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Well, I’ve been talking about it here in this space for the past five years, and the “inevitable” has finally happened: Missouri’s $500 loss limit has been repealed. The inconvenience and intrusion of having your casino visits monitored, and the protection from too-large losses are gone.
On Tuesday, Missouri voters passed Proposition A with 56% of the votes cast. The passage results in:
1. The repeal of the $500 loss limit. More accurately, this gets rid of the $500 "buy-in" limit per two-hour period -- the only such limit of its kind in the United States. (Casino guests swipe a card each time they buy into a table and aren't allowed to spend more than $500 doing this in any two-hour period.) The repeal will dramatically improve the ability of the top Missouri casinos in St. Louis and Kansas City to entice tourists, as well as compete more effectively for high-end players with the casinos on the Illinois side of St. Louis and the coming casinos in Kansas. Customers have complained about the invasion of privacy that comes with the swipe cards, the delays encountered as cards are swiped, and just the limiting of their moves in general.
2. An increase in the gaming tax by 1%, to 21% of gross gaming revenue. Self-explanatory.
3. A cap on casino licenses to 13. This essentially limits new casinos to the ones that are existing or already in the process of being built, including Pinnacle Entertainment’s (NYSE: PNK ) River City project in St. Louis. This also effectively blocks plans to build a new casino in Sugar Creek, near Kansas City.
The biggest winners are Motley Fool Hidden Gems selection Ameristar Casinos (Nasdaq: ASCA ) , Pinnacle Entertainment, and Harrah’s Entertainment. As the top player in both St. Louis and Kansas City, Ameristar -- which just opened its hotel in St. Louis this past January -- stands to benefit greatly from its added ability to attract big gamblers, as does Harrah’s. The companies, which both operate in Kansas City, also benefit from the blocking of a new competitor in Sugar Creek.
Pinnacle, with the high-end Lumiere in downtown St. Louis, is also a big winner here. Currently, Pinnacle’s direct downtown rival is the Casino Queen across the river in East St. Louis. Despite the fact that the Casino Queen is located in a part of town most people with money probably shouldn’t be in, the casino has long been a haven for some of the biggest gamblers in town simply because Illinois doesn’t have a loss limit. Now, many of these gamblers figure to spend more time at Lumiere.
Among the other players in Missouri, Penn National (Nasdaq: PENN ) should see a slight benefit to revenues at its Kansas City property; however, those gains should be slightly offset by losses at its property in the St. Louis market, where Penn owns the bottom-tier Alton Belle on the Illinois side of the market.
Lastly, I expect that the one publicly traded casino operator in Missouri to be hurt by Proposition A will be Isle of Capri (Nasdaq: ISLE ) , which operates bottom-tier casinos in both Kansas City and Boonville. They won't attract the high-rollers, but will pay the higher tax rate.