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Neb. Voters OK Legalizing, Taxing Racetrack Gambling

By Abraham Gross · Nov 4, 2020, 1:18 AM EST

Nebraska voters approved legalizing racetrack gambling and imposing a 20% tax on gambling revenue Tuesday through Initiative Measures 429, 430 and 431, separate initiatives that operate together to authorize and regulate racetrack gambling.

The ballot measures collectively amend the state constitution's prohibition on gambling to allow the licensing, regulation and taxation of gambling at licensed racetracks and to change state statute to impose a regulatory and tax regime and provide certain gambling tax exemptions.

As of late Tuesday, Initiative Measure 429 and Initiative Measure 430 were approved 65% to 35% and Initiative Measure 431 was approved 69% to 31% with nearly 80% of the votes reported.

The vote is a victory for gambling and horse riding associations as well as Keep the Money in Nebraska, the sponsoring committee for the measures that advocated for racetrack gambling legalization as a way of generating new funding for state property tax relief.

Measure 429 amends the state constitution's prohibition on gambling to create an exception for gambling within licensed racetracks. Measure 430 implements the regulatory system for racetrack gambling beginning Jan. 1, 2021, and provides tax exemptions. Measure 431 imposes an annual 20% tax on revenue from racetrack gambling and dictates revenue distribution.

Under the new laws, authorized gambling operators within a licensed racetrack can offer "games of chance," including gambling devices like slot machines, to individuals who are at least 21 years old. Those licensed gambling operators will be exempt from sales and use tax on purchases.

Gambling operations will be regulated by the newly established Nebraska Gaming Commission, composed of members from the existing State Racing Commission and appointees of the governor, which will also oversee tax collection and distribution.

Most tax revenue will be directed to a property tax credit cash fund, with a quarter of revenue distributed evenly to the localities where racetrack enclosures are located, according to Measure 431. The remaining revenue will be split between the state's general fund and a fund for assisting compulsive gamblers.

The measures were challenged by Republican Secretary of State Robert Evnen and several individuals, who argued that they violated the state's constitutional requirement for ballot measures to have a single subject. In a narrow decision issued Sept. 10, the Nebraska Supreme Court said the measures were each limited to a single subject and were meant to be analyzed separately, regardless of overlapping subjects.

In addition to opposing gambling in general and expressing concerns about the health effects of expanded gambling in the state, litigants told Law360 in September that the measures were misleading because they had the hidden purpose of authorizing gambling on tribal lands.

The measures do not explicitly discuss tribal lands, and the court did not settle whether they contained such authorization. One of the sponsors of the measures, Ho-Chunk Inc., is an economic development company owned by the Winnebago Tribe of Nebraska.

Republican Gov. Pete Ricketts has previously opposed legalizing gambling, particularly casino gambling, saying that the practice is addictive, financially costly and socially harmful.

--Editing by Vincent Sherry. 

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