said the esports request is an effort by gambling interests to bring video games under the wagering umbrella — something he had predicted would happen when lawmakers took up the issue of legalizing sports betting in Iowa in 2019.

“That’s just an acceleration of what’s going on anyway,” said Coates. “I said this is only the camel’s nose into the tent on this. It’s not an anomaly, it’s not because of the virus, they’re just moving ahead on what was planned years ago.

“The casinos’ model is dwindling down," he said. “The bread and butter of the casinos is the slot machines. It’s 80% generally of a casino’s revenue and that model is dying out because it’s the older people who were willing to sit on a stool for hours and play the slots. The young kids — the millennials and what have you — they’re not interested in it so you’ve got to take it where the audience is and that’s what they’re trying to do here.”

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