South Dakota Permits Internet Race Betting

Add South Dakota to the list of U.S. states permitting advance deposit wagering.

Gov. Mike Rounds on Thursday signed a bill that creates an exemption for telephone and Internet betting on horses to an existing law that prohibits online gambling.

Race bettors in South Dakota will have the option of betting on horses and dogs through Internet and telephone service providers, provided they set up a wagering account through a bank in the state. Betting races held throughout the United States will be allowed.

South Dakota has two off-track betting parlors, and a third is expected to open soon.

Under SB95, the state will assess a tax of 0.25 percent to the bets, and the proceeds will be used to support the South Dakota horse racing industry. The state's racetracks, Fort Pierre and Aberdeen, as well as those who raise racehorses in the state, will benefit.

The bill failed once in the House, but representatives revived it and passed it on a second vote. It also failed on a first Senate vote, but on a second try it got the two third's majority required for bills involving taxes and money. Senators voted 26-8 to send the measure to the governor, who signed it into law on March 10.

The bill faced much opposition because it was seen by some as an expansion of gambling. Sen. Dave Knudson, R-Sioux Falls, also argued that the system could be used to launder money through the state.

"I think this is a very bad step for South Dakota," Knudson said. "This is a bad deal."

Sen. Duane Sutton, R-Aberdeen, the bill's main sponsor, maintained that instead of expanding the gambling industry in the state, the law would create a mechanism for taxing an activity that was already taking place.

All other types of Internet gambling are illegal in South Dakota. A law passed in 2000 prohibits South Dakota businesses from starting Internet gambling operations. Violators can be punished for each bet on the Internet. The first illegal bet can bring a maximum penalty of two years in jail and a $2,000 fine. All other bets can bring up to five years and $5,000.

Incidentally, South Dakota is not the first U.S state to prohibit Internet gambling and later permit online race betting. Louisiana passed a probation bill in 1997 and a subsequent bill in 2000 allowing its largest track to take bets over the Internet.

Click here to view a copy of SB95.