Lalley: Cap on video lottery in Sioux Falls could trigger gambling debate

SIOUX FALLS, S.D. — Things are getting real on the street.

The Sioux Falls City Council’s recent decision to cap the number of malt beverage licenses in the city limits changed the dynamic of the market.

Suddenly, what once was a fairly attainable permission to sell beer and wine in an establishment, became much less so. That set off a mad dash to get the last few licenses before we reach the limit of 186. And the existing permits become all that much more valuable.

How valuable?

That harkens to the old street phrase, “How much you got?”

That number is up to demand, but it’s sure to be more than the sticker price of a few hundred dollars.

Which, of course, has nothing to do with beer or wine and everything to do with gambling.

To offer video lottery, a restaurant or bar must have either a liquor license — which covers distilled spirits, like whiskey or vodka — or the aforementioned malt beverage version.

Liquor licenses are expensive right out of the gate and based on the population of the community. They’re also limited in number, also based on population.

Beer and wine has always been a different story. Historically, they were cheap and relatively easy to get.

Sioux Falls isn’t the first city to cap malt beverage licenses because of the connection to video lottery. Other South Dakota communities have been doing it a long time.

But as I wrote last week, the sheer volume of money wagered in Sioux Falls means that the city council’s decision is sure to attract a lot more attention.

Which raises an interesting question: Whose attention?

The state has the ultimate authority to regulate video lottery. But lawmakers have been hesitant to reopen that debate.

Video lottery revenue into state coffers grew by 51% over the previous five years, topping $163 million in 2021.

From that perspective, things are going just fine, thank you.

If legislators want to get involved it could spark a protracted debate with all sorts of potential scenarios.

State voters have consistently approved expanded gambling options, whether that’s video lottery or sports betting in Deadwood. But there are other interests in the state that want to allow sports betting beyond Deadwood, specifically in Sioux Falls.

Sports betting is wildly popular and there’s already a full-blown operation at Grand Falls Casino & Golf Resort a few steps across the Iowa border. The casino is about 5 miles from the city’s eastern edge and once your phone hooks up with an Iowa cell tower, the world of sports betting is at your fingertips.

Then there are always implications for the Native American tribes who operate casinos in South Dakota.

So any bill dropped in Pierre regarding video lottery could blossom into a full-on spectacle.

That puts many lawmakers in a difficult position.

While legal gambling has become normalized in the broader society, there remains significant opposition in some quarters, particularly among faith communities. Moderate Republicans, already leery of primary challenges from the right, may be particularly nervous about getting pulled into a discussion of revenue stability versus religious sensibility.

In that sense, the status quo is the path of least resistance.

A few video lottery moguls fighting over the last few pieces of the license pie may not be enough impetus to push for change.

The whole shebang could end up in court but it’s just as likely that the city council’s push back may be light enough as to not activate the heavy hand of state policymakers.

In that case, “how much you got” may become a familiar phrase in the vid lot halls back on the mean streets of Sioux Falls.